2022-01-14_Friday

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00:00:25.960 | It's Friday and today that means live Q&A.

00:00:44.320 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,

00:00:47.320 | skills, insight and encouragement you need to live a rich and meaningful life now while

00:00:51.440 | building a plan for financial freedom in 10 years or less.

00:00:54.480 | My name is Joshua Sheets.

00:00:55.480 | Today is Friday, January 14, 2022.

00:01:00.480 | And today, as we do every Friday, we do live Q&A.

00:01:16.960 | Friday podcasts, whenever I can arrange an appropriate internet signal and all the technology

00:01:21.040 | and have a microphone hooked up, etc.

00:01:22.720 | Friday podcasts are always Q&A shows.

00:01:25.240 | They are live, open-line Fridays.

00:01:27.680 | You can call in, talk about anything you want, ask me any questions you want.

00:01:30.680 | It can be related to something that's in your personal life.

00:01:33.720 | You can talk about a question you have, a particular point of financial planning or

00:01:37.440 | life planning that you'd like to talk about.

00:01:39.340 | You can also discuss anything related to the show.

00:01:42.240 | Questions, comments, you have feedbacks, things that you agreed with and you have an example

00:01:46.560 | of, things that you disagreed with and you want to take me to task.

00:01:49.880 | All of that is welcome here on a Friday Q&A show.

00:01:52.900 | To gain access to one of these Friday Q&A shows, all you need to do is join us on Patreon,

00:01:57.760 | patreon.com/radicalpersonalfinance.

00:01:58.760 | Search for on Patreon for Radical Personal Finance.

00:02:05.240 | You'll find the show there.

00:02:06.240 | And if you sign up to support the show there on Patreon, then you will gain access to one

00:02:10.880 | of these Friday Q&A shows and I would love to have you.

00:02:14.640 | Today we begin with Vinny.

00:02:16.760 | Vinny in Brooklyn.

00:02:17.760 | Welcome, sir.

00:02:18.760 | How can I serve you today?

00:02:19.760 | Thank you so much for taking my call.

00:02:22.280 | My question is regarding DIY projects.

00:02:25.720 | I'm wondering if you have an objective or a formula to determine whether or not you

00:02:31.680 | should do a project yourself or whether you should pay someone to do it.

00:02:35.160 | Long story short, I own a house.

00:02:37.640 | It's about two years.

00:02:38.640 | It's a little bit of a fixer upper and I live in a high cost of living area.

00:02:43.640 | And right now there's unfortunately a little bit of tension with me and my wife because

00:02:48.720 | we're just trying to figure out how to get this stuff done here.

00:02:52.200 | And of course, contractors come to the house, everything's very expensive.

00:02:55.800 | They don't necessarily do the best job.

00:02:57.560 | But on the other hand, I don't have time really to do the work.

00:03:02.200 | I guess it comes at the expense of relaxation.

00:03:04.960 | So my question to you is, obviously I know it's more of a case by case basis question,

00:03:09.360 | but is there an objective formula that we can start at whether or not to determine if

00:03:13.600 | we should do DIY projects ourselves?

00:03:15.600 | Thank you.

00:03:16.600 | So the objective formula from a financial perspective is going to be your personal hourly

00:03:21.860 | rate versus the hourly rate that you're paying for the work that you're commissioning.

00:03:30.100 | So if your personal hourly rate is $20 per hour and the contractor is going to charge

00:03:36.320 | you $50 per hour, then objectively speaking, it's going to be much better for you to go

00:03:42.880 | ahead and do the work yourself because if you can do something close to the rate that

00:03:49.440 | the contractor can do it at, then you're going to be earning a higher hourly rate.

00:03:53.500 | On the other hand, if your personal hourly rate is $500 per hour and the contractor will

00:03:58.520 | work for $50 per hour, then you're far better off going ahead and hiring the contractor

00:04:05.020 | to get those things done.

00:04:06.640 | So that's the objective scenario.

00:04:08.560 | You want to look at the opportunity costs and ask yourself, what am I giving up in order

00:04:11.960 | to do this work?

00:04:12.960 | Now here's where things get tricky.

00:04:15.240 | You have to ask yourself, what am I actually giving up?

00:04:18.840 | So for example, if you have a job where you work 40 hours a week, Monday through Friday,

00:04:25.720 | and your personal rate is $50, and let's drop it down.

00:04:30.360 | Your personal rate is $30.

00:04:32.160 | No, let's do 50.

00:04:34.160 | Your personal rate is $50 and you're going to pay someone else $50, but you could otherwise

00:04:39.740 | do it on a Saturday morning, then all of a sudden the financial considerations go out

00:04:44.920 | the window, right?

00:04:45.960 | Because if you were just going to sit around and do nothing on Saturday morning, or you're

00:04:49.120 | going to do something productive with your Saturday morning, it doesn't matter that your

00:04:52.200 | personal rate is the same as the contractor's.

00:04:55.580 | It matters what is your alternative use of the time.

00:04:59.020 | What would you be doing otherwise?

00:05:01.100 | So I think here you would want to do an analysis and say, do I really enjoy the work?

00:05:06.240 | Is the work something that I enjoy, that I want to do?

00:05:08.800 | Is it something that inspires me, or is it something that I just want to get as far away

00:05:12.480 | from as I possibly can?

00:05:14.780 | Some people come to DIY projects and they find them relaxing.

00:05:20.840 | It's something that they enjoy doing.

00:05:22.320 | They enjoy working with their hands.

00:05:24.260 | They find it relaxing.

00:05:26.080 | Many times this includes people who are knowledge workers.

00:05:28.440 | I personally often get frustrated that most of my work is not tangible, and so it's nice

00:05:33.520 | to do a project and build a deck on your house, and all of a sudden, look, I did that.

00:05:37.600 | I built that.

00:05:38.600 | It feels good to get some of those things done.

00:05:40.880 | On the other hand, some people find them very draining.

00:05:45.980 | You ask an entrepreneur who gets turned on by his business, and you say, "Now you're

00:05:49.720 | going to go home and work on a bathroom," a lot of times, for some people, that can

00:05:53.980 | be very draining.

00:05:54.980 | So I would analyze not only the financial ramifications, but I would analyze and say,

00:06:01.760 | how would I rank this activity?

00:06:03.160 | Is this something that I enjoy?

00:06:04.160 | Is this something that I want to do?

00:06:06.040 | I personally don't enjoy DIY projects.

00:06:09.240 | I used to want to.

00:06:10.920 | I did a lot of it when I was younger.

00:06:12.280 | I'm more capable than many people, but I don't enjoy doing it.

00:06:15.680 | And so I've learned that I would rather spend my time doing something that is a better fit

00:06:21.180 | for me and then simply pay someone to do my DIY projects for me because the time that

00:06:26.760 | I spend on the DIY project is quite draining for me personally.

00:06:31.000 | I don't find it rejuvenating.

00:06:32.540 | I don't find it very rewarding.

00:06:34.320 | I find it really frustrating a lot of times, and then that frustration kind of seeps over,

00:06:40.080 | and it costs me my time and my mental energy in other aspects of my work.

00:06:45.240 | I think another lens that you would look on is a lens with regard to safety and to, is

00:06:50.560 | this actually a good idea?

00:06:51.920 | Is this something that I can actually do?

00:06:55.200 | For example, if you are someone who earns, let's say you use your body and you're an

00:07:02.840 | athlete, right, or you're a surgeon, something like this, it would be crazy for you to spend

00:07:07.200 | a lot of time doing things around equipment and machinery and roofs and eaves and ladders

00:07:13.800 | and nail guns and chainsaws and such, right?

00:07:18.440 | Because if your body is injured in some way, then that has a much higher cost for you than

00:07:23.920 | it does to somebody whose body is not so highly paid.

00:07:27.720 | And so you want to consider that as well.

00:07:30.160 | I think finally, the big question is, what could you do with your energy and with your

00:07:35.440 | time?

00:07:36.440 | If all of the projects were done around the house and your wife weren't as upset about

00:07:41.480 | how long things were taking, would that give you more mental space to be more productive?

00:07:46.680 | Some of us have very large opportunities for productivity.

00:07:50.400 | We have high potential with our earnings, and if we could just put an extra 30 or 50

00:07:55.880 | or 100 hours into a project, it could be an extra five, six, or seven figures to our income.

00:08:01.840 | And so that's a big, it's a big cost if doing a DIY project to save a few pennies keeps

00:08:09.680 | us from that very productive side.

00:08:11.920 | On the other hand, some people don't have such financial potential.

00:08:17.440 | Their earning ability is more modest.

00:08:19.880 | They don't have side work or they don't have projects that have exponential kind of financially

00:08:25.240 | explosive power.

00:08:26.880 | And for those people, I think the return on investment of time and money on DIY projects

00:08:32.240 | is a good return.

00:08:33.920 | But the absolute financial aspect is, how much would you be earning with the time that

00:08:40.200 | you don't put into a DIY project?

00:08:42.440 | How much is the DIY project going to cost you?

00:08:45.100 | And is it a better use of your time to make money, pay taxes, deal with expenses associated

00:08:50.540 | with that and then pay for it?

00:08:52.600 | Or is it better for you to simply do it yourself?

00:08:55.400 | Great, thank you.

00:08:58.480 | The only minor complication, which obviously it's not a financial question, is that the

00:09:02.560 | people around here, you get people, you pay people to do a job and unfortunately, it just

00:09:07.040 | really cut corners.

00:09:08.040 | It seems that people don't really want to do a good job anymore.

00:09:11.360 | But again, that's not a financial concern.

00:09:13.920 | But anyway, I really, really appreciate your time and thank you for answering that.

00:09:17.880 | It really helps me.

00:09:18.880 | I think that's a very valid reason why you might want to spend time doing something yourself.

00:09:24.040 | If you get shoddy work and it's going to annoy you to have crooked tile joints and poor trim

00:09:29.640 | work and that's going to annoy you, then either you pony up and hire a very productive, highly

00:09:34.920 | qualified craftsman or you go ahead and just make it a side project as well.

00:09:40.640 | John of Pennsylvania, welcome to the show.

00:09:41.640 | How can I serve you today, sir?

00:09:42.640 | Hey Joshua.

00:09:43.640 | Good analysis for the last person.

00:09:44.640 | I fully agree on all those.

00:09:45.640 | One way I've become better, if it helps the other guy, Vinny, one way I've felt better

00:09:57.960 | about paying contractors in the past or more recently, it's come to me, if I hire them

00:10:03.720 | and they show up with say three or four people to do a big job and they say it takes them

00:10:08.400 | three full days, I'll calculate all those man hours off and then I'll double it because

00:10:12.200 | my skill level probably isn't as good as theirs and I'll just calculate how many weeks that

00:10:16.280 | would have taken me to do something and then I see the true value in it.

00:10:19.880 | Sometimes it's hard to see it when you're just looking at a number on a contract but

00:10:23.560 | shoddy quality is definitely something that makes you feel bad about paying contractors

00:10:29.120 | for sure.

00:10:30.120 | I think that's a good point and I think that happens to a lot of us.

00:10:32.520 | You look at a project and you say, "You know what?

00:10:34.360 | This project should be simple."

00:10:36.080 | And all of a sudden you get into it and you need new tools and all of a sudden the project

00:10:39.600 | isn't simple and it takes you two or three times as long as it should have because of

00:10:44.240 | lack of experience.

00:10:46.080 | And so I think the key is to recognize that we should all be grateful I think to live

00:10:52.280 | in an economy that runs based upon specialization of labor.

00:10:57.160 | And that's the underlying aspect of what makes us so wealthy in the modern world is highly

00:11:03.940 | specialized economies and high specialization of labor.

00:11:08.160 | As much as we appreciate I think sometimes the idea of a pastoral lifestyle and we think

00:11:16.840 | about how wonderful it would be to have a homestead in the country, if we didn't have

00:11:21.600 | a specialized workforce where we all worked with each other and collaborated based upon

00:11:27.960 | some personal unique area of labor, we would live in absolute poverty.

00:11:33.040 | The poorest places in the world and the poorest lifestyles are always the people who try to

00:11:38.080 | do it all themselves.

00:11:39.960 | You go out in the country, you go up to Alaska and find a homesteader who's really committed

00:11:43.960 | to doing all his work himself.

00:11:45.280 | The guy lives like a pauper.

00:11:47.080 | It's just not a wealthy lifestyle.

00:11:50.200 | And so if we reject that and we say, "I'm going to do it all myself," there's a good

00:11:56.080 | chance we're going to wind up poorer.

00:11:58.560 | And so I don't think that most of us when we look at a DIY project really want to go

00:12:03.200 | and say, "I'm going to be an off-the-grid homesteader doing everything myself."

00:12:07.320 | We just say, "I'm going to go ahead and redo my bathroom."

00:12:09.680 | And that's where I say there are elements of enjoyment and satisfaction, making yourself

00:12:16.120 | into a person of diverse skill sets, building up your... trying different things in the

00:12:22.680 | comfort of your own home where there's not a lot of pressure to see, "Hey, do I like

00:12:25.880 | this?

00:12:26.880 | Maybe I enjoy this.

00:12:27.960 | Maybe this is an expression of my artistry and it brings me satisfaction to make my personal

00:12:33.360 | abode something that reflects my individual taste."

00:12:36.880 | Those are all good, valid reasons.

00:12:38.600 | But generally speaking, we want to work in our areas of specialty where we are the most

00:12:44.600 | productive, where we are the most appreciated, and then we want to let other people work

00:12:48.720 | in their areas of specialty and of genius because that's where we have the wealthiest

00:12:55.320 | lifestyle.

00:12:56.320 | >>Trevor: Yeah.

00:12:57.320 | Yeah, I agree.

00:12:58.320 | I'm certainly guilty of romanticizing the off-grid homesteading lifestyle myself, but

00:13:03.040 | I know in the smarter part of my brain that's no way to live for me and I kind of shy away

00:13:08.440 | from it.

00:13:09.440 | >>Trevor: The romantic...

00:13:10.440 | The very best off-grid lifestyle comes when you have some form of work that you really

00:13:18.240 | enjoy, be it doing scientific experiments or creating YouTube videos or writing the

00:13:24.200 | next greatest American novel, and you have a few hundred thousand dollars a year coming

00:13:28.840 | in.

00:13:29.840 | That way you can buy all your toys, you can have your tractors, you can have all the

00:13:32.840 | people, and then you can give yourself the satisfaction of looking out over your flocks

00:13:36.960 | and your herds that other people take care of, and your beautifully painted stables,

00:13:41.400 | et cetera, but it's all based upon that side income that comes from where you actually

00:13:46.040 | earn a lot of money.

00:13:47.040 | That's the best lifestyle to have.

00:13:48.720 | >>Joseph: Absolutely.

00:13:49.720 | Yep, absolutely.

00:13:50.720 | And one kind of argument, there is one good reason to do it yourself on a lot of jobs

00:13:55.720 | is to know for sure you never want to do them again.

00:13:58.760 | I refinished floors once and I was more than happy to pay for floor installation the next

00:14:04.120 | time rather than refinishing them because it almost killed me.

00:14:07.200 | >>Trevor: Every time I talk about how I don't love DIY projects, I feel like I'm betraying

00:14:12.040 | my father a little bit, because one of the things that my dad worked hard when I was

00:14:15.480 | younger was, in addition to education, he worked hard to give us opportunities to do

00:14:21.280 | work and to do manual labor a lot.

00:14:25.040 | So I spent a summer when I was in middle school, I spent a summer working for a tile setter

00:14:29.280 | as a helper on tile jobs.

00:14:31.520 | I've spent time working on farms.

00:14:33.560 | I've spent time doing construction work, various kinds of carpentry and all kinds of different

00:14:39.320 | stuff.

00:14:40.320 | I've done some electrical work here and there.

00:14:42.160 | And so what I have learned from those things, every one of them is what I do not want to

00:14:47.000 | do and where I'm not good.

00:14:48.880 | And in hindsight, I appreciate that I'm actually pretty capable.

00:14:52.560 | I remember when I was a senior in high school, we got together to build our senior class

00:14:56.920 | float on a trailer to bring along behind.

00:14:59.520 | And I was surprised, because I didn't think I was much of a carpenter, I was surprised

00:15:03.400 | that I was one of just a handful of guys who had a concept of basic construction techniques

00:15:09.360 | and how to drive a toenail into a piece of two by four and how to put something that's

00:15:14.200 | not going to fall off, put together some random float that's going to actually hold together.

00:15:20.200 | But I actually consider it a very good part of my experience that I've done enough of

00:15:25.320 | those kinds of jobs to know that I do not want to do those things for the rest of my

00:15:28.720 | life.

00:15:29.720 | And so it motivated me to not spend my time there, because I just found it so physically

00:15:37.160 | draining and mentally boring.

00:15:41.080 | And that was a useful skill for me.

00:15:43.520 | So I hope to impart the same lessons to my children to either give them the chance to

00:15:47.680 | say, "Hey, my children are good at working with their hands and they find great satisfaction

00:15:52.000 | in it and they're good at it," or to learn the same lessons that I personally have learned.

00:15:56.360 | Go ahead with your comment of the day, John.

00:15:58.360 | Yeah, for sure.

00:15:59.360 | Yeah, we'll do it.

00:16:00.360 | I just run my kids a little house in the prairie and I felt very humbled by how much stuff

00:16:06.160 | the father could do and build the house and everything and all the different skills he

00:16:11.800 | had, for sure.

00:16:13.240 | But yeah, my question is kind of just a boring one about real estate.

00:16:16.640 | But I think I know the proper answer.

00:16:18.360 | I figured I'd run it by you.

00:16:21.400 | My in-laws have a house that they bought from another family member about nine or 10 years

00:16:26.320 | ago.

00:16:27.320 | It wasn't bought because they intended to keep it for an investment.

00:16:32.160 | It was just kind of a circumstance in the family that they ended up buying this house.

00:16:35.440 | It's very close to where they live, right across the street, in fact.

00:16:39.480 | It's appreciated quite a bit.

00:16:41.320 | And now they're getting to the point where they don't...

00:16:43.480 | I don't think they ever really wanted to have a rental home, but it's appreciated quite

00:16:48.200 | a bit.

00:16:49.200 | And some of the other factors, like having a person in the family to do all the repairs,

00:16:56.080 | he's getting a bit older and not as nimble as he used to be to be able to get over and

00:16:59.640 | do all those repairs.

00:17:00.640 | So some things that made it attractive to be an unintended landlord are kind of falling

00:17:05.400 | away.

00:17:06.400 | And I simply told them, "It's probably just time to sell it."

00:17:09.080 | Some of the kids are talking about what they're missing out on there.

00:17:14.040 | And the way I could describe it to them, I think I'm correct in saying that, well, they're

00:17:18.000 | going to miss out rather than their parents keeping it until they die and passing it on

00:17:22.480 | to the children to get the step-up value, which right now I think it has gained somewhere

00:17:26.320 | in the 350,000 mark.

00:17:29.360 | That is significant and they could save a lot of taxes on that, but that's really the

00:17:32.360 | only thing I can see as a benefit.

00:17:35.400 | And if you're talking about 15% capital gains tax, somewhere in the order of $50,000, I

00:17:41.600 | said, "Is that really worth it for your parents to keep a house that they really don't necessarily

00:17:49.120 | want to or need to keep?"

00:17:52.120 | And I think no, but obviously it's their decision to make.

00:17:55.040 | So I don't know if there's any other thoughts I need to bring to the table there to give

00:17:58.160 | them a full breadth of the conversation or if I'm thinking about that correctly.

00:18:03.760 | What do you think would happen to the money if the house were sold?

00:18:08.320 | What do you think would happen with the money, the profits?

00:18:13.320 | It would go to help the parents have a probably more secure retirement, although they're very

00:18:19.720 | good savers.

00:18:20.720 | I don't think they're in any jeopardy of having a bad retirement.

00:18:24.360 | They're just getting to retirement age, by the way.

00:18:26.800 | And I think one of them is still working part-time just to have something to do.

00:18:30.280 | The other one's in her first year of retirement and who knows if she'll go back to work or

00:18:35.520 | whatever.

00:18:36.520 | But I think they're fairly good financially, so it might just go to a net thing.

00:18:41.360 | Maybe it would go to some less desirable trades.

00:18:46.280 | Maybe they'd gamble away.

00:18:47.280 | I don't know.

00:18:48.280 | But I don't think it's necessary for their financial security if that's the case.

00:18:53.800 | Well, here are the things that go through my mind.

00:18:56.920 | Taxes are a question, but I think you're right to demote that to a relatively low importance

00:19:04.040 | because you're talking about long-term capital gains, taxes.

00:19:10.040 | Depending on how good their records are, yes, they may have some gain, but it's not going

00:19:14.600 | to be that big of a deal.

00:19:16.760 | My first question is what happens to the money?

00:19:18.680 | The beautiful thing about real estate is, especially for normal people who aren't engaged

00:19:24.800 | in just every couple of years borrowing every last penny of equity out of their property,

00:19:31.240 | real estate allows people to have an asset that produces an income where they don't spend

00:19:35.720 | the principal.

00:19:37.680 | That's a uniquely beneficial thing for many people.

00:19:41.680 | That's also beneficial with children.

00:19:43.820 | You mentioned the children, which is why I wondered what the ownership here is.

00:19:48.240 | It's really nice if you have an asset that can't be sold, especially when you're thinking

00:19:53.960 | about multi-generational planning.

00:19:56.840 | It's nice if you have an asset that is worth a lot of money but can't really be sold and

00:20:02.960 | won't be sold because it has some kind of value to the family.

00:20:06.060 | That allows the family to maintain wealth but not to fritter it away.

00:20:11.240 | Cash is wonderful, but cash spends really easily.

00:20:15.280 | Real estate doesn't spend very easily.

00:20:17.720 | So I ask myself, is this the kind of property that should be sold or is this because we

00:20:23.080 | don't need it anymore and it was a good move but it's not useful now?

00:20:27.520 | Or is this the kind of property that shouldn't be sold because it would be useful to have

00:20:32.440 | in the family and to have as a piece of wealth that could continue to produce dividends down

00:20:36.780 | through the ages?

00:20:38.440 | This next question I ask myself is, could this real estate fill a unique role in the

00:20:44.000 | retirement and financial planning of the parents who own it?

00:20:47.800 | The nice thing, related to what I just said, the nice thing about real estate is in an

00:20:53.200 | ideal scenario, if I could have every retirement planning client that I encounter have a handful

00:21:03.480 | of houses and the bulk of their assets in mutual funds, stocks, etc., I would be tickled

00:21:12.440 | pink because what happens is those houses balance people's concerns in a way that the

00:21:19.720 | paper assets, which are non-tangible and feel risky to people, those houses are more familiar

00:21:27.200 | to them.

00:21:28.200 | And so when markets are down, as a financial planner, and you're talking to someone and

00:21:31.640 | you're saying, "Listen, markets are down 30%, markets are down 40%, there's fear everywhere,

00:21:36.520 | don't sell, don't sell," it's nice to say, "Look, you guys over here, you've got $4,000

00:21:41.680 | coming in from your rental real estate portfolio, you're fine, right?

00:21:44.880 | You don't need to have all this.

00:21:46.600 | Just ignore the statements for the next year.

00:21:48.760 | Let's let this market clear, let's just relax."

00:21:51.760 | And so the fact that the houses are usually uncorrelated, and I don't want to misstate

00:21:58.600 | that, let's just say less correlated to things like large equity markets, etc., and then

00:22:03.760 | also the fact that they're tangible, that people understand them in a way that nobody

00:22:08.000 | understands stocks and mutual funds, then I like that from a diversification perspective.

00:22:13.880 | And so I think it's valuable to have, and for the reasons stated, that it's nice to

00:22:18.840 | have that income that comes in, it's nice to know there's a bunch of gains sitting there,

00:22:23.080 | it's nice to know we have a paid-off house that we could access if we needed it.

00:22:27.120 | That said, I think people often find themselves to either be real estate people or not to

00:22:33.800 | be real estate people.

00:22:35.440 | And it sounds like these people might not be real estate people.

00:22:40.720 | Like, "Okay, well we bought it because it showed up and it's actually turned out to

00:22:43.720 | be a good move, but we don't really want to be real estate people in the future."

00:22:48.880 | In my experience, many people, once they buy a house, they quickly learn, meaning a rental

00:22:53.280 | house, and they go through it for a couple of years, they quickly find out either, "Yeah,

00:22:57.040 | I can handle this, I can learn these skills, and I'm good at it, I'm a real estate guy,"

00:23:01.600 | or "I'm not, I don't want to deal with it."

00:23:03.600 | In that case, I say sell the house, put the money in mutual funds, and go on.

00:23:09.680 | Because if they're looking for productive assets that don't require the difficulty,

00:23:15.400 | don't require the time, don't require the trips to Home Depot, etc., then I think certainly

00:23:19.640 | there's no question that mutual funds are superior, vastly superior, to that piece of

00:23:23.720 | real estate.

00:23:25.360 | But those are the additional questions that I would ask.

00:23:27.520 | Is this going to be a useful part of their portfolio, etc.?

00:23:32.920 | I think that, as a financial planner, you recognize that people who just have one or

00:23:38.680 | two houses often don't, they often significantly underperform capital markets, but I still

00:23:46.200 | feel like it brings a good amount of mental security to people to know, "I have this house

00:23:52.880 | here that's available for me that's creating rental income."

00:23:55.440 | So I can't give you a clear yes or no, but that is what I think about.

00:23:59.520 | No, that's a good way to think about it.

00:24:02.880 | It's a good thing to consider the realness of it.

00:24:05.320 | While they're good savers, I wouldn't say they're financially savvy as far as anything

00:24:10.680 | regarding markets.

00:24:11.680 | It's all a big mystery to them.

00:24:13.480 | So having something real could help them mentally in the future.

00:24:17.360 | It's a good aspect of what I'll bring up.

00:24:20.040 | Super dangerous for people to say it's all a mystery to me.

00:24:23.680 | It's really dangerous, right?

00:24:24.920 | Because what happens is they can take advantage of it really easily, and they can do dumb

00:24:32.560 | things because, "Oh, it's all a mystery to me."

00:24:35.200 | And so this is one of the reasons why I think that real estate has been so productive at

00:24:40.560 | helping people build wealth.

00:24:42.320 | It has such big dollar signs behind it.

00:24:44.960 | People understand it intuitively because they've always lived in houses.

00:24:48.000 | They understand the value that a house has.

00:24:50.200 | They know a market.

00:24:51.200 | They understand what's necessary.

00:24:53.360 | Houses are big dollar figure things, so they're hard to sell.

00:24:56.840 | They're expensive to sell.

00:24:58.040 | People don't just freak out when the market goes down 5%.

00:25:00.640 | They don't get marked to the market every day.

00:25:02.400 | You don't get a statement every day on your iPhone telling you, "Here's what your house

00:25:05.680 | is worth."

00:25:06.680 | And so because of that benign neglect, real estate generally works out for people.

00:25:12.560 | Whereas with stocks and mutual funds, for the unsophisticated, they often wind up making

00:25:19.140 | these errors when they could be avoided if they would just apply that same principle

00:25:23.920 | of benign neglect.

00:25:24.920 | Jim Collins: Sure.

00:25:25.920 | Yeah, no, good talk, man.

00:25:26.920 | I appreciate all that.

00:25:27.920 | Thank you.

00:25:28.920 | Peter T. Leeson, Jr.: Well, thank you for helping them to think it through clearly and

00:25:33.480 | helping them to come to a good decision.

00:25:34.800 | We go to 703.

00:25:35.800 | Welcome to the show.

00:25:36.800 | How can I serve you today?

00:25:37.800 | Jim Collins, Jr.: Hi, Joshua.

00:25:38.800 | My name is Jim, and I have a, I hope, quick question for you.

00:25:44.360 | The synopsis is my dad is trying to convert his SEP IRA to Roth, do a Roth conversion

00:25:52.660 | on it, a little bit of an amount per year.

00:25:57.340 | The little background on him, 70-year-old single, only on Social Security, so he doesn't

00:26:02.420 | have to file a tax return now.

00:26:03.820 | Obviously, will when he has to start taking RMDs or he starts converting.

00:26:09.060 | He's got a SEP IRA, all taxable, approximately a million dollars.

00:26:14.000 | For him, RMDs will start at 72 instead of 70.5.

00:26:17.720 | He's looking at doing the Roth conversion, and let's see, he's aware the Roth conversion

00:26:24.400 | is going to count as income, and he's going to have to file tax returns.

00:26:27.640 | Wants to stay in the no higher than 24% bracket, which is about 170 for a single person, because

00:26:35.360 | when he takes his regular RMDs, which is going to be about $40,000 to $50,000 a year, that's

00:26:41.680 | automatically going to put him in the 22% bracket.

00:26:43.680 | He figures that the 24% bracket is marginal cost to get the benefits of a Roth.

00:26:52.120 | The real question for you is, do you see, what downsides are there to this?

00:27:00.280 | Before I answer that, what upside is he hoping to get?

00:27:03.880 | Why does he think that he's served well by a Roth conversion?

00:27:09.760 | My brothers and I are the beneficiaries of it.

00:27:15.160 | He does not pull money out of it.

00:27:16.640 | I cannot convince him to take a dollar out of it, and he's basically looking to pass

00:27:20.560 | it on to us.

00:27:22.640 | All three of us are going to be in the 22% or higher bracket, and he figures if it can

00:27:28.720 | grow tax free over the next, he's estimating 10 years, he just thinks that he's a very

00:27:38.120 | anti-tax guy, and he just thinks that this is going to be a better option for him to

00:27:46.760 | give to us, so we don't have to pay taxes on it later.

00:27:51.160 | He hopes to start converting it now at about $150,000 a year, and then he can get it all

00:27:57.360 | converted to Roth, it'll grow a bit, and then everything's tax free after that.

00:28:03.520 | So I think that that answer that you gave is the answer that makes this a good move.

00:28:12.160 | Meaning what he's trying to do is he's trying to pay taxes at a predictable rate that he

00:28:18.720 | can control now based upon the amount of money that he converts, and he's trying to move

00:28:23.440 | it into a Roth IRA where he won't have to take required minimum distributions with the

00:28:29.200 | goal that he lives a long and healthy life for his entire lifetime.

00:28:34.200 | He gets to enjoy that money being tax free, and then at his death, then you would be the

00:28:40.760 | beneficiaries of the Roth IRA, and you would be able to maintain that tax free nature for

00:28:47.960 | a significant amount of time depending on what the actual rules are at the time of his

00:28:53.560 | death based upon the inheritance of a Roth IRA.

00:28:57.560 | I say that because this is one of those areas where there's certain to be change, right?

00:29:01.920 | Traditionally we would say, "Well, you could put it into a stretch IRA and take it out,"

00:29:05.520 | and then in the recent round of tax legislation, there were some new rules imposed, and so

00:29:09.920 | we don't know what those rules are going to be 30 years from now.

00:29:13.120 | All we know is that if he keeps it in the SEP IRA and then he dies, then you as the

00:29:19.920 | beneficiaries will have to pay full income taxes on it as you take it out.

00:29:23.120 | Of course, you can still do some stretch IRA calculations, et cetera, and also we know

00:29:32.040 | that if he keeps it in the SEP IRA, he'll have to start doing required minimum distribution.

00:29:36.320 | I think that here this is a good reason to do a distribution.

00:29:41.720 | So now the question you asked me is what are the downsides?

00:29:44.400 | I'd say number one downside would just be that you're going ahead and locking in the

00:29:50.960 | taxes now, and is it possible that instead of taxes going up in the future, that taxes

00:30:00.220 | go down in the future or that there's some other wrinkle that comes out?

00:30:05.480 | That's unknowable, and so you always hate to pay taxes.

00:30:09.460 | If there's ever a time when you can defer taxes to the future, you always try to do

00:30:13.720 | that.

00:30:14.720 | So in this case, this is one of those questions where maybe something changes in the future,

00:30:18.320 | but of course, I think it's unlikely.

00:30:20.200 | So that's not really a downside.

00:30:22.440 | Go ahead.

00:30:23.440 | He and I have spoken about that, the future risk, and he and I are both, as I think you've

00:30:31.760 | said in the past time or two, that overall tax rates may go up and down and so on and

00:30:38.840 | so forth.

00:30:39.840 | But in general, they generally don't fluctuate a dramatic amount to make a huge difference.

00:30:48.600 | There's a time or two in history that it has, but over the last 20, 25 years, our tax bracket

00:30:53.480 | has stayed fairly stable within reason for up to $150,000 to $200,000 a year.

00:31:03.120 | Typically on those that make more, it fluctuates more, but for the middle class, it seems to

00:31:11.680 | be fairly stable over the last 20, 25 years.

00:31:15.880 | Exactly.

00:31:16.880 | I concur with that.

00:31:17.880 | That is my personal analysis as well, that any changes have generally shown themselves

00:31:25.560 | to be fairly small.

00:31:27.520 | There are changes at the margin, and it seems to me that the taxing authorities feel like

00:31:34.200 | they've pretty well dialed in their Laffer curve, that they're at the optimal amount

00:31:38.600 | to get the most tax revenue out of the population with the least amount of noise.

00:31:43.080 | And so taxes are a political tool that politicians press on, that we're going to raise taxes

00:31:49.680 | on the rich, we're going to lower taxes on business people and on the middle class, et

00:31:53.480 | cetera.

00:31:54.480 | And so when they actually have the opportunity to pass legislation, generally it seems like

00:31:58.800 | they're unpersuaded to make any significant changes.

00:32:02.960 | And so the changes are relatively small, and I think it's simply because they've honed

00:32:06.400 | in on the fact that we've got a precisely very efficient tax code.

00:32:12.080 | I think it's, I say from personal experience, that this is true.

00:32:16.040 | I find the United States kind of maddening, because the taxes are not so low that you

00:32:22.980 | just feel like, you know what, it's wonderful, I'm in the best place in the world because

00:32:26.840 | I'm in tax haven.

00:32:28.600 | On the other hand, they're not so high that they're so uncomfortable that they push you

00:32:31.760 | out.

00:32:32.760 | There's some people, some people, not all, most people just live where they live because

00:32:38.960 | they like being there.

00:32:40.280 | But some people will leave Sweden or leave Holland to go somewhere else, leave the Netherlands

00:32:48.600 | to go somewhere else.

00:32:50.160 | But very rarely does anybody leave the United States for tax planning.

00:32:54.260 | And so they've kind of got this sweet middle zone success story where we're not too high,

00:32:59.160 | we're not too low, and we get a lot of tax revenue out.

00:33:02.380 | So I think that they've dialed in that they're happy with where things are at.

00:33:07.700 | I don't see many downsides.

00:33:08.940 | I think that this is an appropriate situation to do the conversion.

00:33:13.260 | I think that your father's intention for you to inherit the money in the best way possible

00:33:21.400 | is excellent.

00:33:23.580 | The only thing that tickles at the back of my head is I would look to see if he's charitably

00:33:28.920 | minded and ask myself, does he have any personal charitable goals that he would like to use

00:33:36.160 | this SEP IRA to fund in addition to an inheritance for his children?

00:33:43.880 | Because if he set up a charitable organization, even if that was his own fund or made some

00:33:49.080 | kind of charitable transfer with a direct transfer of the SEP IRA, I think that would

00:33:52.340 | be a superior move from a tax perspective.

00:33:54.960 | But beyond that, I think your analysis is good, and I think this is a good situation

00:33:59.680 | for a Roth conversion.

00:34:02.160 | Great.

00:34:03.160 | Thank you.

00:34:04.160 | I've got one more question in relation to this.

00:34:07.640 | At $1 million a year, he's 70.

00:34:12.040 | He's got two years before he has to take RMD.

00:34:17.120 | So assuming he does this at $150,000 a year over the next two years, that's going to reduce

00:34:23.400 | the IRA without any growth or anything down to $700,000.

00:34:27.640 | Now, from my understanding, if you can confirm this, I'd appreciate it.

00:34:34.000 | After he's 72, he's going to take his RMD of about $28,000 to $30,000 a year based on

00:34:42.840 | the $700,000.

00:34:43.840 | And he can still do, above that, he can still do Roth conversions after he has started his

00:34:50.320 | RMD.

00:34:51.320 | Am I thinking that's correct?

00:34:53.680 | Yeah, absolutely.

00:34:54.680 | You can do Roth conversions any time that you want.

00:34:57.200 | Absolutely.

00:34:58.200 | There's no problem there at all.

00:35:00.400 | But your RMD cannot count as part of that Roth conversion, is my understanding.

00:35:06.680 | That's my understanding as well.

00:35:07.680 | Yeah, the RMDs have to go into a taxable account.

00:35:11.160 | And if he doesn't have earned income, then those RMDs would have to go into the taxable

00:35:15.920 | account.

00:35:16.920 | So correct, that's my understanding.

00:35:19.200 | And along those same lines, say in two years at $700,000, he starts his RMD, which is going

00:35:24.800 | to be about $30,000 a year, fall apart.

00:35:28.320 | If he then does an extra $100,000 a year, will his RMDs from 72 to say 77, will his

00:35:37.120 | RMDs go down because that's recalculated every year?

00:35:41.520 | Yes.

00:35:42.520 | Because the balance is much lower?

00:35:44.000 | Exactly.

00:35:45.000 | Yes.

00:35:46.000 | Awesome.

00:35:47.000 | Great.

00:35:48.000 | Josh, thank you so much.

00:35:49.000 | You've answered all my questions.

00:35:50.400 | And I just wanted to, it's a big financial move for my dad.

00:35:55.080 | He's worked in the oil field forever and he just had, he was looking for some maybe confirmation

00:36:01.280 | bias, if you will.

00:36:02.840 | But if nothing else, he was just looking to bounce some ideas and I figured I'd give you

00:36:08.000 | a call.

00:36:09.000 | And I want to say thank you for doing this for your Patreon people.

00:36:13.320 | It's a very valuable thing.

00:36:15.840 | And I think that the Patreon cost is well worth, well underpaid for what the information

00:36:22.600 | I received today.

00:36:23.600 | So thank you.

00:36:24.600 | I'm going to go.

00:36:25.600 | I tell people and sometimes it seems like they don't understand.

00:36:29.160 | The cheapest way to talk to me, as long as you don't mind someone hearing the sound of

00:36:33.320 | your voice and airing out and my choosing how long it is, the cheapest way to talk to

00:36:37.600 | me is to jump on one of these Friday Q&A calls.

00:36:42.680 | And with that we go to Kristen.

00:36:43.680 | Kristen, welcome to the show.

00:36:44.680 | How can I serve you today?

00:36:45.680 | Hi, Joshua.

00:36:46.680 | Thank you so much for taking my call.

00:36:49.680 | This is very exciting for me.

00:36:52.080 | I'm a brand new Patreon.

00:36:55.040 | So my question is, I am thinking of buying a vacation home abroad somewhere in Central

00:37:02.640 | America and my interest is peaked in El Salvador because my husband and I are Bitcoiners and

00:37:11.200 | we love the idea of maybe a plan B residence over there.

00:37:16.160 | The housing is affordable at this time and we might want to possibly retire there.

00:37:22.640 | But most of all, it would just be a vacation home and hopefully something that we could

00:37:28.640 | rent out.

00:37:31.440 | So we basically saved up $100,000 to put toward it so far, which is not enough, I think, to

00:37:40.760 | pay a full cash value.

00:37:43.160 | So my question is, should we keep saving up and just wait for the right time or should

00:37:49.800 | we take some financing?

00:37:53.040 | What's an appropriate amount of money to spend on something like this?

00:37:55.720 | It does seem very luxurious purchase that we're not used to buying, but we are debt

00:38:01.680 | free.

00:38:02.680 | We're actually homesteaders in the country.

00:38:04.720 | Great.

00:38:05.720 | Which is kind of funny.

00:38:07.440 | After my homesteader bashing.

00:38:08.960 | Oh yeah, and we love it, but my husband does have a day job and we do hire people.

00:38:16.000 | I just wrote a big fat check today for a fencer.

00:38:19.480 | But anyway, just kind of wanting to get some advice from someone who's not trying to sell

00:38:24.120 | us a home abroad and maybe a little pep talk about how to make this purchase appropriately

00:38:32.680 | in a way that's not going to stress me out, in a way that's not going to make me regret

00:38:37.760 | that I did this.

00:38:40.080 | And another thing, because we are homesteaders, it's not really possible to spend a huge amount

00:38:44.720 | of time out there at the moment.

00:38:47.840 | We could probably get away for a couple weeks a year.

00:38:50.520 | So I don't know if that affects your answer.

00:38:53.840 | Do you like going to El Salvador?

00:38:58.000 | I've never been.

00:39:00.360 | That's step one.

00:39:01.360 | I like going to Costa Rica.

00:39:04.160 | That's step one, because you want to make sure, if you're going to buy a vacation home,

00:39:10.240 | you want to make sure that you buy somewhere that you like and that you're actually going

00:39:14.280 | to go and do it, especially when you're thinking about doing it abroad.

00:39:18.960 | Where in the United States is your primary homestead?

00:39:21.320 | What region?

00:39:22.320 | We're in southeastern Arizona.

00:39:28.000 | So just trying to think of flights in and out of Central America.

00:39:32.120 | You would always have to connect through either LA or Texas or Florida from Arizona.

00:39:37.560 | I doubt there are any direct flights.

00:39:39.000 | Is that right?

00:39:41.000 | Yeah.

00:39:42.480 | Okay.

00:39:43.800 | So here are some of the questions that I would raise.

00:39:47.160 | And I would be cautious and slow to do it.

00:39:50.640 | And I'll give you some arguments as to why for you to consider.

00:39:55.440 | The second question, do you speak Spanish or does your husband speak Spanish?

00:40:00.440 | No, but I'm trying to learn.

00:40:03.520 | Good.

00:40:04.520 | Third question, if you did buy a property, not having yet gone there, describe to me

00:40:09.840 | what your dream property would look like.

00:40:15.200 | I'm actually looking at a development.

00:40:19.880 | So my dream property would be turnkey.

00:40:23.160 | That included a property manager, because I don't want to be a hands-on landlord.

00:40:28.440 | It would be like a tiny house or a little surf cottage by the beach.

00:40:35.680 | Okay.

00:40:37.040 | So something not in a condominium, not a big building, but some kind of freestanding structure.

00:40:46.360 | And you want a freestanding house, but in a development that somebody is developing

00:40:51.960 | as a centrally planned community?

00:40:54.440 | Yes, exactly.

00:40:57.240 | I have my eye on one that's in development right now.

00:41:00.040 | And it's a series of tiny homes.

00:41:02.280 | How much are they asking for those?

00:41:05.920 | Anywhere between $125 to $175.

00:41:11.880 | So what you're considering is not wrong.

00:41:18.400 | I would caution you and I would say that you want to be very clear on what you're actually

00:41:23.260 | paying for, and I'll give you some insight into the Central American marketplace.

00:41:30.360 | So to begin with, if you're going to choose a vacation home, you need to choose a place

00:41:34.960 | that you actually like.

00:41:37.080 | And I would really want you to spend several significant vacations in this place before

00:41:43.800 | you actually committed to a house.

00:41:47.660 | And make sure that you actually like going there.

00:41:50.680 | And that liking going there needs to be everything associated with liking going there.

00:41:56.520 | Meaning, that's why I asked about airline connections, right?

00:41:59.280 | Do you want to connect through?

00:42:01.200 | It's kind of a hassle if you have to fly from Tucson to Houston and all of the connections

00:42:07.880 | are stink, right?

00:42:08.880 | Or you fly from Tucson to Miami, there is probably a two and a half hour flight.

00:42:13.860 | And then you sit in Miami for four hours, and then it's another two and a half hours

00:42:17.180 | from Miami back west to El Salvador, and now to get back and forth is a whole day's travel

00:42:23.420 | and it's really annoying to you.

00:42:25.440 | On the other hand, if you could find something that's a direct two hour shot, then that's

00:42:30.880 | a much lower and a much easier thing to do.

00:42:34.600 | One of the things that you need to be very aware of when dealing with Central America

00:42:38.560 | specifically, and this is true in many places outside the United States, not all, but it

00:42:42.800 | is definitely true in Central America.

00:42:45.720 | Property does not move fast like you're accustomed to in the United States.

00:42:51.240 | The values thus are very hard to say.

00:42:54.800 | In the United States, especially right now, you can sell a property and you can know a

00:42:59.080 | good idea of what the price is.

00:43:00.680 | You can sell a property in a couple of weeks.

00:43:02.440 | I don't know of anywhere in the United States that has a slow real estate market.

00:43:05.880 | You can sell a property and the market is extremely efficient, so you know what the

00:43:09.960 | price that you're getting in as and you know what the price that you can get out is.

00:43:13.880 | And so that allows you to plan.

00:43:15.240 | You go and you say, "Hey, I bought this property.

00:43:16.800 | It's $125,000 and now I can sell it and I can get out of it."

00:43:21.600 | And so you know your exit plan.

00:43:23.720 | That is not true in any way, shape, or form in any place in Central America.

00:43:31.200 | If it is true, the only place it would be true would be a place like Panama City with

00:43:36.360 | downtown apartments in well-established high-rise apartment buildings.

00:43:43.640 | There's nowhere else or Mexico City in very desirable neighborhoods and very established

00:43:50.280 | places.

00:43:51.400 | That's where you could sell a property quickly.

00:43:53.840 | Everywhere else in Central America, you would expect that if you wanted to sell a property,

00:43:58.640 | minimum you should plan on a couple of years because there's no efficient marketing of

00:44:03.840 | a property.

00:44:05.000 | There's no central database.

00:44:06.560 | There's no central system and there's not a lot of demand, especially the kinds of properties

00:44:12.000 | that you are interested in.

00:44:14.640 | There's not a lot of local demand for those properties.

00:44:18.240 | The reason I say there's not a lot of local demand, let me explain to you how Central

00:44:21.720 | America works.

00:44:22.720 | It's very different than the United States.

00:44:24.800 | In Central America, you have a much greater wealth disparity than you have in the United

00:44:31.440 | States.

00:44:32.440 | In the United States, there is a massive middle class where you have many, many people who

00:44:39.100 | have the means to afford middle class lifestyle.

00:44:43.560 | The United States has the strongest middle class of any country in the world.

00:44:46.320 | It's wonderful.

00:44:47.400 | But in Central America, you don't have that.

00:44:49.440 | In Central America, you have a very, very small middle class.

00:44:53.080 | You rather have a small upper class and a very large lower class.

00:44:58.200 | The upper class is exceedingly wealthy.

00:45:02.100 | You have many, many very, very wealthy people all throughout Central America.

00:45:07.280 | They live like wealthy people, which means they have nice houses, they have nice plantations,

00:45:12.400 | they have nice apartments, they have nice cars, they have large estates with multiple

00:45:19.880 | employees working for them on their estates, etc.

00:45:23.600 | They're not interested in a beach shack somewhere.

00:45:26.240 | They're not interested in a tiny house.

00:45:27.880 | They're not interested in some dinky little apartment.

00:45:30.400 | They're interested in top level properties that are created for wealthy people and they

00:45:35.160 | have the means to afford it.

00:45:36.960 | On the other hand, you have a huge lower class.

00:45:40.880 | That lower class is not interested in buying any kind of property that you would actually

00:45:46.200 | live in.

00:45:47.200 | Why?

00:45:48.200 | Because the lower class can build for itself an appropriate home.

00:45:52.400 | Unlike in the United States where no poor person can build his own home, you can't afford

00:45:56.640 | it because you can't afford to comply with code enforcement, you can't afford to do it

00:46:00.640 | all at once, you can't afford to get your plans through city hall.

00:46:04.400 | Poor people in the United States can't build their own houses, but in Central America you

00:46:08.400 | can.

00:46:09.400 | You can go out and you can get some wood from the local rough cut lumber from the local

00:46:13.440 | saw mill and you can save up and you can get a few pieces of tin and you can build a shack

00:46:17.480 | and you can live in the shack.

00:46:19.360 | Everywhere that you will go in El Salvador where somebody is building a community, there

00:46:24.400 | are plenty of people who are already living there, but they built their house for $2,000,

00:46:29.360 | $3,000, $1,000, etc.

00:46:33.200 | So the kind of property that you're looking at is not the kind of property that you will

00:46:37.840 | be able to sell very quickly.

00:46:40.800 | So you need to know that going in and be thoughtful and recognize, "Hey, if I buy this property,

00:46:46.080 | I'm going to own this property for a very long time and/or I'm going to have to sell

00:46:51.640 | it to another foreigner."

00:46:54.880 | So now let's talk about the foreign property market.

00:46:57.000 | So the development that you're looking at is almost certainly, if it has a website and

00:47:01.600 | if it's something that has crossed your computer screen, that development is almost certainly

00:47:08.360 | a development that has been created for expats, for foreigners, be it for vacationing foreigners

00:47:16.440 | or just expats living in El Salvador, which is great.

00:47:21.360 | There's nothing wrong with that.

00:47:23.080 | And in fact, you might find it to be a wonderful community.

00:47:25.640 | You might really enjoy it.

00:47:27.560 | There'll be a really fun international flair.

00:47:30.960 | There's lots of other expats that you would be able to speak with in English.

00:47:34.720 | You can enjoy your time together.

00:47:37.440 | It's not bad to live in an expat bubble in El Salvador.

00:47:41.480 | You might really enjoy it.

00:47:43.080 | And the kinds of people who would also be interested in a tiny house or a surf shack

00:47:46.880 | on the beach might just be your perfect people that you really want to enjoy being with.

00:47:51.840 | But you are paying a very significant financial premium for that property because you are

00:47:58.840 | compensating the developer who had the vision and the foresight and took the financial risks

00:48:03.800 | to put the land together to get the appropriate zoning permits, to get it all titled and marked

00:48:08.240 | out and surveyed and to go ahead and build the structures, etc.

00:48:11.960 | And that developer probably has a significant inventory.

00:48:16.640 | And so let's say that you buy the property and five years from now you want to sell it,

00:48:21.600 | the developer is still going to probably have a sales office where he's still building other

00:48:25.520 | properties and selling those other properties.

00:48:27.280 | And so why would somebody come and buy your five-year-old lived-in property and not simply

00:48:32.320 | go and buy one of the brand new ones from the developer?

00:48:35.400 | There could be good reasons why.

00:48:36.760 | You might develop the place and it's beautiful.

00:48:38.600 | You might have really mature fruit trees.

00:48:41.400 | And for me, if I could go in and buy a five-year-old house, but that five-year-old house is surrounded

00:48:46.280 | by a food forest, whereas the brand new one has been, the ground has been raised and it's

00:48:50.560 | just denuded earth and I've got to do it all, man, I'll take the five-year-old house with

00:48:54.120 | the food forest any day of the week.

00:48:56.400 | But you need to think about this going in.

00:48:58.320 | So those should be some big warning flags to say to you that if you go into this type

00:49:03.920 | of property, you want to make sure that you actually like it and that you like being there

00:49:09.380 | and you're going to get good use out of it, that you're going to fly down and spend significant

00:49:13.840 | amounts of time there, that your family is going to want to come and be with you there

00:49:18.120 | or that you're going to actually use it.

00:49:20.980 | Whereas the property markets in all of Central America are simply wildly different than everything

00:49:26.940 | that you are accustomed to in the United States.

00:49:30.720 | So can buying a property be a great thing?

00:49:33.780 | Absolutely.

00:49:34.780 | If you buy a property that you love and that you love going to and that you're going to

00:49:39.300 | want to continue to go to for many years, then I say go for it.

00:49:44.580 | If you can afford it, go for it.

00:49:45.980 | Buy it, make use of it because you'll enjoy it.

00:49:48.560 | If your family enjoys it, maybe it's got a wonderful surf break and you just love going

00:49:53.220 | down there, your children love it or your friends love it, go for it.

00:49:58.340 | Is there a good chance that these properties that are purchased today will be worth more

00:50:04.440 | a couple decades from now?

00:50:06.100 | Almost certainly.

00:50:07.380 | All of the economies in Central America are growing with the exception perhaps of Nicaragua.

00:50:15.500 | The business climate has improved.

00:50:17.700 | El Salvador just elected a young forward-thinking president.

00:50:24.860 | Many of these countries have made tremendous progress in reducing corruption, increasing

00:50:30.440 | business friendliness, etc.

00:50:32.620 | There's every reason to think that there's good potential for growth in the future.

00:50:37.700 | I don't expect Central America to be the war-torn, violent place that it was during the 1980s.

00:50:50.020 | I don't personally expect that to happen again, again with the big exception of Nicaragua

00:50:53.460 | right now.

00:50:55.620 | But still, that's a long-term perspective.

00:50:57.780 | If you're looking at it from a financial perspective, I think you would find many, many markets

00:51:04.240 | that seem much more attractive in terms of their growth potential than most places in

00:51:08.780 | Central America.

00:51:13.060 | That would be my caution to say, don't buy a property because it looks good in the pictures.

00:51:21.460 | First thing you do is go there, spend some time there, find some other Bitcoiners who

00:51:26.780 | are also doing that, check out where they're going.

00:51:29.020 | I think there is a good reason to think that El Salvador may indeed have some growth due

00:51:35.200 | to the Bitcoin economy.

00:51:37.000 | There are many people who are overnight Bitcoin millionaires who are going there and seeking

00:51:42.440 | to encourage them for their forward-thinking stance on making Bitcoin a required currency

00:51:50.040 | to be accepted.

00:51:51.480 | But having spent a good amount of time in Central America, I would caution you that

00:51:57.600 | go and live it, spend several good vacations there before you actually go and pull the

00:52:03.640 | trigger on a property.

00:52:05.040 | One more piece of advice and then I'll await your response.

00:52:09.920 | Before you go and you buy in a planned community, make sure that that planned community is going

00:52:16.360 | to offer you something significant that is not available in the open market.

00:52:27.560 | Here is where, since you don't speak fluent Spanish and you are a foreigner, I would strongly

00:52:33.720 | urge you to find a local person, develop some local contacts.

00:52:39.660 | Those can begin with simply social contacts.

00:52:42.400 | You might meet some people who live there, meet some expats, you might meet a missionary

00:52:46.680 | or meet someone who retired down there, etc.

00:52:50.340 | And then you probably want to find some professional contacts, right?

00:52:53.220 | Find a local lawyer.

00:52:54.800 | Probably a local lawyer is one of the best information brokers.

00:53:00.520 | Hire the lawyer to be your representative and to look for some other properties.

00:53:04.760 | Because if you're looking to spend your money well, for $100,000 without question, if you

00:53:12.480 | could work with an appropriate local, you could get far more land and probably more

00:53:18.520 | opportunity for a house than what the developer is offering you.

00:53:22.000 | And go and see the development with your eyes and say, "Is this a place that I actually

00:53:25.340 | want to live in?"

00:53:26.340 | Let me give you an example.

00:53:28.480 | First, all throughout Central America are all kinds of developments where somebody came

00:53:32.720 | in and said, "Hey, you know what?

00:53:34.280 | I'm going to make a buck developing property and selling it to rich Americans."

00:53:39.200 | And they come in and they just never finish the development.

00:53:41.580 | And you'll find that there's this big elaborate gate and then the road is just destroyed in

00:53:45.200 | front and you've got no recourse, right?

00:53:47.400 | You're left with something that is totally, it's not worthless, but it's pretty much worthless.

00:53:54.800 | Because you have no recourse.

00:53:55.800 | There's no legal recourse.

00:53:56.800 | You won't get anywhere in the courts.

00:53:58.000 | And if the developer just takes the money and disappears, then everyone who actually

00:54:01.520 | bought property in that development is left without recourse.

00:54:05.040 | And many times, the development doesn't get finished.

00:54:08.000 | And so you need to be very thoughtful and get good legal advice to make sure that you're

00:54:11.980 | getting in at a phase in which it's appropriate.

00:54:14.800 | There are some developments that are really special.

00:54:19.020 | My favorite development in Central America is Rancho Santana, which is one that Mark

00:54:24.520 | Ford was involved in developing in Nicaragua, San Juan del Sur, Nicaragua.

00:54:29.000 | And it is just, it's stunning, right?

00:54:30.960 | It's amazing.

00:54:32.520 | But it's amazing because Mark and his co-investors, they sank, it was a passion project for them,

00:54:41.280 | right?

00:54:42.280 | They sank Rancho Santana, Rancho San Juan, and they decided to develop it.

00:54:44.320 | And it's luxury.

00:54:45.320 | And they have committed themselves to maintaining that standard of luxury.

00:54:49.520 | And it's the kind of standard that there is a big market for because it's a luxury market.

00:54:54.520 | Another good example would be in Costa Rica, right?

00:54:56.600 | You've got Los Sueños, the development in Jaco.

00:55:01.160 | It's a luxury development.

00:55:03.280 | And it's going to always have that luxury appeal because it's convenient, right?

00:55:09.320 | You can fly into Costa Rica.

00:55:10.320 | In an hour, you can be at your door in Jaco, hour and a half, hour to hour and a half from

00:55:15.360 | the airport.

00:55:16.360 | You can, you have the Marriott Hotel there, which is an attraction for many tourists.

00:55:22.080 | You have the Yacht Club.

00:55:24.000 | You've got kind of this high-end stuff and it's a luxury development that's very proven.

00:55:28.880 | And so I think these are the kinds of developments and they're all over Central America.

00:55:32.600 | You can find them, but they're not at the low end, the low end side.

00:55:36.800 | They're luxury developments.

00:55:37.800 | And I think there's a good, if you're looking for a luxury vacation home, there's a good

00:55:42.040 | argument for them.

00:55:43.040 | But I would be nervous myself, especially without having spent significant amount of

00:55:47.840 | time there vacationing or without having a personal acquaintance.

00:55:53.560 | There are expats developing all kinds of properties all throughout Central America.

00:55:59.320 | And they're often labors of love, right?

00:56:01.080 | Little eco-villages, little things like that.

00:56:03.600 | And so if you can find a labor of love where there's somebody who's building something

00:56:06.880 | because they're committed to it and they're living there, then yes, go all in.

00:56:09.960 | Just make sure that this one that you're involved in does have that expression.

00:56:16.560 | That's my overview.

00:56:17.560 | Awesome.

00:56:18.560 | Thank you.

00:56:19.560 | I think I was feeling like I needed to get in while prices were kind of still low in

00:56:27.280 | the region before things blow up because of Bitcoin.

00:56:30.040 | And I think I was kind of spiraling into an impulse buy, perhaps.

00:56:36.360 | And I think I just need to chill out and I need to go there.

00:56:39.040 | And I mean, if prices rise in the next few years, so be it.

00:56:43.520 | I'll just keep on saving.

00:56:45.640 | You need to go there and you need to make sure.

00:56:47.160 | I do not expect, I think that Bitcoin may have some influence on El Salvador.

00:56:53.920 | But El Salvador is starting from a very position significantly at the rear.

00:57:01.440 | El Salvador is known for having the highest murder rate in Central America.

00:57:05.960 | I think the fear that people have of that is overblown.

00:57:09.240 | Generally, virtually all of the violence that happens in Mexico, in anywhere in Central

00:57:15.520 | America, virtually all of the violence is related to drugs.

00:57:18.840 | Meaning people that are buying drugs, going and literally buying drugs on the beach in

00:57:24.240 | Mexico and get targeted, or who are involved in the drug trade and the gang wars that are

00:57:29.720 | associated with them.

00:57:31.360 | But El Salvador has had its reputation significantly tarnished by that.

00:57:37.120 | And it's one of those things where the reputation of El Salvador is the worst, in my opinion,

00:57:45.720 | of any country in Central America.

00:57:51.040 | I don't need to qualify it.

00:57:52.240 | I would say I think their reputation is the worst.

00:57:54.640 | And so again, I think oftentimes it's overblown.

00:57:57.400 | But most people who don't have some confidence from traveling in the region are going to

00:58:04.200 | be dissuaded from that.

00:58:07.100 | And so you just want to be recognized that it's starting from a backwards position.

00:58:11.360 | And it's going to take some time to work those things out.

00:58:13.800 | So I say, yeah, get in early, but make sure that you go slow.

00:58:18.320 | Because this is the kind of market where there's no clear and obvious wins.

00:58:25.120 | I think that if you're looking from an investment perspective, there are many other places in

00:58:28.520 | the world that are much more exciting from an investment perspective.

00:58:32.280 | The reason you would go to El Salvador would be, hey, I've got some Bitcoin in this wallet

00:58:37.000 | on the side here.

00:58:38.240 | I want to do a direct Bitcoin transaction.

00:58:41.080 | El Salvador, I can do that in El Salvador.

00:58:44.660 | And I like going there.

00:58:45.960 | I enjoy spending time there.

00:58:47.440 | We got this little corner where some other Bitcoiners are also setting up shop, where

00:58:52.280 | we're all going ahead and establishing our homes together.

00:58:55.840 | And we like each other.

00:58:57.680 | Then I think that there's a good reason for you to do it.

00:58:59.520 | But I wouldn't just jump in out of a fear that you're going to miss out.

00:59:03.360 | I don't think you're going to miss out.

00:59:04.840 | All right.

00:59:05.840 | Three, one, two, four.

00:59:06.840 | It doesn't matter.

00:59:07.840 | Five colors left.

00:59:08.840 | Peter, welcome to the show.

00:59:09.840 | How can I serve you today?

00:59:10.840 | Hi, Joshua.

00:59:11.840 | I want to talk about European inheritance taxes.

00:59:19.640 | I'll do my best.

00:59:20.640 | Let me just say that.

00:59:22.640 | I don't promise anything.

00:59:23.640 | I'll do my best.

00:59:24.640 | I keep trying to stump you.

00:59:25.640 | I think you may have.

00:59:26.640 | I could do US inheritance taxes all day long, but I'm not good enough to do European.

00:59:32.800 | But let's try.

00:59:33.800 | Go ahead.

00:59:34.800 | Yeah.

00:59:35.800 | I don't know if the exact specifics are really what I'm looking for.

00:59:39.080 | I think I'm looking for more for just the general strategies to try to reduce them.

00:59:42.920 | And obviously, there will be country-specific stuff.

00:59:45.800 | But I've got friends who have family property in France.

00:59:52.120 | And they're trying to figure out whether going through some maneuvers to try to equity strip

01:00:04.040 | the property with a mortgage on it to reduce the value of the property for the tax basis

01:00:10.840 | purpose is worth it versus just going ahead and paying the taxes.

01:00:15.720 | But I was just sort of curious about just kind of what some of the strategies you can

01:00:20.480 | have other than just straight out paying it in terms of trying to potentially reduce the

01:00:26.960 | tax.

01:00:27.960 | Right.

01:00:28.960 | So, again, we're outside of my area of expertise.

01:00:34.400 | I want to clarify that up front.

01:00:37.000 | This is definitely a question where you would want to retain a proper French financial planner

01:00:44.320 | who understands the ins and outs of French taxation.

01:00:48.600 | That's the key.

01:00:49.600 | What I would point out is that there are a couple of options, things that are worth paying

01:00:57.280 | attention to.

01:00:58.400 | Thing number one, it's important to note, especially when we're dealing with the difference

01:01:02.880 | between Europe and the United States and especially France, that...

01:01:08.640 | And let me just clarify, this is not you that you're working on this problem.

01:01:13.360 | This is some friends of yours.

01:01:14.560 | And you're just kind of meditating on their question, wondering if there are any options

01:01:18.400 | for theirs.

01:01:19.400 | Is that right?

01:01:20.400 | That's correct.

01:01:21.400 | Okay.

01:01:22.400 | And these friends, are they born and bred, raised native French or are they expats who

01:01:29.240 | have French connections?

01:01:31.120 | No, they're French.

01:01:34.000 | Their parents are French.

01:01:36.360 | They're actually dual US French citizens, but they are straight up French.

01:01:41.040 | Okay.

01:01:42.040 | So the dual citizenship thing is actually complex, but let's just give you a quick overview

01:01:48.600 | and I won't be able to give you many details.

01:01:50.320 | Let's give a quick overview.

01:01:51.400 | Number one, it's important to recognize that the attitude and the practice around taxation

01:01:56.440 | and tax paying is exceedingly different between France and the United States.

01:02:02.960 | In the United States, first of all, the United States has the highest rate of tax compliance

01:02:08.800 | of any country in the world.

01:02:10.880 | Regularly, when the surveys are done of people paying their taxes, people in the United States

01:02:16.720 | pay their taxes as they are calculated and owed at a higher rate than any other country

01:02:23.080 | in the world.

01:02:24.080 | Whereas other countries that rank very highly, such as Germany, still the United States comes

01:02:29.560 | out with a higher payment rate of people actually paying their taxes as they are assessed and

01:02:38.480 | as they're owed.

01:02:39.900 | This is often surprising to people because as US Americans, we like to gripe a lot about

01:02:48.640 | our taxes.

01:02:49.720 | We argue about them.

01:02:51.000 | We gripe about them.

01:02:52.060 | We have lots of loud people who, these loud, crazy libertarians who believe that taxation

01:02:57.960 | is theft and they get all grumpy when they think that they should pay any taxes.

01:03:02.680 | But the truth is that there is a deep seated belief in the US American system that you

01:03:09.320 | should pay your taxes.

01:03:11.480 | And thus, we have a system that's somewhat straightforward and people comply.

01:03:18.460 | That is not the same in the French context.

01:03:22.260 | The French context is much more of a matter of a battle, an argument, and there's going

01:03:28.780 | to be some negotiations involved between the tax authorities and the individual taxpayers.

01:03:35.060 | You don't just, in the United States, if you get a bill from the IRS and they say, "You

01:03:38.700 | owe us X amount of dollars," you pull out your checkbook and you write it.

01:03:41.500 | It's not the same in the French culture.

01:03:44.320 | If you get a bill from the tax authorities in France, you start working on it and you

01:03:47.380 | think, "Well, okay, how are we going to do it?"

01:03:49.420 | Now, I wouldn't presume to go beyond that.

01:03:51.780 | I know that that much is true and I wouldn't go beyond that in my personal analysis.

01:03:55.380 | But I would say that here's where the local knowledge is so important.

01:03:59.740 | That it's not like in the United States where there's a set of techniques and we can look

01:04:05.300 | through the book, et cetera.

01:04:06.700 | We need to actually go and say, "Who are the local taxing authorities?

01:04:09.300 | Who's going to be doing the assessment?

01:04:11.020 | What are the opportunities for negotiation?

01:04:12.840 | How does the system work?"

01:04:14.020 | et cetera.

01:04:15.020 | So that would be the first thing.

01:04:16.980 | Second thing is that unlike the United States, which has global taxation, the tax bill that

01:04:23.660 | a French citizen can legally owe is based upon the behavior of that French citizen.

01:04:34.280 | So as a US American, if you've got $150 million, you're going to have to go through the relevant

01:04:42.540 | calculations for your inheritance taxes.

01:04:46.460 | The actual taxes themselves are somewhat optional.

01:04:52.540 | There is an abundant repertoire of techniques that can be applied to the reduction of those

01:04:59.940 | tax rates.

01:05:01.820 | But the whole estate itself is going to be taxed under the US system.

01:05:08.780 | And this is where, for your French friends, they're going to have, if their wealth rises

01:05:15.000 | to the level of where they're going to owe inheritance taxes, estate taxes, then they

01:05:22.900 | will have to deal with the US system itself separate from the French system.

01:05:27.180 | However, a French citizen always has the ability to move his affairs outside of France.

01:05:36.100 | And so this is where, to some degree, some form of equity stripping or looking at the

01:05:41.580 | estate and figuring out where are the assets and what the assets are, and could we move

01:05:45.700 | some of those assets to a tax haven, that can be a very effective strategy.

01:05:50.980 | It is not an effective strategy for US citizens.

01:05:54.500 | Because you could take, let's say you've got $150 million in the US, and you say, "Oh,

01:05:58.700 | I'm just going to move my $150 million from the US, I'm going to move myself outside of

01:06:02.900 | the United States.

01:06:03.900 | I'm going to go down to my little beachfront resort in El Salvador that I bought with my

01:06:07.220 | Bitcoin, and I'm going to move my $150 million just simply outside the United States and

01:06:11.440 | put it in a tax haven."

01:06:12.980 | That's not going to save you anything from an estate tax perspective.

01:06:17.140 | You can do some sophisticated planning, and you can start to move some of the money, some

01:06:21.700 | of the assets into irrevocable trusts, and you can freeze the assets.

01:06:25.980 | You can bring it together under your gift tax exemptions, your estate tax exemptions.

01:06:30.860 | There are techniques that you can do, but the whole offshore thing is not such a direct

01:06:34.780 | scenario.

01:06:35.780 | However, for a French citizen, those things are possible.

01:06:39.500 | The same French citizen could move to El Salvador or to some other place that's more tax-friendly,

01:06:46.500 | could keep his property in France, but could escape over time the French taxation system,

01:06:53.500 | even up to and including not owing inheritance taxes on the bulk of his estate.

01:07:00.940 | Real estate is always going to be taxed by a local government, because that's what a

01:07:05.340 | government has control of.

01:07:07.300 | A government can control your real estate because they, using their martial power, they

01:07:12.500 | control a set of land.

01:07:14.460 | That's our current definition of what a nation state is.

01:07:18.860 | It's a military force that controls, by use of force, a specific area of land.

01:07:25.900 | Because of that, the tax authorities, the tax agents of that government have massive

01:07:32.080 | power to control your affairs over the land.

01:07:35.660 | They own the land.

01:07:36.940 | They don't own everything else.

01:07:38.460 | They can't keep your business from moving.

01:07:39.980 | They can't keep your intellectual property from moving.

01:07:41.940 | They can't keep yourself from moving, but they can control your land.

01:07:46.280 | There is potentially a whole world of techniques that are available to your friends that are

01:07:52.100 | not available to US citizens, where your friends can move themselves to a tax haven.

01:07:57.040 | They can keep their property in France.

01:07:58.740 | They may move some of the equity out of that property.

01:08:01.260 | They may have some negotiations with the local taxing authorities.

01:08:06.620 | They may move the property into trust in some way.

01:08:09.220 | I can't articulate the specific techniques beyond what I've done, but they do have a

01:08:14.460 | lot of options.

01:08:15.900 | What they definitely would want to do is they would want to consult a proper professional

01:08:20.540 | who is familiar with French law and custom and who could work in that area.

01:08:25.140 | I guarantee those planners are out there.

01:08:27.220 | Then do a personalized assessment to figure out what needs to be done with their affairs.

01:08:33.020 | >>Steve: All right, good show.

01:08:36.980 | Thank you.

01:08:37.980 | >>Trevor: My pleasure.

01:08:38.980 | It's a fun question though.

01:08:42.620 | I have spent a lot of money on tax planning materials for Europeans.

01:08:50.340 | So I have a lot of the data.

01:08:52.620 | I've gone through a good bit of it.

01:08:53.940 | I just can't summon it to mind quickly enough to answer it specifically.

01:08:57.860 | Lucas, welcome to the show.

01:08:59.420 | How can I serve you today?

01:09:00.420 | >>Lucas: Hey.

01:09:01.420 | How's it going, Joshua?

01:09:03.380 | Having a good day?

01:09:05.380 | Excellent.

01:09:06.380 | So interested in the subject of what I'm going to call baby prep hacking.

01:09:11.580 | So I've been listening extensively to your series of podcasts about what to do with young

01:09:17.380 | children and homeschooling and babies and diapers and everything and sharing it with

01:09:22.540 | my wife.

01:09:23.540 | We're starting to talk about, okay, what can you do?

01:09:26.460 | What strategically can you put in place financially ahead of or shortly after the birth of your

01:09:31.220 | child?

01:09:32.220 | Things like 529 plans or whole life insurance policies for children.

01:09:36.540 | I was wondering, is there anything new, anything that you haven't talked about yet that are

01:09:41.980 | just kind of little niche fund strategies for giving yourself a financial advantage

01:09:46.260 | by having a baby or giving them a financial advantage?

01:09:49.100 | >>Trevor: Absolutely.

01:09:50.780 | I encourage, so to be clear, are you currently expecting a baby or is this hypothetical at

01:09:56.180 | this point?

01:09:57.180 | >>Lucas: This is hypothetical at this point, but I don't think it will be too far off.

01:10:00.980 | >>Trevor: Okay, great.

01:10:02.300 | So I do like to always insert here the topic of birth tourism.

01:10:08.940 | I think one of the biggest opportunities that you can give your child at the time of birth

01:10:15.300 | is access, and I mean this financially speaking, is access to a country or a region or a set

01:10:25.360 | of resources.

01:10:27.140 | There is a reason why there is a thriving birth tourism industry in the United States,

01:10:34.340 | in Canada, etc., because for people who are not from these countries, they can achieve

01:10:40.540 | for their children a whole new set of opportunities, a whole new set of advantages by virtue of

01:10:48.020 | their child being born a citizen of that particular nation.

01:10:53.340 | So Americans don't think a lot about this because we tend to not look outside of our

01:10:59.460 | borders for opportunities.

01:11:00.820 | We know that we live in the land of opportunity, and so we're not accustomed to thinking I

01:11:05.180 | should go and look somewhere else for opportunity.

01:11:08.300 | But this is something that is well worth considering.

01:11:11.300 | And so let me give you an example.

01:11:13.340 | You could, I'm assuming you sound American, are you living in the United States and you

01:11:17.140 | and your wife are both Americans?

01:11:18.620 | >>Lucas: Yeah.

01:11:19.620 | >>Trevor: Okay.

01:11:20.620 | So right now you could go, and let's say you were having a child, you could go and you

01:11:24.980 | could have the child in Canada.

01:11:27.540 | And if you had your child born in Canada, your child would be from birth a Canadian

01:11:31.700 | citizen.

01:11:32.700 | You can go to Canada, you can rent a nice house or find a nice hospital or birth center,

01:11:37.060 | whatever you wind up doing when it comes time to dealing with the medical details of the

01:11:40.820 | birth, and your child will be a Canadian citizen by virtue of being born on the soil of Canada,

01:11:49.980 | which is a just solely country that offers citizenship to anybody born on its soil.

01:11:56.140 | That won't do anything for you or for your wife, but what it would do for your child

01:12:01.180 | would be, number one, give your child the right to be a Canadian citizen, which means

01:12:08.300 | your child would always have the right to live in Canada.

01:12:11.620 | Your child has the right to work in Canada.

01:12:14.840 | Your child would have the right to be educated without cost to your child in Canada at every

01:12:20.660 | level of education.

01:12:22.400 | Your child would have the right to the Canadian government healthcare system by virtue of

01:12:28.680 | being a Canadian citizen.

01:12:30.520 | And so those four things right there from a financial perspective could be very significant

01:12:36.640 | for your child's future.

01:12:40.120 | You could put money in a 529 account and save money for your child's education, or you could

01:12:44.660 | just simply have your child be a Canadian citizen and have the plan be that your child

01:12:48.600 | goes to Canada and simply goes to college in Canada, which is much more progressive

01:12:56.040 | than the United States with regard to college funding, government healthcare programs, etc.

01:13:02.800 | This is, I think, a wonderful backup plan.

01:13:04.800 | And so it's a significantly difficult thing to do, and I think that very few first-time

01:13:11.800 | parents are going to be motivated enough to do it.

01:13:14.400 | It's difficult.

01:13:15.400 | It's difficult for a first-time mother on top of all of the complications of having

01:13:21.040 | a baby, the fears, the learning style, etc.

01:13:26.480 | It's difficult to imagine going to another country, but that is an opportunity.

01:13:32.040 | So if you're looking for kind of benefits, government benefits, then that's a very, very

01:13:37.600 | simple thing to do.

01:13:38.720 | And totally legal, you can do it.

01:13:40.880 | No problem at all.

01:13:42.120 | You could also look at this in terms of where is an opportunity zone, right?

01:13:46.800 | Where is there an opportunity for significant financial growth?

01:13:50.120 | Where would I want my child to be able to go and work and live, and where would there

01:13:54.880 | be investment options, etc.?

01:13:57.220 | So you could say, where are the places in the world where there's the highest rates

01:14:00.320 | of growth?

01:14:02.200 | Now this is hard for birth tourism because most countries don't offer birthright citizenship,

01:14:09.120 | but there are some that do.

01:14:11.120 | So an example would be South America, right?

01:14:14.100 | If you had a child born in Brazil, as quite commonly talked about, then your child would

01:14:20.240 | have the legal right to live and work virtually in all of South America as part of MERCOSUR,

01:14:25.920 | which is an alliance of South American nations working together.

01:14:30.200 | If you look forward over the next several decades, it's hard for me personally to believe

01:14:35.680 | that Brazil, a nation of a couple hundred million people, plus Argentina, plus Chile,

01:14:42.280 | plus Colombia, plus Venezuela, when it comes out of its nightmare, all these countries,

01:14:47.600 | it's hard for me to believe that there's not more opportunities for a faster growth prospect

01:14:52.760 | than there is in, say, the United States, which is a more mature and advanced economy.

01:14:59.120 | So that would be another way of looking at it.

01:15:04.200 | I won't go on more about birth tourism other than to say that you can look at the world

01:15:08.040 | and there are options that you can achieve.

01:15:10.800 | Let's say that you had an interest in Europe, right?

01:15:12.960 | Many people have an affinity and an attraction to Europe.

01:15:16.040 | Europe is hard.

01:15:17.040 | It's hard to have a European citizen, but since you're not currently expecting a baby,

01:15:21.560 | it could be possible for you to establish a residency, a legal residency for you and

01:15:27.240 | your wife in Europe, and then have your child born in Europe.

01:15:30.160 | And then your child, Portugal would be a good country to look at there, and see if you could

01:15:35.080 | arrange for your child to be a Portuguese citizen from birth by virtue of you and your

01:15:39.760 | wife having Portuguese residence permits.

01:15:44.000 | That could be something worth considering.

01:15:46.040 | Now moving past-

01:15:47.040 | Yeah, I love the idea.

01:15:50.600 | I tend to think that she would be somewhat hesitant with a first child to do that, just

01:15:57.000 | wanting some of the comforts and closeness of home and being around family for it.

01:16:02.520 | But the idea is awesome, and I'm definitely attracted to it.

01:16:06.320 | I think that virtually almost no US American first mother, first time mother would ever

01:16:14.620 | do birth tourism.

01:16:16.720 | And it's hard for me to imagine her saying yes.

01:16:20.460 | My wife and I did it with our third child, and what I would say is-

01:16:24.480 | Sorry, our fourth child, and what I would say is that it's doable.

01:16:28.320 | We've done it.

01:16:30.000 | Having done it, it's much harder than most people think, and most people are not going

01:16:34.520 | to actually do it for all the reasons that you stated.

01:16:37.280 | But I can't myself help but appreciate the elegance of it as a solution.

01:16:43.520 | And there are, and I say that for my international audience, that there is a big difference between

01:16:48.360 | you and your wife's situation versus our Afghani friends who are listening, or our Pakistani

01:16:57.040 | friends who are listening, or our Iraqi friends, or our Haitian friends who are listening.

01:17:02.880 | Because all of a sudden, you and I, you have no concept of how difficult it is to live

01:17:10.560 | in the world as a citizen of Afghanistan only.

01:17:13.840 | And so if there is a kind of a middle class or upper middle class Afghani couple who is

01:17:23.120 | thinking about having a baby, the very best, most important thing that they could do with

01:17:29.080 | their money, if they could in any way work it out, is to fix their paperwork problems.

01:17:34.160 | And I'm using these words very carefully.

01:17:38.380 | There are paperwork problems that Afghanis and Pakistanis and Iraqis face.

01:17:45.220 | And so it's a big deal, and it would without question be the best $20,000, $30,000, $40,000

01:17:51.200 | spent for those people, for that they could invest into their children in order to solve

01:17:58.300 | their children's paperwork problems.

01:17:59.620 | It's a big, big deal.

01:18:01.220 | Now let's go back to your situation personally.

01:18:05.720 | When you have a new child, I would say the first thing is I always buy a whole life insurance

01:18:09.900 | policy for all of my children.

01:18:11.860 | I don't buy generally big ones, but if your financial situation allows you to, I think

01:18:17.020 | it's appropriate.

01:18:18.020 | I always buy at least a small one.

01:18:22.060 | And these are always whole life policies.

01:18:24.220 | And then what I do is I make sure that those policies have two things that are very important

01:18:28.940 | to me.

01:18:29.940 | So number one, I buy a small whole life policy, and I make sure that it has an additional

01:18:34.760 | purchase benefit on it that allows the, where the policy has a guaranteed right to purchase

01:18:42.260 | more life insurance in the future at a certain age.

01:18:47.040 | And so generally, I think with the policies I own for my children, starting at the age

01:18:52.880 | of 20, then I as the policy owner can purchase additional life insurance for them every three

01:19:00.580 | years.

01:19:01.580 | And I usually start with either $25,000 or $50,000 policies, and I can put an additional

01:19:07.340 | purchase benefit on the policy of $50,000 or $100,000 or $150,000.

01:19:12.220 | What that means is, let's say I start with a $50,000 policy, and I have usually, I think

01:19:17.500 | it's seven opportunities between 20 and 40 to add $150,000.

01:19:22.420 | I can buy a $50,000 whole life policy when my child is 10 days old.

01:19:28.380 | And I can't remember, I think the child does have to be at least five days old, seven days

01:19:33.020 | old, 10 days old, something like that.

01:19:34.780 | But I can buy a policy within the first month of my child's life when the child has no medical

01:19:40.340 | underwriting, no anything.

01:19:42.700 | My children aren't scuba diving, they're not learning to fly airplanes, they're not doing

01:19:47.060 | anything dangerous at zero years old.

01:19:50.340 | And then with that additional purchase benefit, I can increase it in the future without any

01:19:54.720 | medical underwriting.

01:19:56.580 | I can increase it without any hobby or avocation underwriting.

01:20:00.700 | There's no lifestyle questions.

01:20:02.740 | And so I have those options to increase it in the future for them.

01:20:06.660 | Now most of the time, this is unnecessary, right?

01:20:10.020 | Most of the time you're not going to need it.

01:20:12.580 | You're just going to keep the policy and maybe you just gift it to your child when your child

01:20:17.020 | is 40, something like that.

01:20:20.180 | But if you need it, right?

01:20:21.620 | If you have a child that takes up a major interest in racing cars, if you have a child

01:20:28.180 | who takes up an interest in becoming an underwater welder or to get a pilot's license, or you

01:20:34.300 | have a child that faces medical problems, heart defect, leukemia, is a drug addict,

01:20:42.900 | very depressed, suicidal, like these are the kinds of things that can make a big, big difference

01:20:48.260 | for you.

01:20:49.260 | The fact that you can buy life insurance for your children in the future is a very nice

01:20:54.340 | thing.

01:20:55.340 | You've got to be careful because these policies are not term insurance policies.

01:21:00.100 | And so to add on $150,000, you're buying $150,000 whole life policy for your children at every

01:21:07.620 | time.

01:21:08.620 | But to know that I could turn my $50,000 policy into an excess of a million dollar policy

01:21:13.180 | for each of my children, I really appreciate that.

01:21:15.580 | And I think that's useful.

01:21:17.140 | These policies are terrible for cash accumulation.

01:21:21.180 | The cost of the additional purchase benefit, and I also put a waiver of premium benefit

01:21:24.660 | on there, where if the child is ever disabled, then the premiums get waived on the policy.

01:21:29.340 | But on all my children's ones, there's a clause where I can still exercise the additional

01:21:35.060 | purchase benefit and the premiums are included.

01:21:38.660 | The cost of those benefits, while very modest on a monthly basis, I'm not sure, I don't

01:21:43.380 | even remember how much these policies cost.

01:21:44.620 | I think they're like $30 a month, $50 a month, something like that, I can't remember.

01:21:49.500 | But it's very modest on a monthly basis.

01:21:53.980 | But most of the cost goes straight to insurance and to these additional purchase benefits,

01:21:59.340 | et cetera.

01:22:00.340 | And so the cash value in the policy is quite anemic.

01:22:04.020 | It is there.

01:22:05.020 | They do grow and they do build cash value, but they're not great investments.

01:22:09.220 | That's the first thing.

01:22:12.980 | The next thing, 529 accounts, can a 529 account be a good idea?

01:22:17.060 | Sure.

01:22:18.060 | If it's important to you to have money set aside for college funding, then the best time

01:22:22.660 | to do that is when your child is one day old.

01:22:26.660 | And the best way to do it is to make massive transfers into your child's 529 account up

01:22:34.980 | front.

01:22:36.020 | And so if you're wealthy enough to do it, you can put up to five years of your annual

01:22:40.900 | exclusion gifting amount into a 529 account on day one.

01:22:45.740 | And then you can do that for a husband, you can do that for a wife, your parents can do

01:22:49.820 | it, your grandparents can do it, et cetera.

01:22:51.860 | And so you can put in excess of six figures easily into a 529 account.

01:22:57.140 | And the benefit of this is this immediately puts money aside that can grow for your children's

01:23:03.100 | college.

01:23:04.340 | If it doesn't get used for college, you can get the money out either with a couple of

01:23:09.700 | the escape options that we've talked about in the past.

01:23:13.020 | More importantly, this is one of the very few assets that moves money out of your estate

01:23:19.900 | but allows you to control the asset still.

01:23:23.700 | So generally, just like we're talking about estate planning under US estate law, if you

01:23:27.460 | move an asset out of your estate, it has to go into an irrevocable trust that you get

01:23:31.540 | no interest in, you get no control of, et cetera.

01:23:34.920 | But a 529 account allows you to move the money into the 529 account and you can still get

01:23:39.660 | still control it.

01:23:40.660 | You can change the beneficiary, you control the money, but it's out of your estate.

01:23:45.500 | It's also frequently an asset that's protected from the claims of creditors in many states.

01:23:51.380 | It's also an asset that can be frequently protected in bankruptcy.

01:23:55.600 | And so it's a very useful way that you could set aside a lot of money for your child's

01:24:00.940 | future for his or her education and yet do it in a good way.

01:24:06.060 | And then when you put a lot of money into those accounts up front and you have a long

01:24:09.680 | time for them to grow with good investments, that's where from a tax perspective they really

01:24:14.160 | do work out very well.

01:24:16.740 | I'll pause for a moment.

01:24:18.780 | Any questions, comments, anything so far?

01:24:20.500 | No, that's all great so far.

01:24:23.260 | Definitely a little better clarification than I had on the 529 and really how to maximize

01:24:29.060 | value there by making a large upfront payment.

01:24:33.540 | We've done some of the more niche stuff, just the kind of people we are.

01:24:40.060 | I think we probably see eye to eye on several things.

01:24:42.540 | We already bought used cloth diapers in bulk from a friend who was selling them.

01:24:49.500 | Anything else like that that you haven't mentioned on the podcast before?

01:24:53.780 | I think my wife would be willing to listen to an entire podcast of your wife talking

01:24:58.100 | about ways to save money on babies.

01:25:00.020 | Yeah, absolutely.

01:25:01.340 | So used cloth diapers are wonderful because, so first of all, people who aren't familiar

01:25:09.340 | with cloth diapering, they're like, "I don't do cloth diapering."

01:25:14.780 | What's funny is that we've used cloth diapers with all of our children, but we use disposable

01:25:19.080 | diapers when we travel because we don't have the facility to wash the diapers.

01:25:24.660 | And it's not such a big deal to me.

01:25:27.100 | My wife can't stand disposable diapers because they always blow out.

01:25:30.620 | They don't hold the things that they're supposed to hold, whereas cloth diapers, properly done,

01:25:35.140 | don't ever blow out.

01:25:38.900 | And if you buy them early and if you get them in bulk, if you get them used from a friend,

01:25:43.740 | etc., then they're fantastic because they're super expensive to buy.

01:25:48.140 | Especially if you go and buy them new, they're really expensive to buy.

01:25:51.020 | And so that's a good purchase.

01:25:52.020 | That's a good area where doing a bulk buy on the secondhand market is really, really

01:25:56.740 | good.

01:25:57.740 | The other thing that you just want to be careful of is it takes a little time to figure out

01:26:00.820 | what you like.

01:26:02.060 | So an example, with our first baby, we thought, I forget the brands now, but we thought we

01:26:08.860 | really liked this brand that you put the...

01:26:13.460 | It was a fancy brand.

01:26:15.060 | I've forgotten all the brand names.

01:26:17.020 | But then, it's funny, a midwife said, "Just covers and inserts, covers and inserts."

01:26:22.500 | And this brand, I think it may have been Fuzzy Buns or something, where you have to insert

01:26:26.940 | the insert into the actual diaper.

01:26:28.660 | It becomes super annoying over time because you always are doing this extra work.

01:26:33.340 | And so we've switched over the years.

01:26:35.820 | My wife really likes the Buttons brand.

01:26:37.740 | That's her favorite, which is just a cover with inserts, but she likes the Buttons brand.

01:26:42.580 | So that's what she would say if she were giving her cloth diaper spiel.

01:26:47.220 | But it's really great and it's definitely the way to go.

01:26:52.540 | It's better.

01:26:53.540 | I hate throwing away diapers.

01:26:55.020 | I hate creating all that garbage.

01:26:56.860 | Putting all the plastic into a landfill drives me nuts for something that can be so easily

01:27:01.340 | solved.

01:27:02.340 | You'll also want to think ahead about your washing machine.

01:27:04.720 | If you're going to do cloth diapers, you want to have, if possible, you don't want to have

01:27:08.540 | a high efficiency washing machine.

01:27:10.540 | You want to have an upright washing machine with a center agitator.

01:27:14.900 | So that's your best one.

01:27:16.980 | You also want to be careful on the soap that you use and make sure that you have an appropriate

01:27:20.780 | soap.

01:27:21.780 | The big thing you can do is you can stockpile clothing pretty easily.

01:27:26.420 | So what my wife did when we had children was whenever people said, "Hey, do you want baby

01:27:33.260 | clothes?"

01:27:34.260 | She would say, "Yes."

01:27:35.260 | And so most people have one or two children and then they're looking to, they don't want

01:27:40.980 | to have any more children and they need to free up their space and they need to get rid

01:27:43.820 | of the baby clothes.

01:27:45.260 | And most people that have one or two children who are upwardly mobile, et cetera, they have

01:27:50.420 | lots of nice clothes and the clothes barely ever get worn.

01:27:53.820 | And so we just practiced saying, "Yes."

01:27:56.260 | Anytime someone says, "Oh, do you want this certain thing?"

01:27:58.260 | "Yeah, absolutely.

01:27:59.260 | We'll take it."

01:28:00.260 | And the clothes are the most valuable.

01:28:01.260 | And what she would do is she would go through, organize them, sort them, take the ones that

01:28:05.240 | she liked, make her outfits, et cetera, and then just line them up according to size.

01:28:10.660 | She would clean them, get some of the spots off, et cetera.

01:28:13.380 | But I set her up these shelves.

01:28:15.740 | I got some of just those standard shelving units at a home improvement store and I set

01:28:21.860 | her up with these Tupperware bins.

01:28:24.180 | And for the first, she had I think 12 Tupperware bins of free clothes that she got or had them

01:28:29.860 | all organized according to size, all organized in advance.

01:28:33.420 | And basically for the first years of our three children life, she bought like three outfits

01:28:41.160 | and it was three outfits because she just thought they were really cute and she'd never

01:28:44.120 | bought any of our children outfits.

01:28:46.820 | And so I was like, "Buy them.

01:28:48.020 | Come on, spend some money."

01:28:49.700 | And so the clothes are a great way.

01:28:51.620 | And it's really a relief also for the parents who are just a little bit ahead of you.

01:28:57.240 | They have a child that's a few years older because now once they have a repository for

01:29:01.780 | their used clothing, then that solves their problem.

01:29:04.540 | They feel good.

01:29:05.540 | They give it to you.

01:29:06.540 | You take it.

01:29:07.540 | You pass along what you don't like.

01:29:08.780 | You use it.

01:29:09.780 | And then when you're done, you pass it along to others, et cetera.

01:29:11.620 | So the clothing is the big one.

01:29:14.200 | Beyond that, with children, there's really not a lot of costs.

01:29:19.420 | Children don't cost much.

01:29:22.220 | If you wipe out your diaper cost, depending on whether you're able to successfully breastfeed

01:29:27.900 | or not, buying formula can be a cost.

01:29:31.100 | But if you take that out, there are very few costs for babies.

01:29:33.300 | And so my biggest encouragement is invest into your child as much as possible.

01:29:39.960 | And so the big investments that I think pay off in spades is, if at all possible, make

01:29:46.740 | sure that your child can have a full-time mother, most importantly, at least for the

01:29:51.300 | first three to five years of his or her life.

01:29:54.900 | And I say organize your finances in such a way that that is doable and affordable for

01:30:00.540 | your family.

01:30:02.220 | If you can make sure that your child has a full-time mother for at least those establishing

01:30:08.420 | years, that can make such a difference for the rest of your child's life.

01:30:14.420 | And the data on that is very, very clear.

01:30:16.660 | If you can avoid institutionalizing your children when they're very young, then that can pay

01:30:20.700 | off in spades.

01:30:22.380 | And then you can work on their intelligence.

01:30:25.900 | And mom can have all times.

01:30:27.780 | There are several good books on how to improve your baby's intelligence.

01:30:32.060 | Some of that is innate, of course, genetic.

01:30:34.300 | But there are a lot of things that you can do of stimulating your baby in different ways.

01:30:38.060 | It's as simple as reading to your children, making sure your children get sunshine, and

01:30:43.460 | all the stuff.

01:30:44.820 | But I think that your best investments are not financial in that case.

01:30:48.460 | Just a matter of how can I invest into my children to make sure that my children have

01:30:52.540 | maximum opportunities.

01:30:53.980 | You can deal with some of the stuff that I've talked about with multiple languages.

01:30:57.440 | You can bring in tutors or nannies to help support you in that.

01:31:01.020 | You can look at early child education.

01:31:03.820 | I think that it's interesting to look at, but some of it can be overwhelming.

01:31:08.060 | A lot of it can just be simplified down to take time and spend time with your baby.

01:31:14.060 | But yet those things can pay off in spades and largely obviate the need for all of the

01:31:19.500 | financial stuff.

01:31:21.660 | To me, it's obvious that if you're thoughtful about what you do in the first few years of

01:31:26.980 | life and you make sure that your children have a good, solid emotional grounding where

01:31:34.540 | they're not traumatized in some way, and you work hard at those early years of education,

01:31:45.340 | early years of vocabulary, early years of school, homeschooling is great for many families,

01:31:52.020 | then you basically eliminate all of the things that are going to cost you money down the

01:31:56.980 | way.

01:31:58.100 | People will throw money at your children for college.

01:32:01.300 | People will throw opportunities at them, and all the stuff kind of takes care of itself.

01:32:05.580 | And so the least efficient way to handle those things is through all of the financial stuff.

01:32:11.860 | That's an industry that has been developed that allows we financial advisors to sell

01:32:16.100 | stuff.

01:32:17.460 | But it's much more efficient for you if you handle it in the old way, and then the whole

01:32:23.380 | system again will throw money at your children for the rest of their life if you get those

01:32:27.980 | early years as best as you can.

01:32:30.720 | So there's my little spiel.

01:32:32.780 | Yeah, really, really compelling stuff.

01:32:35.580 | I think summarized, I think you said in the last Q&A call, it's quantity of time at work

01:32:42.220 | and quality of time—I'm sorry, the reverse—quality of time at work and quantity of time at home.

01:32:46.780 | So that'll be my guiding star when that time comes.

01:32:50.660 | Yeah, exactly.

01:32:51.660 | So think about it in terms of not having payments, not having big bills.

01:32:55.740 | If you can pay off a house, great.

01:32:57.140 | Or if you can't pay off a house, don't have a car payment.

01:32:59.960 | Think about it in terms of, well, maybe you and your wife both have to work.

01:33:03.860 | You both need jobs, but is grandma available?

01:33:06.960 | Could we go ahead and move into a bigger house where grandma could be in the house?

01:33:11.900 | So something like that.

01:33:13.700 | Just think about it in terms of the infrastructure of your life because it pays off.

01:33:19.060 | I'm convinced it pays off big time.

01:33:21.480 | So keep me in the loop and then, hey, call back in the future and we'll see what happens.

01:33:25.580 | All right, I had several callers drop off, but here we go.

01:33:28.660 | Welcome to Radical Personal Finance.

01:33:29.660 | How can I serve you today?

01:33:30.660 | Last caller.

01:33:31.660 | Is it just me?

01:33:32.660 | Yeah, go ahead.

01:33:33.660 | Tell me your name, please.

01:33:34.660 | Okay.

01:33:35.660 | Frank.

01:33:36.660 | Frank, welcome to the show.

01:33:37.660 | Hi.

01:33:38.660 | Thank you.

01:33:39.660 | So I have a main question and then a quicker second question if we have time, but I'll

01:33:48.260 | start with the first question.

01:33:49.500 | So I'm 25 years old.

01:33:52.060 | I have a career as an IT specialist with a government defense contractor, and I'm considering

01:33:58.540 | joining the reserves or the Air National Guard on a part-time basis.

01:34:03.580 | And I was wondering what your thoughts were on whether you think the benefits of part-time

01:34:08.980 | military service outweigh the downsides.

01:34:11.780 | Thinking about it, like in my mind, the pros would be the potential to gain more experience

01:34:19.380 | and different kinds of opportunities in my field, the education and healthcare benefits,

01:34:25.540 | eligibility for VA home loans, eligibility to use commissaries and future retirement

01:34:31.180 | benefits.

01:34:32.180 | But some of my concerns are the increasingly authoritarian kinds of rules being imposed

01:34:39.540 | on military members and federal employees, like the vaccine mandates, as well as just

01:34:47.740 | more limits on my freedom and free time, especially if I were to have a family in the next five

01:34:53.300 | years.

01:34:55.940 | Adding another layer of bureaucracy to my life, like another person telling me where

01:35:00.580 | I have to be and when I have to work or train, as well as it being more difficult to transfer

01:35:06.540 | or move to a different state or part of the country if another opportunity came up, like

01:35:13.180 | with my civilian contractor job.

01:35:18.260 | I will answer your question, and I will be as clear as I can.

01:35:25.100 | This will be an extremely offensive answer to some of my listeners, and I don't enjoy

01:35:29.260 | offending people.

01:35:30.740 | I especially don't enjoy offending people who have dedicated their lives to public service,

01:35:37.620 | service to country, etc. because generally those are the kinds of people that I like.

01:35:43.060 | But I believe in being honest, and so I'll give you my honest opinion, as if you were

01:35:49.580 | my younger brother.

01:35:52.220 | I come from a family of people who served in the military.

01:35:57.700 | My grandfather was in the army in World War II.

01:36:00.780 | He was on the beaches of Normandy two days after D-Day.

01:36:04.540 | It was D-Day plus two, something like that.

01:36:07.340 | My father was a lieutenant commander in the Navy and served in a submarine for many years.

01:36:20.060 | So I come from a family of people who were in the military.

01:36:25.340 | My father was in the reserves for many years, even after he left active service.

01:36:31.580 | I cannot understand today why any intelligent, capable man or woman would ever join the U.S.

01:36:42.660 | military.

01:36:44.100 | I cannot see an argument in which it makes any kind of sense.

01:36:49.860 | The things that we honor, the arguments that we most honor are usually protecting freedom

01:37:00.940 | or standing up a sense of patriotism, a love of country, etc.

01:37:05.220 | Those are things that we rightly honor.

01:37:06.460 | I believe that we should honor patriotism.

01:37:08.900 | We should honor people who want to defend their neighbors, etc.

01:37:13.660 | But for people who have the most noble of ambitions to serve and to protect, etc., I

01:37:24.820 | do not see how those noble ambitions can be achieved by serving in the U.S. military in

01:37:32.260 | any capacity, especially even including the reserves.

01:37:36.780 | The entire framework of the modern military system is utterly corrupt.

01:37:43.580 | You cannot be honest and succeed in that system.

01:37:48.500 | The only way that you succeed in the military system is by being dishonest.

01:37:55.980 | I think the writer, who I would encourage you to read what he has written, who is the

01:38:00.940 | best at articulating that from experience.

01:38:03.580 | I have no experience.

01:38:04.580 | I've never served in the military, and I was strongly discouraged by my father from ever

01:38:10.380 | even considering serving in the military.

01:38:12.660 | I grew up reading books, reading Tom Clancy books and other thrillers that imbued me with

01:38:18.460 | this sense of patriotism.

01:38:19.900 | I wanted to go in the military.

01:38:22.140 | My brothers wanted to go in the military.

01:38:23.980 | My father refused to the extent possible.

01:38:28.540 | Of course, we were legally adults.

01:38:30.140 | We could have disobeyed him and gone.

01:38:32.540 | But he strongly discouraged and sought very, very vigorously to dissuade us from going

01:38:38.420 | into the military.

01:38:39.780 | I am today exceedingly grateful that he did, because I would have joined some form of the

01:38:46.420 | military, some branch of the military out of a desire to have a sense of adventure,

01:38:52.300 | out of a desire to have that sense of camaraderie, kind of that being with the boys, doing something

01:38:58.700 | that matters and protecting freedom, etc.

01:39:03.540 | I could have literally lost my life for no good reason at all.

01:39:08.940 | I could have had my entire life disrupted.

01:39:12.660 | I'm grateful that I listened to him and his discouragement of going in the military and

01:39:16.580 | didn't join myself.

01:39:18.820 | Back to my point, I don't see...

01:39:21.740 | Go and read.

01:39:22.740 | First of all, read what John T. Reid writes on the subject.

01:39:25.860 | John is known mostly in financial circles for being a real estate pundit, but he went

01:39:31.500 | to West Point and he spent a good number of years in the military academy.

01:39:35.460 | One of the things that I appreciate about him is he writes honestly on military issues.

01:39:43.420 | For example, I find his article that he wrote years ago on military draft to be exceedingly

01:39:53.500 | persuasive as to why he believes that all military members should be drafted, that having

01:39:59.940 | an all-drafty army is actually one of the best ways that you could get a potentially

01:40:03.900 | moral and upright army of anything else.

01:40:07.320 | So I don't support a draft, but I find his arguments very, very persuasive.

01:40:13.180 | Read some of his arguments about joining the military from the perspective of someone who

01:40:16.300 | has been inside the military.

01:40:20.060 | From my perspective, I would say that virtually everything that you want to get out of the

01:40:25.500 | military you can get better in another circumstance.

01:40:30.780 | So when I get a college education.

01:40:32.760 | The fact that you have paid me money to go and be on this Q&A call today tells me that

01:40:38.640 | you're smarter than the person who needs the military for a college degree.

01:40:44.220 | The training that you need, the specialization, even a sense of adventure, all of those things

01:40:49.560 | can be accomplished better and more effectively than in the military.

01:40:55.500 | The problem is if you join the military, you will face a significant series of ethical

01:41:00.700 | conflicts combined with a set of very difficult personal conflicts in your own life.

01:41:08.460 | Let's begin with the ethical conflicts.

01:41:11.180 | The US government and the vast majority of military actions that the US government engages

01:41:17.380 | in are immoral because they are not involved in defensive warfare.

01:41:23.340 | I personally, this is kind of a joke that in today's world, I oppose a standing army.

01:41:28.100 | The United States should not have a standing army.

01:41:31.100 | There should not be an army that has military bases in a hundred and probably thirty or

01:41:36.620 | a hundred and fifty countries in the world.

01:41:38.620 | It is an insane policy.

01:41:40.740 | All of those bases should be sold and all of the troops should be returned back home.

01:41:45.940 | There should be no standing army.

01:41:47.980 | Or if there is a standing army, it should be a very, very small standing army.

01:41:51.940 | But that is not the path that we have taken as a nation.

01:41:56.060 | So if you get involved with the US military, you're not involved in serving and protecting.

01:42:00.580 | You're involved in being in promoting military power around the world for the protection

01:42:09.500 | and the advancement of military, of American business interests.

01:42:14.180 | That's why the American military exists.

01:42:17.380 | It's my dad who taught me that.

01:42:18.900 | He was in Vietnam in a submarine spying through the periscope on Russia and other places.

01:42:29.060 | And his commander told him, "Dave, listen, you need to understand the US military exists

01:42:34.780 | for one reason and that is to protect American economic interests.

01:42:39.100 | And so when you sign up for that, you are going into a moral conflict and you're putting

01:42:44.860 | yourself in a situation in which you will be court-martialed if you follow your conscience.

01:42:51.260 | And most of the time, people that come out of the military, they have to work very hard

01:42:55.900 | to justify to themselves many of their actions.

01:42:59.420 | But go and look in your lifetime.

01:43:00.860 | At 25 years, you were born in 1997, I guess.

01:43:07.020 | So you go back and in my lifetime, the US military has been involved in undeclared war

01:43:13.860 | after undeclared war after undeclared war.

01:43:17.060 | And every single one of them has been a failure.

01:43:19.660 | The US military has not won a war since World War II.

01:43:25.700 | They've not won a war since World War II.

01:43:28.740 | There was one spectacular victory in Desert Storm, which then of course resulted in Enduring

01:43:37.220 | Freedom Operation to depose Saddam Hussein and then the quagmire that was Iraq.

01:43:44.060 | And if you go and you look at the death toll of even just these recent conflicts, the war

01:43:51.300 | in Afghanistan, the war in Iraq, and the military actions in Pakistan have cost the lives of

01:43:57.140 | perhaps somewhere between 2 and 4 million people.

01:44:01.980 | For what?

01:44:02.980 | For what moral purpose?

01:44:05.340 | So you have to recognize that when you're joining an organization that exists to kill

01:44:10.260 | people, that you are going to be in a situation in which you are going to be asked to kill

01:44:16.060 | people.

01:44:17.620 | And that is something that should not be taken lightly.

01:44:20.420 | That's something that if you kill someone, whether you kill someone straightforward at

01:44:26.940 | the muzzle of your gun, or if you kill someone by you're sitting in a trailer and driving

01:44:32.320 | a drone and dropping a bomb on someone, or whether you just simply do it in a supporting

01:44:37.620 | role cooking for your mates on the ship, you are involved in an organization that exists

01:44:44.940 | to kill people.

01:44:46.900 | And virtually all of that killing in the modern context is absolutely immoral.

01:44:52.460 | The only, only circumstance in which taking another man's life is morally justified is

01:45:00.700 | in the direct defense of human life.

01:45:04.660 | That is the only context in which it is morally justified.

01:45:07.980 | And so you can create these elaborate theories that somehow the United States of America

01:45:12.700 | is safer because we have military bases in a hundred and whatever fifty countries around

01:45:19.020 | the world, and we have all this stuff, and somehow that's a defensive warfare and we're

01:45:24.180 | going to go into Afghanistan and we're going to get those nasty terrorists before they

01:45:28.380 | get us and somehow that's moral.

01:45:30.300 | I don't buy it.

01:45:31.300 | I don't buy it a bit.

01:45:33.380 | And so I think that you run the risk of putting yourself into a moral conundrum.

01:45:41.340 | And it's very difficult, again I gave my trigger warning up front, that this is very difficult

01:45:47.540 | for most people because once you get into it, if you enlist, you are going to quickly

01:45:52.140 | start to talk yourself into the moral appropriateness of your actions.

01:45:59.820 | Because you'll see information and you will be conditioned into believing that what you

01:46:03.620 | do is morally right.

01:46:05.580 | The reason why militaries all around the world enlist you at seventeen and eighteen and nineteen

01:46:13.620 | and twenty and frankly twenty-five years old is because you are gullible.

01:46:18.700 | You are gullible at twenty-five years old.

01:46:20.580 | You're gullible at twenty years old.

01:46:22.040 | We all are.

01:46:23.040 | I was.

01:46:24.300 | I remember vividly my driving in my car, listening to right-wing talk radio talk about

01:46:33.140 | "we've got to go ahead and we've got to go in and get those people who attacked us on

01:46:37.060 | 9/11 and we've got to go in and it's Operation, I forget, it was Enduring Freedom."

01:46:41.360 | And I was so gullible that I was just enthusiastic about it.

01:46:46.380 | Well now in my mid-thirties I'm less gullible than I was.

01:46:49.940 | And so if you talk to young men, young men think that war is exciting.

01:46:54.860 | Old men know that war is absolute hell.

01:46:57.620 | And the only time at which you voluntarily walk into hell is when the people are literally

01:47:03.820 | at your door and they're going to kill your children and rape your wife and steal your

01:47:09.660 | goods.

01:47:10.660 | In that sense, yes, you walk into hell and you defend your home.

01:47:15.540 | But you don't do it voluntarily for any beyond that.

01:47:19.420 | So it's almost, I would say impossible, although I haven't been in the military and I've known

01:47:25.620 | a number of friends, people that I admired.

01:47:27.900 | I've had clients, I've had people I've served on boards, I've had good friends who've served

01:47:31.380 | in the military.

01:47:32.380 | Okay, I think they're good people.

01:47:33.980 | Right?

01:47:34.980 | But I don't think you can walk in integrity in the military.

01:47:39.540 | And I believe that you run the risk of signing yourself up for a great moral harm when you

01:47:44.180 | put yourself in a situation where you are making a voluntary choice to go and enlist

01:47:50.420 | in an organization that exists to kill people.

01:47:53.380 | And that organization has proven itself to be lawless and the people that direct it,

01:48:00.180 | right?

01:48:01.180 | A commander in chief who basically uses the organization with minimal to no congressional

01:48:06.940 | oversight, no formal declaration of war, and just pops people into Kosovo, pops bombs,

01:48:13.380 | sends missiles into Kosovo and sends troops in here and troops in there.

01:48:18.100 | I don't buy it.

01:48:19.180 | Now, if you got into it, you would see enough situations where you felt like you did good

01:48:22.420 | that that's what those people, like I said, I like military guys, I always have.

01:48:26.100 | But that's the first thing.

01:48:27.540 | The next thing, you are giving over control of your life.

01:48:31.460 | It's the exact opposite of freedom.

01:48:34.100 | You are giving over control of your life.

01:48:35.500 | And even if you do something seemingly as benign as joining the reserves, and they say,

01:48:42.180 | listen, come out and spend a few weeks a year training with us and we'll give you some

01:48:46.900 | cool gear, we'll let you drive some cool gadgets, we'll let you learn a little bit

01:48:50.300 | about your specialty, etc.

01:48:53.800 | You very well could be signing yourself up for a death sentence.

01:48:56.460 | And I don't say that lightly.

01:48:58.300 | We've had too many people, I have a friend of mine recently who she lost her, not recently,

01:49:03.500 | it was a number of years ago, but she lost her husband in Iraq, right?

01:49:06.840 | How many people go and join the reserves and then all of a sudden they find themselves

01:49:11.700 | sitting in Iraq for two years?

01:49:13.300 | Why?

01:49:14.300 | What was the point of it?

01:49:15.300 | And what's the point?

01:49:17.260 | How do you look, if I'm at your funeral and I'm talking to your widow, what do I

01:49:22.340 | say was the point?

01:49:23.340 | What do I say was the point?

01:49:26.380 | What was the point of Iraq and Afghanistan?

01:49:29.140 | A few years ago, I spent some time with a guy who had flown, who was a marine helicopter

01:49:33.580 | pilot in Afghanistan.

01:49:35.340 | And again, the key is, as was the case with me as a financial planner.

01:49:40.700 | A financial planner who is actively making his living as a financial planner has a very

01:49:48.260 | hard time being honest with himself, honest enough with himself to speak honestly about

01:49:54.820 | his industry.

01:49:55.820 | You have a very hard time convincing a man of something when his salary depends upon

01:50:02.860 | his believing otherwise.

01:50:04.620 | And so I found it very difficult for years to separate myself from even the job of being

01:50:14.460 | a financial planner to the point where I could look at it dispassionately and see the good

01:50:18.780 | things, see the bad things and have some sense of personal honesty.

01:50:21.500 | And the same thing in my experience with people in the military.

01:50:25.380 | So anyway, I just remember a few years ago I met this marine helicopter pilot and we

01:50:29.700 | were in Utah at Zion National Park in Utah.

01:50:36.380 | And we spent time and he was camping with his family and we just talked about it.

01:50:40.180 | And he of course didn't share much about his actual experiences on the battlefield,

01:50:44.740 | but I just said like, "What was it worth?"

01:50:46.580 | And he's like, "I can't say that there was any point in being there."

01:50:50.500 | And I think about a guy like that after the US withdrawal from Afghanistan last year.

01:50:56.100 | And your heart breaks.

01:50:58.260 | Here you were at the front end of the spear inflicting bodily harm and death on other

01:51:04.700 | people and what was it for?

01:51:06.860 | What do you tell your children that you were fighting for?

01:51:10.140 | It's difficult enough to defend things like World War II.

01:51:14.760 | Very difficult to defend ethically things like World War II.

01:51:18.260 | But you can always point to the Holocaust.

01:51:20.260 | You can always point and say, "Look, we liberated the camps or we fought Hitler."

01:51:25.020 | And so you think, "Okay, well there was some justification."

01:51:30.780 | But it's harder to defend anything else.

01:51:34.720 | So let me continue my list.

01:51:35.980 | Sorry, I got a little detracted.

01:51:37.740 | So number one, you're dealing with not an employer.

01:51:42.740 | You're dealing with, I'm going to use this term, it's not quite the right term, but it

01:51:46.540 | evokes the right emotion.

01:51:47.980 | You're dealing with a slave master, meaning someone who controls your body and your time

01:51:54.140 | and every aspect of it.

01:51:55.740 | You're voluntarily committing yourself to obey with virtually no questioning the orders

01:52:02.260 | of unknown men and women who literally will use you as cannon fodder.

01:52:10.220 | And they do that with your life.

01:52:17.820 | So what can it cost you?

01:52:18.820 | Number one, it can cost you your life.

01:52:22.460 | Number two, let's say that you survive your time in the military and you're sent off in

01:52:30.100 | the reserves, you're sent off to war somewhere, but you survive.

01:52:36.740 | You come back.

01:52:37.740 | And how many veterans commit suicide every day?

01:52:41.180 | It's stunning.

01:52:42.260 | It destroys men's souls.

01:52:43.860 | It destroys their brains.

01:52:45.500 | It puts them through incredible trauma.

01:52:48.260 | And because most of it is not morally defensible, the trauma just sticks with them.

01:52:54.620 | And it literally drives men to put a gun in their mouth every single day and pull the

01:52:58.700 | trigger.

01:52:59.700 | It's evil.

01:53:00.700 | It's an evil system.

01:53:02.060 | And that's what you're potentially signing yourself up for.

01:53:04.340 | So you say, "Well, Joshua, that's unlikely, right?

01:53:06.660 | We're kind of tired of war.

01:53:07.860 | We learned our lessons in Iraq and Afghanistan.

01:53:11.060 | So what is it good for?"

01:53:12.540 | "Well, I'll go and I'll get some advanced training."

01:53:14.580 | I don't buy that you can't get that better.

01:53:17.220 | And here I would refer you to my best anecdote.

01:53:19.540 | I remember years ago, I heard Joel Salatin talk about this.

01:53:22.300 | Joel Salatin was invited by a local set of legislators.

01:53:28.620 | And I forget all the details.

01:53:30.500 | It was where he lives in Virginia.

01:53:31.900 | And he was supposed to serve on some kind of board or whatever.

01:53:35.660 | He tells a story.

01:53:36.660 | You can go and find it.

01:53:38.100 | But he goes into this board and he was talking about something about farmers.

01:53:41.620 | And he's like, "We need to do blah, blah, blah with farmers, blah, blah, blah, blah."

01:53:44.340 | And a legislator said out loud what we all know is true.

01:53:49.180 | But he says, "We need farmers because we need people to serve in the military."

01:53:57.020 | And the basic idea was that instead of allowing farmers to actually build wealth, he was—I

01:54:02.140 | wish I could do the anecdote more justice.

01:54:04.100 | But instead of—it was a shocking statement to come out of his local legislator's mouth.

01:54:08.780 | But basically, you need to understand that government representatives view that they

01:54:16.340 | need stupid poor people to sign up and serve in the military because they need bodies and

01:54:23.380 | they need people who believe in the sense of patriotism.

01:54:26.140 | They need people who believe in the sense of duty to country.

01:54:29.660 | And the people who do this are poor people, they're country people, and they're farmers.

01:54:34.300 | And so they waive things like they're people from poor backgrounds, inner city, and they

01:54:41.580 | waive things like, "Oh, get a college education."

01:54:43.900 | They waive all this stuff at them, "Get a VA loan," et cetera, because they're getting

01:54:48.100 | poor people.

01:54:49.140 | You will never find in the modern world, you will never find a wealthy family, a sophisticated,

01:54:55.500 | connected family that would send their child into the military.

01:54:58.360 | It's all people who have no options, no opportunities, no intelligence, meaning that—what I mean

01:55:06.280 | is they don't see the other options, they don't have enough mentors around them to show

01:55:10.080 | them the better path.

01:55:11.960 | And so then they go and they sign up for the military.

01:55:13.760 | And so many of them wind up destroyed by the experience.

01:55:17.260 | And so even if you come out the other side and you just went to reserve training and

01:55:20.560 | you never got deployed and, "Yeah, I got a VA loan now," what is that really worth

01:55:25.300 | as compared to the risk?

01:55:28.360 | A VA loan is not going to change your life.

01:55:31.440 | Access to TRICARE is not going to change your life.

01:55:35.000 | Access to the college funding, the GI Bill, is not going to change your life.

01:55:42.000 | So if you got those things, they can be useful tools in the hands of a financial planner,

01:55:46.520 | right?

01:55:47.520 | I've known multiple people, many veterans, they get their medical care from the VA, fine.

01:55:52.540 | They get a VA loan, great, go for it.

01:55:54.760 | They got TRICARE, they got a disability benefit, go for it.

01:55:58.080 | But the problem is that the risks are so high of it going another way that I think that

01:56:05.720 | getting a VA loan, getting a GI Bill, et cetera, is very, very poor compensation for the risk

01:56:12.440 | on the other side.

01:56:13.800 | And if you're smart enough to ask the question of, "Should I do this?"

01:56:17.160 | And if you're smart enough to already be working in that industry, I believe that joining the

01:56:21.200 | military would be one of the most, at the very least, one of the most inefficient ways

01:56:25.720 | for you to accomplish your goals.

01:56:27.520 | And in the worst case scenario, potentially cost you your life, potentially cost your

01:56:33.840 | soul, potentially cost you your sense of peace, et cetera.

01:56:37.420 | And so I think that just in conclusion, a cold look at the pay, the benefits, et cetera,

01:56:48.920 | as compared to what you can get without that, a cold look at that would say that there's

01:56:58.240 | very little benefit for a person who has income, for someone who's not penniless.

01:57:06.360 | I always want to be careful because there's no question that many people have had their

01:57:10.240 | lives improved by the military.

01:57:12.400 | There are many stories of people who grew up in poverty, I didn't have a dad, and I

01:57:17.040 | went into the military and I found my buddies and I found my father, my father figure in

01:57:21.960 | Sergeant So-and-so who straightened me out.

01:57:24.800 | I went on the straight and narrow and I went in and I did my four years and I got out and

01:57:28.560 | I was a totally different man.

01:57:34.120 | There are those stories, but that same guy who did have that good experience is offset

01:57:39.840 | by the guys every single day who are putting a gun in their mouth because they can't deal

01:57:43.320 | with what they did.

01:57:44.320 | They can't deal with what they saw.

01:57:45.320 | They can't deal with what happened to them.

01:57:49.920 | From a practical perspective, I can't see why the military is a good move.

01:57:54.360 | And then from a sense of honor and duty, this desire to love neighbors, protect and serve,

01:58:03.520 | freedom, make sure that we live in a free world, most of those things just cannot be

01:58:09.640 | borne out by the military.

01:58:12.680 | I wrestle with this every Veterans Day and Fourth of July.

01:58:16.760 | It's like, well, what do I tell my children about things like protecting freedom?

01:58:20.720 | What freedom has the US military ever protected for Americans?

01:58:26.760 | There's no question, okay, we liberated the camps of Jews that were going to be murdered.

01:58:31.800 | Fine, but what freedom has the US military ever protected for Americans?

01:58:36.320 | My entire lifetime and my entire reading of history has shown that we've gone from the

01:58:42.480 | highest levels of freedom in the world in, say, 1750, to significantly lower levels of

01:58:49.720 | freedom in, say, 1780.

01:58:52.480 | And since then, the decline of freedom has been inexorable, and I can't find a military

01:58:58.340 | conflict that has actually resulted in increased levels of freedom.

01:59:02.520 | Rather, I find that almost every military conflict has resulted in decreased levels

01:59:07.280 | of freedom.

01:59:08.360 | And so most of the whole freedom thing is pablum, as best I can tell.

01:59:12.320 | So if you want to defend freedom, I think your best solution is go become a lawyer and

01:59:16.080 | fight in the courts.

01:59:17.360 | If you want to defend your freedom and your neighbors, go and encourage people and teach

01:59:22.040 | firearms training in your local community, encourage people to own weapons.

01:59:26.800 | That's the best way to encourage freedom in the local area, et cetera.

01:59:30.080 | So I went on a little bit long, but it's obviously a difficult thing and an emotionally laden

01:59:34.080 | thing.

01:59:35.080 | But if you were my younger brother, that's the speech I would give you to say, I can't

01:59:38.660 | see how or why anybody would want to join the military, especially in the modern world.

01:59:46.500 | Consider after Afghanistan.

01:59:49.680 | Consider who your commanders in chief are, meaning who your commander in chief is and/or

01:59:55.360 | who your commander in chief would be.

01:59:57.880 | Do you respect that man or that woman to the point where you would sign up to take the

02:00:04.080 | pledge to obey them?

02:00:06.760 | And do you want to be used as a political tool for influence in the modern world?

02:00:12.640 | I can't see it.

02:00:13.720 | So forgive me if that was a little bit strong, but that is my honest answer to your question.

02:00:18.400 | And I give you the floor.

02:00:20.160 | No, no, I really appreciate your insight.

02:00:24.680 | I mean, I agree with you on all those points.

02:00:27.920 | So I appreciate it.

02:00:30.600 | I think that--

02:00:31.600 | I would--

02:00:32.600 | Go ahead.

02:00:33.600 | Go ahead.

02:00:34.600 | I talked for a long time.

02:00:35.600 | Go ahead.

02:00:36.600 | Oh, no.

02:00:37.600 | I was just going to bring up a second question that's unrelated.

02:00:41.720 | Well, then let me just say one more comment.

02:00:43.920 | Here's what I would say.

02:00:45.960 | You take every single one of the benefits, the reasons why you wanted to join the military

02:00:52.040 | or want to join the military or are thinking about joining the military.

02:00:55.440 | And then just call me back once a week, and we'll take one of them at a time.

02:00:58.400 | How do I enhance my career?

02:00:59.400 | And I'll give you a 20-minute speech on things you can do with your career.

02:01:02.520 | And going to reserve training is never going to be on that list.

02:01:06.560 | So again, it all comes down to opportunity cost.

02:01:10.280 | For the-- that's why I try to be thoughtful.

02:01:13.160 | I want to be honest, but I don't want to be hyperbolic.

02:01:18.400 | There's no question that there have been many people whose lives have been improved by the

02:01:22.020 | military.

02:01:23.340 | These were generally people with no network, no parents, no opportunities, nobody who reached

02:01:28.360 | out and helped them.

02:01:30.920 | And so for them, the opportunity cost was, well, I'm going to be stuck in poverty, or

02:01:37.600 | I'm going to be-- I'm going to have no friends or no opportunities.

02:01:40.440 | OK, great.

02:01:41.440 | The military was a better move for them if they survive it.

02:01:45.480 | But for you, that's certainly not the case.

02:01:47.480 | And so you can replace with the military with better strategies that don't have so many

02:01:59.440 | downsides and potential downsides.

02:02:02.160 | And before you say your second question, I just want to say this.

02:02:04.280 | I understand that this is an extremely inflammatory opinion.

02:02:07.640 | I hope that those of you who are in my audience who are in the military and who are doing

02:02:15.600 | it with the noblest of intentions, I hope that you understand that I respect your desires

02:02:22.640 | and I respect your intentions.

02:02:24.000 | My assessment is what I have said.

02:02:26.360 | I don't see how it can be otherwise.

02:02:28.000 | And I've asked enough people and talked to enough people that I think that many of my

02:02:32.400 | listeners who would agree with me ideologically and psychologically or who would share some

02:02:37.560 | of the things that I care about would often agree with me.

02:02:41.320 | But I don't intend to, I'm not saying that you as an individual have done wrong.

02:02:48.280 | There's many people who think they can change it.

02:02:49.640 | There's many people who serve for many reasons.

02:02:51.560 | I think it's a lost cause at this point in time.

02:02:54.520 | And I think that it's a lost cause and that one of the best things you can do if you're

02:03:00.980 | in the military is get out as quickly and as reasonably as you can for the reasons stated.

02:03:06.240 | So go ahead with your second question and we'll wrap up on hopefully a less potentially

02:03:12.280 | inflammatory question.

02:03:14.680 | >>Adam: Yeah, sure.

02:03:18.000 | So what is your opinion on using, like investing in treasury inflation protected securities

02:03:25.520 | or inflation adjusted treasury bonds or whatever they're called, like for short term savings

02:03:31.320 | such as to save for a down payment on a house?

02:03:34.880 | I was looking at one of the Vanguard mutual funds, I think it's Vips, and it paid about

02:03:41.160 | like 10% in interest, which depending on your inflation calculations, might have kind of

02:03:50.400 | tracked the long inflation for the past year and is definitely way better than any bank

02:03:55.560 | account while at the same time being far less risky than equities or any kind of like DeFi

02:04:04.400 | arrangement.

02:04:05.400 | But I don't really hear anybody recommending this avenue for short term savings.

02:04:12.160 | I'm kind of missing or wondering if I'm missing anything there.

02:04:15.440 | >>Tavis: I would never think of this avenue for short term savings, but I don't have a

02:04:20.840 | clear argument as to why I wouldn't.

02:04:24.400 | So do me a favor, send me a link, either whatever brochure, whatever you're looking at, send

02:04:29.760 | it to me at joshuatradicalpersonalfinance.com.

02:04:31.760 | Let me look at it because this is not something that I have on my mental menu of options,

02:04:38.440 | but now I'm wondering why I don't.

02:04:41.040 | I don't think that tips are the greatest option of all time for retirees and protecting your

02:04:46.440 | money against inflation.

02:04:49.080 | And I have some arguments there, but I need to think and consider from a short term perspective

02:04:53.060 | and see is there some cost that I'm missing?

02:04:55.520 | Is there something?

02:04:56.640 | Why isn't that on my menu?

02:04:57.880 | So send it to me, joshuatradicalpersonalfinance.com.

02:04:59.800 | I will review and then we'll go from there.

02:05:03.160 | Fair enough?

02:05:04.160 | >>Joshua: Okay.

02:05:05.160 | Yes.

02:05:06.160 | >>Tavis: Wonderful.

02:05:07.160 | >>Joshua: Thank you.

02:05:08.160 | >>Tavis: And with that, looks like my other two callers dropped off, which is probably

02:05:12.240 | good given we're already at two hours here.

02:05:17.040 | Thank you all so much for listening to today's show.

02:05:18.920 | Thank you for being here.

02:05:19.920 | I enjoyed the questions.

02:05:21.820 | Quite stimulating and quite diverse and I love doing these shows.

02:05:25.760 | It's hard for me to give answers that I know are offensive to people from whatever perspective,

02:05:31.600 | but I do try to – I made myself a promise years ago.

02:05:35.160 | I will be honest.

02:05:36.160 | So thank you for listening.

02:05:37.160 | If you'd like to join me on next week's Q&A show, go to patreon.com/radicalpersonalfinance,

02:05:42.480 | patreon.com/radicalpersonalfinance, sign up to support the show there on Patreon and I

02:05:47.080 | would love to welcome you next week.

02:05:48.640 | Remember that if you'd like to talk to me in private, I am currently accepting consulting

02:05:52.060 | clients booked up through January but available at the end of January.

02:05:55.840 | Go to radicalpersonalfinance.com/consult, radicalpersonalfinance.com/consult if you would like to schedule an hour

02:06:03.520 | of consulting time with me and I'll be back with you very soon.

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2022-01-14_Friday_QA