2022-05-26_Friday

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

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

00:00:22.280 | skills, insight and encouragement you need to live a rich and meaningful life now, while

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00:00:29.520 | My name is Josh Rascheits, I'm your host and today we do live Q&A.

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00:01:28.220 | We begin today with Tim.

00:01:29.800 | Tim, welcome to the show.

00:01:30.800 | How can I serve you today, sir?

00:01:31.800 | Can you hear me?

00:01:32.800 | Sounds good.

00:01:33.800 | Good.

00:01:34.800 | I just changed jobs and I'm moving my retirement to what I think would be the best option,

00:01:47.240 | the pension versus a 401(k).

00:01:51.160 | I first wanted to know whether it's more valuable to move it to the 401(k) versus to an IRA.

00:01:57.760 | And then whether it's worth it to pull the funds out as an indirect 60-day rollover to

00:02:04.160 | leverage the market downturn or whether it's too high risk.

00:02:08.320 | All right.

00:02:09.320 | So let's deal with the first one first because it's fairly simple and fairly straightforward.

00:02:14.760 | Generally speaking, when you leave an old company, generally speaking, you will want

00:02:19.760 | to move your money from the old 401(k) into a traditional IRA that you control in the

00:02:26.760 | open market.

00:02:28.200 | There is one exception to that, one reason not to.

00:02:31.040 | Two reasons.

00:02:32.040 | Let me go with two, maybe three.

00:02:34.240 | We'll see when I get there and the answer whether it's two or three.

00:02:37.860 | But the primary reason why you choose to move your 401(k) from the old company into your

00:02:44.600 | own independently controlled traditional IRA is because you then open up the world of investing

00:02:51.140 | to work with any custodian and to work with basically any investment option that you are

00:02:56.360 | personally interested in.

00:02:58.480 | This means that you can go to the best custodian out there.

00:03:01.720 | You're not limited to the custodian that previously had your funds.

00:03:06.040 | And it means that you can invest in anything that you can set up, even to the point of

00:03:10.240 | setting up a self-directed IRA, which would allow you to invest in all kinds of exotic

00:03:15.520 | assets, all kinds of interesting things.

00:03:18.840 | Now, most people, of course, shouldn't do that.

00:03:21.160 | That'd be unwise for most people, but that's the reason why.

00:03:24.120 | This can sometimes, so the big benefit is investment flexibility.

00:03:27.960 | Sometimes you can also save a decent amount of money with costs.

00:03:32.000 | Some people have old 401(k)s that have fairly high embedded expenses.

00:03:36.320 | And so by going to your own independent IRA, you can carefully reduce your costs.

00:03:42.040 | Why wouldn't you do that?

00:03:43.720 | Well, number one would be the big one is that in some states you will lose a significant

00:03:49.520 | amount of asset protection benefits on your funds by making that move.

00:03:55.840 | 401(k)s or any other type of qualified plans are exempt from the claims of creditors under

00:04:04.840 | federal bankruptcy laws.

00:04:07.280 | That means that if someone sues you, unless it's a super creditor, such as the IRS or

00:04:12.960 | a divorcing spouse who can indeed access a 401(k), unless it's a super creditor, somebody

00:04:20.480 | who's suing you for money will not be able to attach or get your 401(k) money.

00:04:27.720 | In addition, a 401(k) is protected in bankruptcy court.

00:04:31.860 | So if you're ever forced into bankruptcy, then the money that's in your 401(k) is protected

00:04:38.880 | under federal bankruptcy law.

00:04:40.800 | IRAs, however, are not qualified accounts.

00:04:44.960 | And because they are not qualified accounts, they are not governed by the same legislation

00:04:49.800 | that protects a 401(k).

00:04:52.400 | The taxation is not any different.

00:04:55.020 | Qualified account does not mean that the taxation is any different.

00:04:57.200 | There are no tax consequences for doing the rollover.

00:04:59.600 | It's taxed identically.

00:05:01.200 | The key thing is simply that because they're not qualified accounts, you rely on state

00:05:07.080 | law to answer whether or not those assets are protected from creditors and whether or

00:05:13.600 | not those assets are protected in bankruptcy court.

00:05:16.880 | Some states have applied the same level of protection to IRAs as exist in 401(k)s.

00:05:25.720 | So for example, I'm from the state of Florida.

00:05:27.360 | Florida has legislation stating IRAs, Roth IRAs, all of these are exempt accounts and

00:05:33.800 | protected from the claims of creditors, the same as a 401(k).

00:05:36.840 | However, there are many other states, I don't remember the exact number, but at least a

00:05:41.720 | third to a half of states in the United States that don't protect IRAs to the same degree

00:05:49.560 | which have minor exemptions for IRAs from the claims of creditors.

00:05:55.640 | And so those states need to be careful.

00:05:59.000 | Now if you are living in a state where you get good protection from an IRA, I think it's

00:06:04.400 | a minor point and you should just go ahead and move it to an IRA.

00:06:07.640 | In addition, if you don't have any reason to think that this might be super important,

00:06:14.040 | meaning that you're not facing creditors, you're not facing an impending lawsuit, etc.,

00:06:19.640 | then you would still want to, you would just go ahead and put it in an IRA because chances

00:06:25.180 | are it's not a necessary part of it.

00:06:27.720 | However, if I were facing or knew that I could face some kind of adverse action in the future,

00:06:32.520 | either get sued, be forced into bankruptcy, etc., I myself would choose to make sure that

00:06:38.560 | I maintain the umbrella of the qualified account, the 401(k), as part of my overall asset protection

00:06:45.240 | scheme, especially if I wound up moving among states and thus being subject to different

00:06:51.560 | states' laws.

00:06:52.920 | So I don't think it's a big deal for most people, but it is a big deal for the few people

00:06:56.820 | for whom it applies, which is why I'm always careful to mention it.

00:07:00.400 | The second reason why you wouldn't take your money out of the 401(k) would be if you have

00:07:07.000 | a superior option at that 401(k).

00:07:10.040 | So contrary to what I said earlier about moving your money to an IRA and getting lower expenses,

00:07:17.360 | sometimes 401(k)s can be very, very inexpensive, depending on how we use it.

00:07:22.760 | For example, if you work for the government and you have access to the government plan,

00:07:26.920 | well, you get great funds at a great price, you get access to the guaranteed fund, you

00:07:31.320 | have wonderful options that you don't have in the private market.

00:07:34.960 | Years ago I used to have a pension that was this way, and so I could roll it out, but

00:07:39.400 | if I rolled it out, I lost the ability to invest in the better funds that were available

00:07:44.180 | to me in my pension.

00:07:46.960 | In addition, sometimes you're working for a company that just has a wonderfully inexpensive

00:07:52.560 | 401(k) plan and it has just the options you need.

00:07:54.800 | And so you want to keep an eye on expenses, you want to keep an eye on fund choice, etc.,

00:08:00.000 | because sometimes you may have a fund choice that's been negotiated for you in the 401(k)

00:08:03.840 | and you can't beat it in the open market.

00:08:05.680 | For most people I think that's not true, but in some cases it is true.

00:08:09.200 | And then the third reason, which I'll just mention in passing, is that if you are anticipating

00:08:15.260 | early retirement, you can actually, if you separate from service and you have money in

00:08:20.600 | a 401(k), you can withdraw your money without any tax penalties starting at the age of 55

00:08:27.000 | rather than waiting for 59 and a half.

00:08:30.200 | And at that point in time, so that gives you an extra 4 and a half years of no penalty

00:08:37.720 | to withdraw your funds.

00:08:39.240 | And so some are pursuing early retirement and that would be a good reason to keep your

00:08:43.480 | money at the 401(k) so that you can separate from service at 55, start making distributions

00:08:48.420 | and be able to continue on.

00:08:54.320 | I guess one more point I would add actually would be sometimes a company will have a provision

00:08:59.860 | for a 401(k) loan.

00:09:02.320 | I'm struggling to remember, I don't think that would generally be allowed if you've

00:09:07.000 | separated from service.

00:09:09.000 | But another good reason to have your money in a 401(k) is that you can take a 401(k)

00:09:13.600 | loan under some plan documents whereas you can't generally take a loan against an IRA

00:09:20.080 | without doing the goofy 60-day rollover thing that we're about to talk about.

00:09:23.760 | So those are my comments on reasons to consider keeping a 401(k).

00:09:30.120 | Most people go ahead and move it to an IRA but keep those reasons in mind.

00:09:36.560 | So hopefully I've explained that.

00:09:38.800 | Now explain to me your question about doing a 60-day rollover and how you're hoping to

00:09:42.360 | use it to save money.

00:09:44.600 | Sure.

00:09:45.600 | So I have the ability to take the funds out of one account and then wait 60 days maximum

00:10:04.680 | to put them into the new retirement fund.

00:10:08.560 | And given the way that the market has been trending, I'm wondering whether it's even

00:10:13.760 | worth it to take the risk of say keeping it out there for 45 days and then putting it

00:10:21.000 | in the account and sort of sidestepping the losses that seem to be pretty apparent over

00:10:29.400 | the next month or two.

00:10:31.140 | You think the market is going to go down in the next month or two?

00:10:35.960 | Yes.

00:10:37.640 | So I would just say to answer that question, you would need to disconnect the two issues.

00:10:44.560 | Number one, there are sometimes reasons to do the 60-day transfer.

00:10:51.640 | And basically the reason is if you need access to the money for a very short-term bridge

00:11:00.600 | loan of some kind, you can use a scheme where you close the money out of one account, take

00:11:08.680 | possession of the check from the investment company, use the money, and then before the

00:11:14.960 | 60-day period ends, get it into a second account.

00:11:18.640 | It is risky, but there have been times, I've suggested it in a couple of situations, where

00:11:23.480 | you just need a source of bridge financing and you need quick access to money, you can

00:11:28.440 | use that law to your favor.

00:11:30.440 | It's risky, as I stated, it's risky, but that can in some cases be something that you want

00:11:35.800 | to do.

00:11:36.800 | However, in the scenario you're proposing, I don't see any reason why you need to do

00:11:42.720 | that.

00:11:43.720 | If you want to make a market bet, just simply put the money into a cash account at whatever

00:11:48.880 | fund provider you're going to use and then sit back and make your market bet.

00:11:55.320 | So if you believe that stocks are going to go down a month and a half from now, or for

00:11:59.760 | the next month or two, fine, just put the money into a cash account and don't take the

00:12:04.520 | risk of failing that transfer in time, such meaning that you have an unintended IRA distribution.

00:12:11.200 | You don't need to do the 60-day game in order for you to take action on your stock market

00:12:17.520 | prediction.

00:12:19.200 | The only piece that has me a little concerned about keeping the money out would be if you…

00:12:34.360 | I think there's something where they withhold a certain amount, like 20% of the total amount

00:12:41.480 | until the end of the year, so you need to front the cash to do something like that.

00:12:45.800 | Correct.

00:12:46.800 | Correct.

00:12:47.800 | So the key is, it's always simpler just to do a custodian to custodian transfer.

00:12:52.840 | And simplicity is good.

00:12:54.200 | So I would encourage you, I don't see any reason in what you described why you should

00:12:59.040 | play the 60-day game or why you should take possession of the funds directly.

00:13:03.920 | Open the new account with your investment provider, get the transfer instructions, then

00:13:10.240 | simply take those transfer instructions to the 401k custodian and have them do a direct

00:13:14.880 | custodian to custodian transfer.

00:13:17.440 | But simply direct that money into a cash account and then you can invest it when you believe

00:13:22.880 | that it's the right time to invest.

00:13:25.240 | Okay.

00:13:26.240 | Okay.

00:13:27.240 | Well, incidentally, we're closing on a house in mid-July, so it is possible that we may

00:13:35.240 | or could actually use those funds.

00:13:38.840 | If that were to be the case, I mean, I think I talked to both the old retirement and the

00:13:44.280 | new and they said there's no time limit within what you need to make your transfer,

00:13:49.880 | that you can take them out at any time.

00:13:52.720 | If I were to leverage those funds, is that something that you could actually use for

00:13:57.960 | that purpose?

00:14:00.480 | Could it be used?

00:14:01.480 | Yes.

00:14:02.480 | Do you need to use it?

00:14:04.160 | That would be my question.

00:14:05.960 | Why would you need to do that?

00:14:07.600 | What would you need the cash for in order to close on the house?

00:14:10.960 | What do you need the money for?

00:14:14.000 | If something came up either with interest rates or where we just simply didn't have

00:14:20.120 | enough cash to close but could easily make that up in the following months.

00:14:25.520 | So yes, it is an option.

00:14:28.280 | I would rather you do a 401k loan, if you can do that after having separated from service,

00:14:34.680 | then do the 60-day rollover option.

00:14:37.720 | Rollover, yes.

00:14:39.280 | If you need the money, then you can take the money out, you will have possession of it

00:14:45.000 | and if you can get it into the next plan before the 60-day expires, then there are no adverse

00:14:49.960 | tax effects.

00:14:51.760 | However, they are going to deduct the 20% taxes if you do that and so you have to plan

00:14:57.840 | that in as well and make up the taxes in order for you to meet the rollover.

00:15:04.640 | So I would prefer you do a 401k loan if you can do that, but if you get down to the end

00:15:10.280 | of the day and we've got to close on this two weeks from now and I need an extra little

00:15:14.180 | bit of money and you can see that that could work, then yes, it is a nice option to have

00:15:17.380 | in your back pocket.

00:15:19.000 | I would repeat, before I would do it, number one, I would do a personal loan from a friend

00:15:23.760 | or a relative.

00:15:24.880 | I would do a 0% credit card loan.

00:15:28.400 | I would exhaust almost every other form of financing before I would do this because number

00:15:35.320 | one, them withholding the taxes by taking the transfer directly to you is inconvenient

00:15:42.560 | and there is often a lot of risk that you don't get it done.

00:15:46.120 | 60 days sounds like a long time.

00:15:47.880 | 60 days is not really that long and so I would use myself every other form of financing that

00:15:53.080 | was available to me before I would do this one.

00:15:55.920 | I just think it's riskier and if you have a sizable 401k, it can be a significant penalty

00:16:01.960 | if you don't get it exactly right.

00:16:04.000 | Okay.

00:16:05.000 | Makes sense?

00:16:06.000 | It all makes sense.

00:16:07.560 | Good stuff.

00:16:08.560 | Great questions.

00:16:09.560 | Wonderful.

00:16:10.560 | We move on to Adam.

00:16:11.560 | There we go.

00:16:12.560 | Adam, welcome to the show.

00:16:13.560 | How can I serve you today, sir?

00:16:14.560 | Hi, Josh.

00:16:15.560 | Thanks for taking the call.

00:16:16.560 | I'm a digital nomad, an American citizen, an EU citizen living in Europe, kind of down

00:16:25.880 | bouncing around and my girlfriend will soon be finishing school and joining me in the

00:16:31.320 | digital nomad life and I had a couple of questions about what might be the best way to set up

00:16:37.920 | her financial architecture.

00:16:42.360 | I have myself set up but I kind of want to get her together.

00:16:46.120 | Her plan is when she finishes is to set up a freelance design business and essentially

00:16:53.320 | what we do is travel between different EU countries and never stay anywhere long enough

00:16:58.760 | to become a tax resident.

00:17:01.480 | She is a EU citizen as well or she will be in a few months.

00:17:06.120 | She's from outside of Europe and is looking to sever her connections to her very tax unfriendly

00:17:12.360 | native land.

00:17:15.000 | She's kind of like a free agent and can set up shop wherever she wants.

00:17:18.760 | I guess my question is what would be the most advantageous way to set up a business inside

00:17:26.240 | of Europe?

00:17:27.240 | A lot of people say Estonia or Malta.

00:17:30.520 | How should we approach this question?

00:17:32.320 | I guess if you need more information I can give you.

00:17:34.800 | I don't want to rant for too long.

00:17:36.620 | Which country is she a citizen of and which country is she moving from?

00:17:42.560 | She's moving from Argentina and she is going to be an Italian citizen but she has no meaningful

00:17:54.000 | connection to Italy aside from a grandparent which is how she got the passport.

00:18:00.360 | You said she was trying to move out of her high tax country.

00:18:03.560 | Did you mean Argentina?

00:18:05.560 | Yeah.

00:18:07.240 | Okay.

00:18:08.960 | So this is good.

00:18:11.320 | So she is an Argentinian citizen.

00:18:13.360 | She's claiming Italian citizenship by descent and she's in that process and she's planning

00:18:18.280 | to join you in the European Union living a digital nomad lifestyle after she finishes

00:18:26.000 | her studies.

00:18:27.000 | Correct.

00:18:28.000 | Correct.

00:18:29.000 | Okay.

00:18:30.000 | And the idea is she'll have the Italian passport but she has no bank accounts in Europe or

00:18:36.560 | anything so she can sort of pick her country where she wants to set up shop and we're just

00:18:41.240 | bouncing around the EU essentially.

00:18:44.000 | You are an American citizen and also an EU citizen.

00:18:48.560 | So yeah.

00:18:49.560 | There's another wrinkle with me which is that I have a salaried position in the United

00:18:55.880 | Kingdom and I can't get out of that.

00:19:00.600 | I draw a salary there and then I use the tax credit to pay for my US taxes or to cover

00:19:06.800 | what would be my US tax obligation.

00:19:09.360 | But I don't go to the UK.

00:19:11.520 | I just draw a salary there and have a checking account and that's really it for me there.

00:19:15.320 | Do you maintain your financial infrastructure in the United States?

00:19:18.880 | Correct.

00:19:19.880 | Yeah.

00:19:20.880 | I mean I contribute to a Roth every year.

00:19:25.080 | Essentially I use American credit cards because the remittance fee is less than the difference

00:19:32.000 | in the rewards that I get from my American credit card.

00:19:34.440 | So everything for me runs through the US except for the UK checking account where I get my

00:19:39.400 | salary.

00:19:40.400 | Right.

00:19:41.400 | Okay.

00:19:42.400 | And so you don't have, although you, so you enter the European Union using your EU passport

00:19:49.320 | but you don't declare an EU tax residency currently.

00:19:52.520 | You just simply maintain your American tax residency and you float around.

00:19:56.920 | Exactly.

00:19:57.920 | So this is one of those gray areas of international planning.

00:20:03.120 | And it's gray because there, it's a gray area which means that you can choose various ways

00:20:13.200 | to structure this.

00:20:15.520 | Let me think of how to begin.

00:20:18.720 | So first, the good news for your girlfriend.

00:20:21.320 | Let's just deal with her first.

00:20:22.520 | The good news is this.

00:20:25.880 | If she leaves Argentina, I'm not familiar with what would be necessary of reporting

00:20:31.720 | for the Argentinian government to end things.

00:20:35.720 | But she should research what is necessary for the Argentinian government for her to

00:20:39.960 | say I'm leaving Argentina, I'm moving abroad, and I'm no longer going to be a resident or

00:20:45.520 | a tax resident of Argentina.

00:20:48.720 | Given the fact that...

00:20:49.720 | So I can speak to that really quickly.

00:20:50.720 | Go ahead.

00:20:51.720 | Please, yeah, please do.

00:20:52.720 | Educate me.

00:20:53.720 | Yeah, yeah.

00:20:54.720 | So she's, you know, she's a few years younger than me.

00:20:56.680 | She's worked before but it was always informal, kind of under the table, you know, like Argentina

00:21:01.040 | or Italy is often the case.

00:21:02.920 | Of course, of course.

00:21:03.920 | So I don't think she's formally paid taxes there.

00:21:06.320 | So the idea is I think she'll get her passport by the end of this year and would not begin

00:21:11.000 | working in Europe to avoid any entanglements with Argentina until January 1st, you know,

00:21:18.520 | the new calendar year which is also the new tax year for Argentina, and then just be free

00:21:22.460 | and clear and put that country in her rear view, you know, aside from visiting family

00:21:26.400 | once a year or whatever it is.

00:21:28.000 | Right, good.

00:21:29.000 | So you're making the point that I was going to make is that if she's in university, there's

00:21:32.920 | a good chance she's not generating any meaningful income, she's not... she doesn't have a high

00:21:37.040 | target on her back.

00:21:38.280 | She can most likely just leave and, you know, renew her passport for convenience before

00:21:42.840 | she leaves, of course, get the maximum duration passport and she can just simply leave.

00:21:48.320 | Regardless, though, many countries...

00:21:51.260 | So there are only some countries in the world that have a formal exit requirement.

00:21:57.120 | So a country like Canada has a formal exit requirement.

00:22:00.020 | If you want to leave, you need to file an exit tax return with the CRA, you need to

00:22:04.960 | end your ties with Canada, etc.

00:22:07.560 | Argentina would be much less bureaucratic from that regard and fewer requirements for

00:22:13.240 | her.

00:22:14.240 | So when she finishes her studies, I would say most likely she can just simply finish

00:22:17.680 | her studies, take her diploma, get on an airplane and go wherever she wants.

00:22:21.240 | And of course, the Argentinian passport is a very useful passport, gives her... it's

00:22:26.000 | a great... it's a very useful passport.

00:22:28.360 | So then, with regard to the Italian government, her claim to Italian citizenship does not

00:22:36.760 | in and of itself generate any liability with the Italian government or with the European

00:22:41.800 | Union generally.

00:22:43.340 | So the basic function is that that's just simply her claim by descent.

00:22:49.680 | Now if she moved to Italy, she could become a tax resident, but you're seeking to avoid

00:22:54.680 | that.

00:22:55.680 | And the thing that you're doing right is what you want to do is you want to avoid tax

00:23:00.040 | residence.

00:23:01.040 | It's more about where you're not a tax resident than necessarily where you are a tax resident.

00:23:05.840 | So this is where you have to be very careful, especially with several countries in the European

00:23:11.040 | Union.

00:23:12.240 | Several countries in the European Union are very well organized and they have rules and

00:23:16.400 | they will, if you spend substantial amounts of time in that country, they can and will

00:23:22.520 | say, "Listen, you're a tax resident."

00:23:24.280 | And so it's more a matter of not becoming a tax resident of a country that you don't

00:23:28.520 | want to be a tax resident of than it is of where specifically are you a tax resident.

00:23:34.280 | So as an Italian, once she has her Italian passport, she could simply join you and of

00:23:40.640 | course she could join you on her Argentinian passport, but once she has her Italian passport,

00:23:44.260 | she could join you.

00:23:45.480 | And generally speaking, I don't think it's a big deal.

00:23:47.680 | As long as you're not, I don't think she needs to declare a tax residency in Europe necessarily,

00:23:54.640 | as long as she's not becoming a tax resident of any one particular country.

00:23:59.400 | So she, because of the simplicity of having an EU passport, she doesn't have the same

00:24:03.600 | visa controls that others have, but you'll just want to make sure that you don't become

00:24:07.660 | a tax resident of any particular country in Europe.

00:24:12.960 | What's wrong with that plan?

00:24:14.680 | Well basically it's a matter of what infrastructure do I need?

00:24:18.160 | So if I'm going to go and start a business, where is that business going to be based?

00:24:27.800 | If you base the business in the European Union with some kind of formal structure, now that's

00:24:33.320 | going to start to create a tie.

00:24:35.440 | And you can choose a country that you're not a resident of, but is that really necessary?

00:24:41.400 | And so, and then the other wrinkle is that increasingly the place where you need to declare

00:24:47.440 | tax residency is often now with banking.

00:24:51.280 | Banking has become so difficult to deal with in the modern world, and that's where, they

00:24:56.080 | say, where are you a tax resident of?

00:24:58.040 | And that's where it's convenient to be able to report, here's where I'm a tax resident.

00:25:02.420 | So I could give some specific, I'm trying to think of how much to say here in a public

00:25:09.800 | format.

00:25:13.440 | I'll say this, so number one, make sure that you're not generating a claim to tax residency

00:25:21.000 | based upon your actions.

00:25:23.120 | So don't buy a car in Germany and spend nine months a year in Germany.

00:25:29.600 | Make sure that if you pass through Germany, that you're genuinely passing through.

00:25:34.960 | There are a few problematic countries in the EU that you'll just want to be careful that

00:25:38.480 | you don't trigger those countries' problems.

00:25:42.440 | From what you're describing, if she were making quite a lot of money or had a large and established

00:25:47.040 | business, then I think there are several really good options in Europe for people who want

00:25:55.000 | to establish a formal tax residency so that they have the proper cover.

00:26:01.080 | And that's important, I believe, for somebody who is, who has a substantial income or a

00:26:07.840 | substantial business.

00:26:09.280 | But I think from what you're describing, I'm imagining her doing kind of a digital nomad

00:26:13.080 | thing, starting a couple of businesses, maybe some of them hit, but I'm not imagining she's

00:26:16.520 | going to make $5 million this next year.

00:26:18.600 | Do you think, am I right in my perception there?

00:26:20.960 | >>Toby: Yeah, yeah.

00:26:21.960 | >>Dave: Yeah.

00:26:22.960 | >>Toby: If I can interject for a second.

00:26:23.960 | So I myself, I've been doing the digital nomad thing in Europe.

00:26:28.400 | She studied in Europe, it's how we met each other, for about two and a half, three years

00:26:32.640 | now.

00:26:33.640 | We're in like eight different countries and I've kind of gotten a pretty good grip on

00:26:38.040 | not becoming a tax resident wherever I go, follow the rules, make sure it's up to six

00:26:42.600 | months or up to three months, whatever.

00:26:44.160 | So I'm not so much worried about that aspect because she's kind of just happy to go and

00:26:50.260 | explore Europe with me.

00:26:52.280 | The real question is, and the other sort of irony, I mean, we're going, we intend to get

00:26:57.560 | married at some point in the near future, the next year or two.

00:27:02.760 | And her income is less important.

00:27:04.800 | I will be sort of the breadwinner.

00:27:07.400 | So I'm just thinking of if she does have this freelance business, we don't know how big

00:27:12.600 | it will grow, right?

00:27:13.600 | Or what it will look like, but we figure the money needs to go somewhere and we don't want

00:27:19.440 | to send it to Argentina, right?

00:27:21.080 | Given just what a nightmare that they are, right?

00:27:24.560 | >>Dave: Right, of course.

00:27:25.560 | >>Toby: To deal with.

00:27:26.560 | So it's just a matter for her of picking which country do you want to set up your bank account

00:27:31.960 | and register your business.

00:27:34.720 | And the idea may possibly be to not even touch the money from her business because I believe

00:27:40.120 | in a country like Estonia, for my initial reason, for example, you don't have to pay

00:27:44.840 | tax from the business.

00:27:48.200 | >>Dave: Yeah.

00:27:49.880 | I wouldn't do, you're breaking up a little bit, so I'm just going to talk for a second

00:27:52.520 | while your phone reconnects.

00:27:54.120 | I don't see any benefit in your case for Estonia.

00:27:57.960 | I would use the US.

00:27:59.400 | I think the US is perfect for this, especially with her not being an American.

00:28:03.800 | >>Toby: For her?

00:28:04.800 | >>Dave: Yeah, for her.

00:28:05.800 | Yeah.

00:28:06.800 | The US is perfect for this.

00:28:07.800 | So she can set up banking in the United States.

00:28:12.000 | You'll have to be careful with what banks, but the United States is a world-class banking

00:28:17.840 | destination, very good banks.

00:28:19.720 | Of course, there are many other countries and not all, not, not, not, there's so many

00:28:24.800 | US people in the United States trying to go abroad.

00:28:26.960 | I think the United States is a great place for her to bank.

00:28:29.040 | I think the United States is a great place for her to run her business.

00:28:31.920 | I think the United States is a great place for her to keep money.

00:28:38.360 | And so if she's looking for one simple solution, I think the United States can be a really,

00:28:45.200 | really good solution for her.

00:28:47.280 | I think that from a business perspective, she may not need any kind of business, any

00:28:53.920 | kind of complex business structure, but a US single member LLC and owned by an offshore

00:29:02.280 | company gives her the ability to run all of her stuff in the United States, access US

00:29:07.840 | banking, access US merchant payment processing, et cetera, that won't generate any tax nexus

00:29:13.440 | for her with the US as long as she's thoughtful and careful.

00:29:17.360 | Even she can invest in the United States, right?

00:29:19.920 | Non-US persons can invest in the US stock market.

00:29:22.920 | No, no taxes.

00:29:24.320 | And so I think the United States would be a good place for her to begin with that.

00:29:29.120 | Otherwise, while she's in Argentina, I think that there are some good options potentially

00:29:33.840 | in Uruguay that would go across the border there.

00:29:36.400 | It's a standard destination.

00:29:38.040 | And if she needs to start, she should start while she has a simple story to tell, that

00:29:43.240 | I'm an Argentinian living in Argentina, et cetera.

00:29:46.460 | She should see if she can access that.

00:29:48.680 | And then, of course, as her wealth grows, she can access many of the banking options

00:29:52.960 | in Europe.

00:29:55.800 | I think the big thing that you have to help her with is that even in your case, digital

00:30:00.600 | nomad, you need to have a clear story that makes sense where she has what phone number

00:30:05.160 | do I have, what address do I have, where do I receive mail, what's my story that I tell?

00:30:11.840 | Because the world is not friendly to nomads who don't have a clear story, who don't have

00:30:18.200 | good contact information.

00:30:20.000 | And so I would begin now by just having her develop that and build that.

00:30:23.400 | But I think the United States should be your primary place to look first.

00:30:26.320 | >>Tom: Right.

00:30:27.320 | And you're saying she could build that out in the US, for example.

00:30:31.560 | For example, use the American address that I still use of a relative or something like

00:30:35.880 | that for what she's doing, or a PO box.

00:30:38.480 | >>Aaron: Absolutely.

00:30:39.480 | >>Tom: Thanks.

00:30:40.480 | OK.

00:30:41.480 | So I'll look into that.

00:30:42.480 | I hadn't thought about the US.

00:30:43.480 | I guess from what I had heard from talking to people in Europe, they said, well, if she

00:30:46.480 | has European clients, she may need to set up shop in Europe.

00:30:51.360 | But I'm not sure if that's correct or not.

00:30:56.600 | The follow-up question I have related to this is, when we do get married, the intention

00:31:02.160 | is to sort of merge our finances.

00:31:04.600 | Are there issues for me, for example, as an American citizen, giving her a credit card

00:31:13.240 | on my account, like in her name, but through my account, even though she's not a US citizen?

00:31:19.120 | Are there any frictions or problems with integrating her into my financial life when it comes to

00:31:25.120 | that?

00:31:26.120 | >>Aaron: If you're very, very wealthy and you're facing estate taxes, it is complicated

00:31:32.160 | to have an American married to a non-American, because you don't have an unlimited transfer

00:31:41.880 | of money between spouses for the purposes of estate tax planning.

00:31:46.360 | Assuming that you're not yet that wealthy, the answer is basically no.

00:31:50.640 | And in fact, it opens up a significant number of benefits to you in your business endeavors.

00:31:57.880 | I of course would not, I myself would not base a marriage decision based upon the citizenship

00:32:06.240 | papers that someone does or doesn't hold, obviously.

00:32:09.680 | But as a planner, if you come to me and you say, "I'm an American who's not married to

00:32:14.720 | an American," it opens, I would encourage, and I like living outside the United States,

00:32:19.520 | right?

00:32:20.520 | Because many people who marry an American, they would love to live in the United States

00:32:23.120 | because of the many lifestyle benefits.

00:32:25.560 | But if you are an American not married to an American, sorry, married to someone who's

00:32:29.960 | not an American, then I would beg you, don't just automatically go and create ties with

00:32:35.360 | the United States.

00:32:36.440 | Because you can use your marriage, if you have your finances joined and you join your

00:32:42.160 | business efforts, you can use your marriage very efficiently.

00:32:44.440 | A couple of opportunities that opens up.

00:32:46.720 | Number one, an American who owns a business and who works for a company is liable to the

00:32:54.360 | US government on all of his income from around the world.

00:32:58.320 | Now, of course, there are some useful tax exemptions for living outside the United States.

00:33:03.800 | You can lower your taxes substantially to the US by living outside of the US.

00:33:10.520 | But someone who's not an American can genuinely eliminate all of her taxes.

00:33:17.680 | I'll talk to your girlfriend.

00:33:20.080 | She can genuinely, legally eliminate all of her taxes and never create that tax nexus

00:33:26.320 | with the United States.

00:33:28.080 | So the reason I'm suggesting that the United States be an option is simply that it sounds

00:33:34.440 | like she's going to take a little while to figure out how to make money with her business.

00:33:39.040 | However, if she is more established or if you become more established, you and she can

00:33:45.120 | build a large business.

00:33:48.000 | And in that case, I would take it to one of the tax-free, the genuine tax-free jurisdictions.

00:33:55.160 | And so you can use the various tax havens of the world and you can legitimately set

00:34:00.880 | up a completely zero-tax lifestyle, even earning $100 million a year if the business fits that

00:34:09.640 | model where you don't generate local income tax requirements due to physical presence,

00:34:14.120 | etc.

00:34:15.120 | So let's say that she sets up an online business making $100 million a year.

00:34:18.960 | She can go and she can take her business to Hong Kong, Dubai.

00:34:25.740 | She could take it to one of the Caribbean countries, but Hong Kong and Dubai both excellent.

00:34:28.760 | Let's say it was Hong Kong, right?

00:34:29.760 | She's a Hong Kong corporation.

00:34:32.300 | She won't pay any taxes in Hong Kong.

00:34:33.920 | She can do her banking in Singapore.

00:34:36.080 | She can set up her tax residency if she needs to, which would be convenient.

00:34:40.100 | She can set it up easily.

00:34:41.140 | She can go to Greece, would be a good solution, or a zero-tax or a territorial tax jurisdiction.

00:34:47.520 | And so you can set up a genuinely tax-free lifestyle and she can live that way as a non-American.

00:34:53.760 | You as an American, you do not pay tax on money that's transferred to you by your rich

00:35:01.560 | spouse because you're married.

00:35:03.860 | And so if she has a business that she earns lots of money, then she can earn the money.

00:35:08.600 | The money can stay in a tax haven and you don't have to pay tax on the income simply

00:35:13.240 | because it's a spousal transfer.

00:35:15.380 | So that can help you both to enjoy a high marital lifestyle without your necessarily

00:35:21.440 | paying American taxes.

00:35:23.200 | That's something that's not open to those of us who are Americans married to Americans.

00:35:27.320 | In addition, you can then ask...

00:35:29.160 | Go ahead.

00:35:30.160 | Oh, sorry.

00:35:31.160 | Just on this subject now, let's say we get married.

00:35:35.680 | I don't know, we'd probably do it in Europe or Argentina or something.

00:35:40.400 | When I'm filing my taxes, do I still file them as a single person or am I able to...

00:35:44.760 | Or should I say that I'm in my American taxes, that is?

00:35:48.760 | Does the US recognize my marriage if it's outside of the US?

00:35:53.120 | The US does recognize your marriage if it's outside of the United States.

00:35:56.760 | The tax filing designation that you choose, you don't owe...

00:36:03.840 | I'm trying to remember if you have to file as single if you're married or if you have

00:36:08.680 | to file as married filing separately or if you have to file as single.

00:36:11.520 | I would assume, although I haven't done it myself being married to an American, I would

00:36:18.160 | assume that you would just simply file married filing separately.

00:36:21.200 | But the point is that your wife, if she does not become a US person, meaning she doesn't

00:36:26.820 | become a US green card holder or other permanent...

00:36:30.120 | She doesn't become a permanent resident, she doesn't become a US citizen and/or she doesn't

00:36:34.960 | become a US person for tax purposes, triggering something like the substantial presence test

00:36:40.480 | or getting some kind of residency visa in the United States that would subject her to

00:36:44.720 | taxes or creating some kind of tax nexus with the United States.

00:36:49.200 | If she doesn't become a US person, then no, there's no requirement that she file or report

00:36:53.920 | any of her income to the United States.

00:36:55.680 | She doesn't automatically have a tax agreement with the United States simply by being married

00:37:02.080 | to an American, nor do you have to report her income as a non-American on your American

00:37:07.880 | tax return.

00:37:09.040 | You simply need to continue to file tax returns for your income personally.

00:37:13.360 | Got it, got it.

00:37:17.040 | The last question, a real quick one, is just...

00:37:20.000 | I'm going to Google all this, of course, do my own research, but I don't know if you have

00:37:23.520 | a book or blog recommendation for setting up a business in the US if you're not a citizen

00:37:29.680 | or any particular further reading recommendations you might have on this subject.

00:37:34.480 | You'll find plenty with a web search.

00:37:36.920 | That's what the whole industry in the United States does.

00:37:41.320 | Whether it's a big corporation or whether it's a small, there's plenty of options available

00:37:46.000 | and there's plenty of business agents that will help with those details.

00:37:49.540 | If you're outside the United States, no doubt you get served ads all the time for companies

00:37:54.160 | that offer to help you set up an international tax ID number, an ITIN.

00:37:58.720 | There's plenty of information available.

00:38:00.720 | I don't have a specific book, but there's plenty of information available.

00:38:03.760 | I would say that you can do it, you can figure it out yourself.

00:38:07.840 | It's pretty simple, it's totally legal.

00:38:10.320 | The US does very well at this.

00:38:12.840 | The other thing I was going to point out really quickly is that it's also beneficial to you

00:38:18.920 | being married to a non-American because if your assets grow, there are some really cool

00:38:24.800 | things you can do in the world of international trusts that Americans cannot participate in.

00:38:29.720 | Because Americans have to report and pay taxes on any trusts that they are trustees of or

00:38:39.800 | that they control around the world, then for most Americans, there's no tax benefits for

00:38:47.400 | doing international trust planning.

00:38:49.980 | But if you have a non-American spouse, then you can use international trusts to hold your

00:38:55.360 | assets.

00:38:56.360 | So a non-American spouse or family member can be the trustee on those accounts, and

00:39:02.040 | then the Americans then only have to pay tax on income that they receive from the trust.

00:39:06.760 | So the point is, it's actually a pretty big benefit to mixing those two together if you

00:39:13.360 | don't want to live in the United States, meaning that you can use the American and the non-American

00:39:18.160 | status to your advantage.

00:39:20.680 | >> Steve: Oh, this is great.

00:39:23.680 | The only hard part is going to be making a hundred million dollars.

00:39:26.680 | >> Josh: Exactly.

00:39:27.680 | >> Steve: This all sounds excellent.

00:39:28.680 | So once we get to that part, maybe I'll call you back.

00:39:32.320 | Well, I think maybe at that point I won't need the Patreon.

00:39:34.960 | I'll hire some spouse employers.

00:39:35.960 | >> Josh: Exactly.

00:39:36.960 | >> Steve: Until then, I appreciate it, Josh.

00:39:37.960 | Thanks so much.

00:39:38.960 | >> Josh: My pleasure.

00:39:39.960 | All right, we move on to, let's go to 219 Area Code.

00:39:45.760 | Oh, I already got you.

00:39:46.760 | That was Tim.

00:39:47.760 | Sorry, Tim, I forgot to hang up on you.

00:39:49.320 | Let's go to, it was Trey.

00:39:50.320 | Trey, welcome to the show.

00:39:51.320 | How can I serve you today?

00:39:52.320 | Trey, you're up.

00:39:53.320 | >> Trey: Sorry about that, Josh.

00:39:54.320 | Hey, I wanted to ask.

00:39:55.320 | So we, my wife is a professional and has devoted a lot of time to her schooling.

00:40:08.320 | We got one kid who is just about to turn a year old, but she's not really ready to, you

00:40:13.720 | know, stay home.

00:40:14.720 | She doesn't really want to do that yet, if at all.

00:40:17.880 | But what we are doing is I got a remote job and she also, it looks like she's about to

00:40:23.920 | get a remote job where she can have basically the same position that she has right now,

00:40:28.920 | which she loves doing, loves the job.

00:40:29.920 | But yeah, so it's going to open up a lot more opportunity for us.

00:40:35.200 | The thing that I was wondering though is obviously, you know, two professionals working at home

00:40:39.280 | doesn't mean that you don't need childcare.

00:40:40.280 | >> Josh: Of course not.

00:40:41.280 | >> Trey: Especially with a one year old.

00:40:42.280 | And so I was kind of, since this is radical personal finance, I had kind of a radical

00:40:47.860 | idea, especially for somebody who's not really wealthy.

00:40:50.440 | I wanted to know if you had any knowledge about the use of au pairs.

00:40:54.680 | It's kind of like live in help so that, you know, we'd still be at the house and we could

00:40:59.080 | check in with them all the time, but they would have a designated sort of caregiver

00:41:03.640 | during the day.

00:41:04.640 | >> Josh Yeah.

00:41:05.640 | Yeah, it's a, it's a, it's a wonderful thing to do.

00:41:08.400 | And so if both you and your wife are generating income, then you should certainly be able

00:41:11.900 | to afford it.

00:41:12.900 | I think it's one of the best things that you can do.

00:41:17.640 | I think that the reason is that you, so let me back up.

00:41:25.300 | In a perfect world, what would we do?

00:41:28.240 | In a perfect world, we would have with children, especially babies, which is what you have,

00:41:34.520 | we would have one on one attention all the time so that there is a loving adult who's

00:41:41.460 | there for the child at all times.

00:41:43.360 | That would be a perfect world.

00:41:45.420 | And then expanding from that, we would recognize that there are benefits to having, there are

00:41:53.920 | benefits to having social contact, right, child playing with others, having friends,

00:41:59.920 | etc.

00:42:00.920 | And so it wouldn't always be just a child and an adult, but it would be a child with

00:42:05.400 | friends.

00:42:06.400 | And then usually the most important relationship to nurture is generally going to be between

00:42:12.140 | the mother and the baby.

00:42:14.780 | And then also the father and the baby.

00:42:17.800 | So clearly the mother's bond is more important at an early age, especially for a baby.

00:42:23.160 | A baby and a mother have a very close connection that goes beyond even, I mean, it includes

00:42:29.120 | just tremendous levels of personal biology, right?

00:42:32.440 | The mother literally, after bearing a child, carries the baby's blood in her, it's my understanding,

00:42:37.920 | for the rest of her life.

00:42:39.600 | A mother's body responds to the baby's needs.

00:42:43.360 | For example, a breastfeeding mother will, a mother's body will change the makeup and

00:42:48.280 | the chemical composition of the breast milk in response to what the baby's body needs.

00:42:53.120 | The smell of the baby invokes a response in the mother that affects her body to change

00:43:00.000 | breast milk.

00:43:01.000 | And so a breastfed baby is something that obviously you need the mother to do.

00:43:07.840 | Now going back off of that, if we say this is not the choice that seems appropriate for

00:43:14.400 | us right now, then we say how can we get as close to that as is possible and can we bring

00:43:22.840 | in other benefits?

00:43:24.880 | So let's say that your wife died and you were left with a child and your wife was dead.

00:43:33.200 | Well, if that happened to me, I would want my children to have the same close relationship

00:43:41.240 | of care and so of course I would want to provide that.

00:43:44.760 | If I couldn't provide that, then I would look and say how could I hire someone to provide

00:43:49.680 | that?

00:43:50.680 | So if you think about wealthy families throughout history, how have they done this?

00:43:54.600 | Well traditionally it's with a governess.

00:43:56.240 | You have a governess.

00:43:57.680 | And so you have a full-time employee who cares for your child or for your children.

00:44:03.760 | And when you think about British literature and the British culture, this is a very, very

00:44:07.320 | common thing.

00:44:08.320 | You have a mother that they have plenty of money.

00:44:10.600 | The mother doesn't want to be kind of a full-time on-demand mother all the time.

00:44:16.320 | She has other things that she's doing and so she has a governess.

00:44:19.960 | You go to a very wealthy family in the United States, generally you'll see that they have

00:44:23.560 | some kind of live-in servant who cares for the children, who provides for the children,

00:44:28.160 | etc. and the mother and father are not involved in that daily activity.

00:44:32.160 | So the benefits of this are that you get a much closer relationship with the child with

00:44:37.480 | a loving adult and you get the child's needs met.

00:44:42.160 | So why don't people do that in every situation?

00:44:47.160 | Well, it's obvious that because of the high cost of maintaining a one-on-one relationship,

00:44:54.840 | then it's just not feasible for anybody except those who are genuinely wealthy.

00:45:01.240 | So thus you have the emergence of daycare.

00:45:04.000 | Daycare is a special—it takes advantage of the division of labor.

00:45:08.040 | It says, "How can we find a caregiver who can provide good care for children, but how

00:45:14.280 | can we get the ratio up high enough that this can be feasible for most people?"

00:45:19.680 | If you recognize that the amount—so let's say you have a mother and a father who are

00:45:25.240 | working and earning a median wage each of them.

00:45:28.440 | Well, it doesn't make any sense for a mother and a father to each earn a median wage.

00:45:32.760 | Let's say it's $55,000 a year.

00:45:33.760 | So you have a household income of $110,000.

00:45:37.020 | It doesn't make any sense for the mother and the father to keep going and earning that

00:45:41.640 | $55,000 per year pre-tax if they have to turn around and make a $55,000 non-tax-advantaged

00:45:49.240 | expense on paying someone else a salary to care for their child.

00:45:54.240 | It just doesn't make a lot of sense, which is why, in addition to all of the personal

00:45:57.800 | reasons, from a financial perspective, you say, "Okay, well, mother will stay home.

00:46:02.520 | Sometimes father will stay home, and we'll take care of the children."

00:46:06.800 | So a daycare seeks to expand that.

00:46:08.840 | And so you can have different levels, right?

00:46:10.240 | If you've looked, I'm sure you have, looked at daycare, you'll have very expensive daycare,

00:46:13.880 | you'll have very inexpensive daycare.

00:46:15.880 | What are the factors?

00:46:16.880 | Well, one factor is the child's, the class size to adult supervisor.

00:46:23.660 | If you have 30 children and to one adult, you clearly can get the cost down, but now

00:46:28.860 | you wonder, "Can the care be provided be as good as I want?"

00:46:33.600 | It's better to have five children to one adult, generally speaking, than 30 to one.

00:46:38.380 | Another thing can be facilities.

00:46:40.580 | Is there a better facility?

00:46:41.580 | Well, that has to be paid for.

00:46:44.240 | Other things would include, are there other opportunities, right?

00:46:47.200 | Maybe I want to enroll my child in a Chinese daycare because now my child can learn Chinese

00:46:52.340 | from an infant.

00:46:53.340 | That's a great, great reason to use a Chinese daycare instead of providing your own English-speaking

00:46:58.520 | au pair.

00:46:59.660 | But when you put this all down, if you have money, I think a lot of times you're going

00:47:04.960 | to wind up in the situation where you say, "I'd like to have somebody in my home so that

00:47:10.140 | way it's not like my children are away from my home."

00:47:14.000 | Obviously, even with recent events, that can inspire certain levels of concern to know

00:47:18.320 | that your children are in another place that may not be as safe as your home.

00:47:22.400 | In my home means I can supervise, even if it's out the window from the work office that

00:47:28.740 | we built in the backyard, at least I can supervise, I can see, I can build more contact with my

00:47:34.460 | family because my children are at home.

00:47:37.100 | So I can be there for breakfast, lunch, and dinner.

00:47:39.300 | They can nap in their own beds.

00:47:42.780 | With the exception of social contact, playmates, etc., and with the exception of some special

00:47:47.580 | education that you can provide, certainly you want your children cared for in your home

00:47:54.540 | by a full-time caregiver during the hours that you are needed for work.

00:48:00.460 | And I think it's a great idea.

00:48:01.660 | And so back to the au pair, yes, you can hire from all around the world, you can hire au

00:48:05.780 | pair.

00:48:06.780 | Au pair is just the normal kind of European word for nanny, basically.

00:48:11.380 | And you can hire people from around the world.

00:48:13.720 | There are plenty of job boards.

00:48:14.720 | I've looked at them.

00:48:15.720 | I've looked at them primarily for the purposes of language acquisition to say, "If I'm going

00:48:22.960 | to hire an au pair or a nanny and I want someone to care for that, well, if I'm going to teach

00:48:28.020 | my children English, I'd just as soon have a Spanish-speaking au pair or nanny or a French-speaking

00:48:32.900 | au pair or nanny, etc."

00:48:34.740 | So I've looked at it a lot from that perspective.

00:48:37.960 | And I think that if you can do it and if you have the house space where it works, where

00:48:42.980 | you can have a live-in house help, I think it's a wonderful thing to do.

00:48:47.740 | And it will give you the opportunity for you and your wife to maintain your jobs, your

00:48:52.820 | income, and yet have the highest level of confidence that you're providing, the very

00:48:57.320 | best childcare that you can.

00:49:00.060 | And I think there are good arguments being made that in some cases, children are actually

00:49:03.660 | better with that.

00:49:04.660 | Right?

00:49:05.660 | If mom and dad—this is the argument many people make about childcare generally, and

00:49:08.620 | I think in some cases it is true—that if mom and dad are fresh, if mom and dad aren't

00:49:14.260 | all the time providing for all of the daily needs, then they can have a better, or at

00:49:20.500 | least different and sometimes just happier relationship with their children where they're

00:49:25.100 | less worn out, they're less frazzled from providing for those basic needs.

00:49:31.780 | And so it's a little longer than I intended, but yeah, I think it's great and worth pursuing.

00:49:40.180 | >>Trevor: Great.

00:49:41.780 | Yeah, I'm glad you said that.

00:49:44.060 | I wonder, from my preliminary research, we can absolutely afford it, but I kind of was

00:49:51.700 | looking at it as a way to try to get the best of both worlds.

00:49:54.900 | Like I said, my wife really enjoys her career.

00:49:58.020 | She spent a lot of time in education and in the health pursuit.

00:50:03.140 | And I'm just trying to do what's best for everybody.

00:50:06.260 | >>Steve: Of course.

00:50:07.660 | I think it is absolutely an excellent option.

00:50:12.620 | And you're kind of caught in a situation like that, right?

00:50:15.300 | As a husband, if your wife says, "This is something that's important to me.

00:50:19.460 | I really enjoy my career.

00:50:20.940 | It's something that is an important part of my life.

00:50:22.900 | I want to keep it.

00:50:24.940 | And I don't want to take the sacrifices that are required for me to walk away from a career

00:50:29.300 | to provide childcare."

00:50:31.700 | And then you look at your own career, you look at your own things, and you say, "This

00:50:36.900 | is important to me, and I don't want to walk away from this to provide childcare."

00:50:41.520 | And if there's no way that you can make those two things work together, you're going to

00:50:45.420 | need some help with childcare.

00:50:47.500 | And so in that situation, I think that absolutely the best thing to do in the early years is

00:50:53.420 | to provide as close to a full-time parent experience as you can.

00:51:03.580 | And having either very close help of a regular babysitter who's a trusted nanny who's there

00:51:10.500 | every single day, or having a live-in nanny au pair servant is the best way to do it.

00:51:19.620 | And I would just say that go ahead and use it as an opportunity to look for ways to help

00:51:25.580 | your children.

00:51:26.580 | So, like, for example, I wouldn't—unless there was somebody that you just loved, loved,

00:51:32.340 | loved, because they were a wonderful childcare provider, I would not necessarily look for

00:51:39.640 | an English speaker.

00:51:40.640 | I would look for someone who speaks another language.

00:51:43.140 | Why not?

00:51:44.180 | I would look for somebody who has skills that are going to add to the family.

00:51:50.500 | I have a maid who comes to my house right now five days a week.

00:51:57.540 | She cleans, she does some of the cooking, she helps with some childcare, and it really

00:52:04.060 | does add a lot.

00:52:05.260 | And so it allows me to help, it allows me to make sure that my family has—that we

00:52:12.240 | have what we need.

00:52:14.200 | My wife is less burdened because she's freed up from a lot of those other things that freeze

00:52:18.120 | her to focus on higher-level activities.

00:52:22.020 | That frees her up and keeps her from being stressed out and tired with all of the—with

00:52:27.400 | work, etc.

00:52:30.160 | And it—but yet allows me to feel really confident because my children are still in

00:52:35.160 | a totally safe, totally cared-for environment where they're in my home, right?

00:52:40.500 | They're on my property.

00:52:41.860 | I know where they are.

00:52:43.060 | I'm not worried about the influences that they're under.

00:52:45.540 | They're not—they didn't just get stuck in a daycare where they flip on the TV and just

00:52:49.820 | watch movies all day.

00:52:51.700 | I can provide the very best of both worlds because I have the financial resources, and

00:52:58.380 | you do too.

00:52:59.380 | So it's a wonderful decision.

00:53:00.380 | And if it works out for the wife and if you can find someone excellent, I think it's

00:53:04.900 | great.

00:53:05.900 | All right.

00:53:06.900 | Thanks so much, Joshua.

00:53:07.900 | And it's interesting that you brought up the language thing too because that had crossed

00:53:10.060 | my mind.

00:53:11.060 | I thought, "Well, maybe we can get even more out of this than just some help."

00:53:13.900 | So I appreciate your insight.

00:53:15.260 | Right.

00:53:16.260 | And I think there are, depending—so depending on the rates, there are very highly qualified

00:53:21.260 | people who aren't just bodies.

00:53:24.260 | So let's say that you were—I don't know your financial condition, but let's say you're

00:53:28.900 | making $50 million a year.

00:53:31.100 | You wouldn't just go and hire some 18-year-old girl.

00:53:34.740 | You would go and you would hire a very highly qualified, very competent governess for your

00:53:39.820 | home.

00:53:40.980 | And so we might joke at Mary Poppins movies or—but that's what you're looking for.

00:53:46.780 | You're looking for a very highly qualified professional, professional childcare provider,

00:53:52.860 | somebody who is going to provide the environment for your child.

00:53:57.560 | And so what I would say is in the beginning, you're looking for, of course, childcare.

00:54:02.740 | Childcare is a special skill that some people are really skilled at.

00:54:08.260 | Some people are really good at.

00:54:09.800 | And those people have the ability to provide—they're patient.

00:54:14.500 | They're good at working with babies, good at working with children.

00:54:17.540 | And I would look for people who are going to do what you want done for your children.

00:54:21.060 | If I'm hiring an au pair, right, during those hours, we're not going to just put on cartoons

00:54:27.380 | and play it for the children.

00:54:28.700 | We're going to be reading to the children.

00:54:29.980 | We're going to be playing with the children.

00:54:31.660 | And this is so important in the baby years because in those first few years, that's where

00:54:36.260 | you're having vocabulary development.

00:54:39.060 | That's where you're having kind of worldview shaping, etc.

00:54:42.380 | As your child grows older, if you continue with this, then I think that's where you can

00:54:46.260 | start to bring in specialized tutors.

00:54:48.660 | And so I've said this before when talking about homeschooling, but if I come to a place

00:54:53.180 | where I can't run my business effectively with homeschooling, if my wife can't pursue

00:54:57.020 | her lifestyle with homeschooling, I'll bring in a professional tutor.

00:55:02.460 | I'll bring in somebody who is responsible and tutors my children in our home.

00:55:08.220 | And I'm always going to look at the options that are available, right?

00:55:10.980 | Once you get to school age, now all of a sudden you have a much bigger world that's tailored

00:55:16.620 | where you can use the division of labor and the benefits of that to give the best things

00:55:20.520 | to your child.

00:55:21.700 | But even in those early years, look for somebody with capacity, look for somebody with professional

00:55:26.020 | qualifications.

00:55:28.260 | And look for something excellent.

00:55:30.660 | Make it something really, really positive and good in your family.

00:55:33.980 | Great.

00:55:34.980 | Will do.

00:55:35.980 | And just selfishly, the thing that I would be most excited about is my day is pretty

00:55:41.500 | flexible.

00:55:42.500 | So I love it when he's at the house, even if I'm working, because I can just go check

00:55:46.500 | in and I can't really do that at daycare.

00:55:49.500 | And especially if you have a, so I'll just, I'll finish with this, like, here's how my

00:55:56.380 | day works right now and how I'm currently dealing with these things.

00:56:00.460 | I work from home.

00:56:01.460 | I work a pretty good, healthy work week.

00:56:05.180 | Most of my work, though, doesn't necessarily require perfect silence and very little of

00:56:10.220 | it is scheduled.

00:56:11.220 | I work hard to keep my schedule free of, I don't like appointments on my schedule.

00:56:16.020 | So I have a good bit of flexibility.

00:56:18.020 | So I get up in the morning.

00:56:19.220 | I usually will work early in the morning.

00:56:20.820 | I read a lot early in the morning.

00:56:22.620 | My children wake up.

00:56:23.620 | I usually am up about by five.

00:56:25.900 | Children wake up five thirty to six.

00:56:27.580 | They play a little bit while I read.

00:56:30.480 | They play.

00:56:32.700 | And then we have breakfast.

00:56:33.700 | So I breakfast with them.

00:56:34.700 | Then I go and I work in, it's on our property, but I work in an outbuilding where I have

00:56:39.700 | an office and I go out and I start working.

00:56:43.460 | Right now, my eldest son does homeschool.

00:56:45.820 | And so from eight to twelve, he's in my office at a desk right next to mine.

00:56:50.500 | That's been hard because it's impacted my day, but it's something that's important to

00:56:53.820 | me.

00:56:54.820 | He can't focus when I'm doing, when I'm making calls or when I'm doing things.

00:57:00.260 | And so I have to be careful not to schedule anything that's going to require me to make

00:57:03.820 | noise during that time.

00:57:05.560 | But I get to homeschool him.

00:57:06.780 | And then my other children are at the house with my wife and with our nanny housekeeper

00:57:11.740 | as well.

00:57:12.820 | And then I go home for lunch.

00:57:14.140 | I walk across the yard.

00:57:15.580 | I'm there.

00:57:16.580 | I have lunch and then I go back to work and I work in the afternoon.

00:57:20.460 | In the afternoon, I can usually see the children playing outside.

00:57:23.420 | They're playing in the grass.

00:57:24.580 | I can see them.

00:57:25.900 | Sometimes you hear them in the microphone.

00:57:27.680 | That's often when I record.

00:57:29.140 | And then in the evening, I walk home and I'm there for dinner at 530 and I'm with them

00:57:33.940 | for the evening.

00:57:34.940 | And so my wife doesn't have her own independent income generating career that she pursues,

00:57:43.040 | but she could be doing the same thing and we could be getting good results.

00:57:46.940 | So it is a really gratifying lifestyle.

00:57:49.700 | And then if you have the flexibility to do that, it's really great.

00:57:54.540 | I love it.

00:57:55.540 | So as someone who is doing that right now, I strongly encourage you.

00:57:58.940 | I think it's a great option and a really wonderful way for you to make sure that you and your

00:58:04.340 | wife can maintain the careers that you have while also providing a very, very high level

00:58:08.480 | of care for your children, which is awesome.

00:58:10.780 | All right.

00:58:11.780 | Thanks for walking me through your day.

00:58:13.860 | That's pretty much what I had envisioned too.

00:58:16.180 | It's as cool as it's cool.

00:58:18.740 | It's what I dreamed years ago and I'm very fortunate to have been able to do it.

00:58:22.780 | Mike in Colorado, welcome to the show.

00:58:23.780 | How can I serve you today?

00:58:28.020 | Mike in Colorado, you're up.

00:58:32.380 | Going once.

00:58:33.380 | I'll come back to you in a few minutes, Mike.

00:58:35.660 | Let's go to Austin in Louisiana.

00:58:37.700 | Austin, welcome to the show.

00:58:39.220 | How can I serve you today?

00:58:40.780 | Hey Joshua.

00:58:41.780 | First, I guess I wanted to give a little bit of a testimonial.

00:58:45.860 | Then I had a question.

00:58:47.140 | I just wanted to, I had a really good experience last year.

00:58:51.060 | I was actually able to acquire a rental property using some of the lessons that I learned in

00:58:56.780 | your credit card course.

00:58:59.380 | And so now I'm at the point where I've actually renovated that property and it's time for

00:59:04.220 | me to pull my capital out to go on to some new projects.

00:59:09.420 | I was wondering if you had any thoughts in terms of putting a line of credit on that

00:59:16.860 | property versus doing a cash out refinance for somebody that's looking to get, I guess

00:59:23.940 | take on more leveraged debt to grow their portfolio.

00:59:28.040 | You had preference for one or the other.

00:59:30.940 | In that situation, it primarily depends on the terms.

00:59:34.620 | So it's very much going to depend upon what kind of terms can you get for the financing

00:59:39.580 | of the property.

00:59:41.700 | Terms of the interest rate, terms of costs of loan inception, closing costs, and then

00:59:48.740 | whether, and then what you think you'll be doing on an ongoing basis.

00:59:53.820 | So a line of credit is best used as a form of flexible financing.

01:00:00.540 | You can increase the balance, you can decrease the balance, and it's just a wonderful flexible

01:00:04.820 | tool.

01:00:06.820 | Generally going to be, I want to be very careful because I don't have current numbers or even

01:00:12.100 | what's been offered to you, but you're going to pay lower terms and you can put it in,

01:00:16.980 | take it out anytime.

01:00:17.980 | There's a minor risk with a line of credit that they can reduce your credit line.

01:00:24.460 | On property this happens less, but you know, like I talked about in the credit card course,

01:00:28.820 | if you have high credit card balances, then your credit card issuers can turn around and

01:00:34.300 | reduce your available credit at any time.

01:00:37.100 | And they can do that on a line of credit as well.

01:00:39.460 | This caused a lot of people tremendous heartbreak in 2008 when their lines of credit were reduced

01:00:45.900 | massively and they were planning to depend on them.

01:00:48.100 | So if you do a cash out refi, you avoid that.

01:00:50.780 | Cash out refi, the problem is what am I going to do with the money?

01:00:53.340 | And do I really want this and do I want it at the terms?

01:00:55.500 | And so I don't have a strong preference for one or the other.

01:00:57.460 | I would just say that it should be fairly evident once you think about what you want

01:01:01.100 | to use the money on and once you review the terms of the loan offers that are being made

01:01:05.340 | to you.

01:01:06.340 | Okay.

01:01:07.340 | I guess what I'm looking at is I'm kind of looking to double down on my portfolio.

01:01:14.740 | I've scaled up to three rental houses in the last year and a half.

01:01:18.780 | So I'm looking to as quickly as I can, you know, scale that up to about six or seven

01:01:25.660 | units over the next year to year and a half.

01:01:28.220 | Right.

01:01:29.220 | That's kind of what I'm looking at.

01:01:30.220 | So I'm looking to deploy all the capital that I would be able to get out of the unit.

01:01:34.580 | So how much will they loan you on a cash out refi?

01:01:39.940 | So I've got all said and done, I'm into the property for about 60 and it'll probably appraise

01:01:48.660 | for approximately 120 and they're going to give me 75%.

01:01:55.060 | And have you gotten an offer of how much of a line of credit they'll give you either without

01:02:00.180 | that loan or with a line of credit on top of the first mortgage?

01:02:08.060 | So I've just looked at doing a line of credit on the appraised value of the house since

01:02:14.380 | I own the home free and clear at this point.

01:02:18.340 | So it's the same terms.

01:02:20.820 | Well basically they're still willing to give 75% of the appraised value.

01:02:26.220 | The big difference being obviously the cash out refi is a 30 year term and the line of

01:02:32.220 | credit is a five year term.

01:02:34.620 | So I think in that situation, I won't say obvious, but I would think very strongly the

01:02:40.960 | weight would be to do a traditional cash out refi because number one, you'll be able to

01:02:46.980 | lock in your terms, you'll have a known sum of money that you can use, you'll lock in

01:02:52.100 | your terms and you'll have a very long amortization period at what's probably going to be a favorable

01:02:57.440 | interest rate.

01:02:59.020 | Obviously we don't know what will happen with interest rates, but the interest rate on your

01:03:02.980 | line of credit will probably be a floating interest rate, whereas whatever they offer

01:03:07.220 | you on this particular 30 year mortgage will be fixed.

01:03:10.660 | If rates go down, you can refinance and you can reduce your costs.

01:03:14.460 | If rates go up, you've fixed it and you've stretched out your repayment period to the

01:03:19.180 | longest period possible, which keeps you in the maximum margin of safety.

01:03:24.020 | So I think from what you're describing, I would do a cash out refi to lock those terms

01:03:31.180 | in so that I can make maximum use of the money, I can predict my cash flow needs in the future

01:03:36.420 | and I can continue to grow my portfolio aggressively.

01:03:39.300 | Awesome.

01:03:40.300 | I appreciate the perspective.

01:03:43.580 | My pleasure.

01:03:44.580 | All right, we move on to Mark.

01:03:46.460 | Mark welcome to the show.

01:03:47.460 | How can I serve you today?

01:03:48.460 | Hi Joshua.

01:03:49.460 | Thank you for taking my call.

01:03:53.500 | I'm considering a career change into the financial services industry and I've interviewed with

01:04:00.780 | a firm and I'm also going to be meeting with another one in the near future.

01:04:08.540 | And I'm just trying to get your input as to what I should be looking for to kind of

01:04:16.340 | compare the two and see overall which would be a better fit.

01:04:23.020 | So the first thing I would say is probably you shouldn't be doing two interviews, you

01:04:27.940 | should probably be doing 10.

01:04:31.140 | And the reason I say that is remember this, the financial services industry, and of course

01:04:35.580 | that's a big term, but if you are looking for some kind of sales role, some kind of

01:04:42.340 | producer role, something where you're going to go out and get customers, which encompasses

01:04:47.780 | a wide swath of the financial services industry that includes insurance agents, that includes

01:04:52.820 | financial advisors, if you're doing something where you're going to be going getting customers,

01:04:56.820 | remember that this is something that all of the companies are recruiting for actively.

01:05:03.820 | Now not all firms have as big of a recruiting budget as others, but they're recruiting actively.

01:05:10.820 | And so it's less a matter of there's a limited number of jobs and too many candidates and

01:05:16.580 | so I just got to get my foot in the door and it's much more a matter of there are plenty

01:05:20.360 | of jobs and they're trying to pull the best candidates to them.

01:05:24.820 | And so one of the best things you can do is before you're actually committed or entrenched

01:05:28.860 | in any company is go around and interview widely.

01:05:32.620 | And so usually I give the advice to make a list of all of the different types of financial

01:05:40.740 | services positions that you know of that either you may or may not be interested in and then

01:05:47.020 | go and interview for those.

01:05:48.620 | So for example, I would interview with a life insurance company, I would interview, and

01:05:54.860 | I would even do this, I would interview with a big name brand life insurance company and

01:05:58.580 | I would find a local independent life insurance agent and interview.

01:06:02.420 | I would interview with a property and casualty insurance company, I would interview with

01:06:05.900 | a big name brand property and casualty insurance company and with a local independent PNC company.

01:06:13.180 | I would interview with a big traditional wire house financial planning firm and I would

01:06:21.740 | interview with a smaller more local boutique financial planning firm.

01:06:25.980 | I would interview with anybody and I would probably, depending on the direction, I would

01:06:30.900 | try to find various flavors of those companies.

01:06:34.860 | And so if you go around and you interview, then each one of them will make you a different

01:06:39.780 | kind of offer.

01:06:40.780 | Say here are the kinds of packages that we offer and you'll find out, hey, company A

01:06:46.500 | offers a salary of zero dollars but they predict their normal earnings are X.

01:06:53.420 | Or company B, they'll give me a salary of $85,000 but then they'll pay me this.

01:06:58.300 | And so you get an idea of what their options are.

01:07:00.880 | And then my question, my secret question, which I'll give you here, is simply this.

01:07:05.700 | What I love to do is ask people, okay, if you weren't with this company, what would

01:07:11.380 | you do?

01:07:13.460 | If you weren't with this, if you weren't, you know, dear Mr. Property and Casualty Agent,

01:07:18.460 | you're running here this big firm, you're making $700,000 a year but if you weren't

01:07:22.940 | with this company, what would you do?

01:07:26.060 | And get an idea of what people say.

01:07:29.420 | And then use that for your second round and go and pursue interviews with those companies

01:07:33.820 | and try to find out what the options are.

01:07:36.200 | So that's my first piece of advice, not having heard anything about the two particular options

01:07:39.780 | you are, is that you can probably answer this by interviewing more widely.

01:07:43.820 | And I think that interviewing widely is something that people don't do enough of.

01:07:51.340 | And there's no reason not to.

01:07:53.580 | Okay.

01:07:55.020 | Yeah, I appreciate that input.

01:08:01.140 | As a follow-up, you know, we may potentially be heading into a recession.

01:08:06.780 | What are your thoughts about transitioning into financial services industry during a

01:08:13.180 | potential recession?

01:08:14.420 | I don't know if you worked during the '08, '09 recession.

01:08:18.740 | I began my career in financial services in the fall of 2008.

01:08:23.580 | I was laid off from my job in about May or June, I think it was May of 2008.

01:08:32.580 | I spent several months goofing around.

01:08:34.500 | I went and took a trip across the United States.

01:08:36.820 | I traveled a good bit.

01:08:38.140 | And I came back and I started getting serious about job hunting after about three months

01:08:43.180 | or so.

01:08:44.340 | I signed my contract in the financial services industry.

01:08:47.780 | I would guess something like September or October of 2008.

01:08:53.380 | Started my licensing and doing my classes, etc.

01:08:56.580 | I remember vividly, because I was driving to Miami every day to go to my insurance license

01:09:02.740 | class to get my life health and annuities license.

01:09:07.060 | And I remember vividly listening to NPR.

01:09:10.300 | I would listen every day to NPR and to All Things Considered and also the Marketplace.

01:09:17.820 | I remember driving up every day from Miami to West Palm Beach listening to Marketplace

01:09:24.220 | every day on NPR with them talking about the bailout package.

01:09:28.580 | This was TARP and whatnot.

01:09:30.340 | So then that was my first month in the business was immediately following that.

01:09:37.340 | But I learned from it.

01:09:42.100 | My entire career was built in a frame of declining interest rates on fixed income investments,

01:09:49.100 | which is inconvenient when you sell life insurance because life insurance, whole life insurance

01:09:55.340 | with cash values is connected to fixed income rates.

01:09:58.820 | And so every single year the dividend rate, the dividend crediting rate on life insurance

01:10:03.500 | policies was going down.

01:10:05.820 | And then we had a great run in the stock market for a time, but various levels of uncertainty.

01:10:12.020 | So all that to say though that I've been there, done it.

01:10:15.780 | And in hindsight, I would do it again.

01:10:18.020 | The thing I've often wondered, which is what you're dealing with right now.

01:10:22.060 | In hindsight, I came to view getting laid off as a blessing because I realized that

01:10:28.220 | if I had waited until I was ready, I had been planning to leave the job that I got laid

01:10:34.280 | off of, I was planning to leave at the end of the year in January of 2009 and go do something

01:10:38.140 | else.

01:10:39.140 | I didn't like the job, didn't want to do it anymore.

01:10:41.980 | But in hindsight, I don't know if I would have had the courage to go in January of 2009

01:10:46.300 | because I would have told myself, oh, there's a recession on, jobs are tight, there's too

01:10:50.460 | many unemployed people, blah, blah, blah.

01:10:53.140 | And so I think that it was a blessing in disguise.

01:10:58.900 | I think you can build a career in financial services in any market.

01:11:07.640 | And there are a couple of important reasons for you to understand why.

01:11:10.900 | Number one, generally in financial services, you are generally serving the wealthy.

01:11:17.040 | And I believe that serving the wealthy is one of the best things that you can do to

01:11:20.200 | be protected against market swings in the economy.

01:11:24.640 | People who are wealthy are not affected in a significant way by short-term fluctuations

01:11:34.560 | in the economy large.

01:11:36.280 | Obviously, there are industries that are affected.

01:11:40.200 | If your entire NFT portfolio fell apart or all of your crypto portfolio completely collapsed

01:11:47.040 | in the last month, you may have had a US dollar token value of $60 million and now you're

01:11:53.900 | down to $10.

01:11:54.900 | Well, that's going to affect a lot of people.

01:11:56.280 | But generally speaking, it's just not that big of a deal for the wealthy to go through

01:12:02.920 | fluctuations.

01:12:04.400 | And so if you're serving the wealthy, the wealthy aren't like, okay, so stock market

01:12:10.440 | went down 20%.

01:12:11.440 | Big deal, right?

01:12:12.440 | It's just not that big of a deal when you're wealthy.

01:12:15.480 | It seems like a big deal to a lot of people, but it's not that big of a deal.

01:12:20.200 | And so wealthy people always have money.

01:12:23.040 | And they're always willing to listen to people who will help them make money.

01:12:26.920 | And so while you might have fewer clients to some degree, it's just not that big of

01:12:31.280 | a deal.

01:12:33.320 | Number two is if the industry that you're choosing has some kind of opportunity.

01:12:37.480 | And let me, because I got to carve this out here.

01:12:40.560 | In some roles in the financial services industry, you will exclusively serve the wealthy.

01:12:45.040 | So as an example would be, let's say that you're going to try to build a money management

01:12:48.840 | business and your account minimums that are set by your firm are a million dollars.

01:12:53.560 | Well, the guy with a million dollars, if his account value goes down, because there's a

01:12:58.720 | recession on and he goes down to 800,000, you could probably still prospect him.

01:13:04.600 | And there's plenty of other guys with an account value of 1.3 million where their account went

01:13:08.320 | down.

01:13:09.320 | It's just not that big of a deal.

01:13:10.320 | We're not dealing with people who have $20,000 in a Roth IRA if you have million dollar minimums.

01:13:15.700 | People with million dollars in their accounts, it's just not going to make that big of a

01:13:18.880 | difference in the short term.

01:13:20.480 | On the other hand, there are certain expressions of the financial services industry where you

01:13:25.360 | sell more products.

01:13:26.360 | Right?

01:13:27.360 | So when I started, I sold life insurance.

01:13:28.360 | I sold life insurance, disability insurance, long term care insurance.

01:13:31.840 | Well, a recession is not bad for that business in any way, shape or form.

01:13:37.400 | Are there people who have, who are losing their jobs?

01:13:40.560 | Of course there are.

01:13:42.360 | But the number of people who are losing their jobs is a few percent of the economy.

01:13:48.720 | Right?

01:13:49.720 | So let me give you some numbers to put this into context.

01:13:53.320 | There are a few percent of the potential prospects and targets out there.

01:13:57.440 | So let's say that unemployment goes up by 2%.

01:14:03.280 | When I was selling life insurance agents, not agents, when I was selling life insurance,

01:14:09.320 | we had a pretty intense model.

01:14:11.560 | So I would see on average about 15 people a week.

01:14:16.360 | Higher if I could manage it, lower was bad, but 15 people a week.

01:14:20.600 | So that means that over the course, if I'm doing 15 people a week, in order for me to

01:14:25.280 | see 100 people and offer to sell them life insurance, it takes me 6.67 weeks.

01:14:32.740 | That means that over the course of 6.67 weeks, almost, let's call it 7 weeks, there are 2

01:14:39.560 | fewer people who can buy life insurance from me out of 100 versus before the recession.

01:14:50.200 | And what's more important is that I always have the choice to just weed those people

01:14:55.000 | out.

01:14:56.000 | So if I get to someone's kitchen table or they walk in the office and they're totally

01:15:01.840 | broke and have no money and they don't have a job because they got laid off in the recession

01:15:06.400 | and everything is collapsing, if I can't help them, then I say, "I'm sorry, I can't help

01:15:10.840 | you.

01:15:11.840 | I used to carry around Dave Ramsey books.

01:15:13.040 | Here, read Dave Ramsey's book.

01:15:14.160 | He can help you.

01:15:15.160 | I can't, but call me when, I'll call you next year."

01:15:18.480 | And so the point is it just doesn't matter.

01:15:20.000 | 2% increase in unemployment doesn't matter.

01:15:22.260 | And then if you start to work in the groups that most of the time we work in as people

01:15:29.260 | in the financial services industry, it's just not effective the same way.

01:15:32.080 | If your normal client is an attorney, maybe a mid-level attorney, and that's your starting

01:15:38.520 | client that you're trying to work with or a business owner, just most of the time, these

01:15:42.680 | professions are insulated from those economic worries.

01:15:48.560 | So what are the industries you got to be careful of?

01:15:50.560 | Well, let's say the mortgage industry.

01:15:52.120 | Right now the mortgage industry is falling apart because there's been massive business

01:15:56.080 | done by all kinds of companies due to just a continual flow of refinancing leads.

01:16:04.580 | But if you're either in that now people can't refinance and save a bunch of money, so you're

01:16:10.160 | reliant on new mortgage inception in order to sell to, or if you have a business serving

01:16:15.420 | mortgage brokers, now you've got real trouble right now.

01:16:19.020 | So if you're in the financial service industry in an area where that is facing the general

01:16:25.280 | public, then something like a recession can really pull you apart.

01:16:29.920 | But in most cases, it just doesn't really matter because it's just a couple people who

01:16:34.640 | can't buy something from you that could before, and you can control that.

01:16:38.600 | You can quickly weed that out with activity, with your own hustle.

01:16:43.040 | There's plenty of money, there's plenty of people, there's plenty of people that need

01:16:46.440 | help, there's plenty of people that their business went broke and they want to buy more

01:16:49.920 | life insurance because now they don't have as much money as they did.

01:16:53.160 | There's plenty of people who hate their financial advisor who just lost 30% and they want to

01:16:57.960 | try someone new.

01:16:59.120 | I just don't think it matters.

01:17:00.720 | Okay.

01:17:01.720 | Well, thank you.

01:17:03.760 | I appreciate your input and I'm looking forward to seeing how things play out.

01:17:11.840 | Anything else?

01:17:12.840 | No, I think that's it.

01:17:15.440 | Appreciate it.

01:17:17.080 | And we go to Bradley in California.

01:17:18.440 | Bradley, welcome to the show.

01:17:19.440 | How can I serve you today, sir?

01:17:20.440 | Hey, Joshua.

01:17:21.440 | I'm calling because I've been making some considerations about changing my career path

01:17:29.120 | and there's a really small startup that I've been interested in working with for about

01:17:35.320 | the last three years now.

01:17:37.720 | And they've been interested in taking me on to do sales for them and possibly some coaching.

01:17:43.320 | The problem is essentially to bring me on, I would first need to bring them sales so

01:17:49.320 | they can't offer me any kind of salary or anything without first bringing them sales

01:17:53.240 | to prove that it's going to be viable for them.

01:17:56.480 | And I'm really confident that this is going to be a successful growing business and it

01:18:01.840 | has been for the last few years.

01:18:03.720 | Just not enough to expand their staff.

01:18:06.760 | But to do that, I wouldn't be provided any leads or any marketing.

01:18:11.520 | So essentially I have to be sales marketing all in one.

01:18:17.360 | Now again, I do believe in the business and I'm just wondering if it's crazy for me to

01:18:23.160 | go out and try to do my own marketing and try and spend my own money to bring business

01:18:28.600 | into a company that I don't even work for.

01:18:31.240 | Right.

01:18:32.240 | Do you have any experience in sales or marketing?

01:18:35.800 | I do.

01:18:36.800 | Not in marketing, but in sales, yes.

01:18:39.700 | So you have gone out, found customers, sold those customers and consummated transactions

01:18:46.080 | and you've done it for more than a short period of time.

01:18:51.160 | Only for about three years, but enough to where I feel confident in it.

01:18:54.240 | And I have brought them some business already, but that's more through my personal network.

01:19:02.240 | But I am confident that this is a product or really it's a service that I could sell.

01:19:07.920 | Yes.

01:19:09.020 | Is there a way that you could test this on the side while keeping your current job?

01:19:14.520 | Yes, there is.

01:19:16.520 | Then I would do that.

01:19:19.240 | I don't see any downside.

01:19:20.880 | If you have some experience in sales, you know how to pick up the phone and go and see

01:19:25.480 | someone and sell them the thing that you have to sell them.

01:19:29.020 | That's important.

01:19:30.020 | If you believe in the product, that's important.

01:19:33.220 | And if you have the ability to test it in some way without jumping full on and burning

01:19:38.120 | bridges at your current opportunity, then the only downside would be what you said about

01:19:43.040 | the need to spend money or the idea of spending money.

01:19:47.360 | And so we could talk about that separately.

01:19:51.040 | So setting aside the issue of how much money you would invest into this opportunity, what's

01:19:55.680 | the downside to testing it on the side until you feel confident enough to take the jump?

01:20:01.080 | Well, I guess I should say I did test that for a while.

01:20:05.960 | There was a way for me to try to bring in sales without paid marketing and I did test

01:20:10.120 | that.

01:20:11.120 | But it didn't prove as fruitful as I thought it might be.

01:20:14.720 | And I guess the downside of doing that was that was very, because it was all very, you

01:20:19.720 | know, it wasn't passive marketing where people were coming to me.

01:20:22.560 | I was going out.

01:20:23.560 | It was very active and that took a lot of time away from my family, my primary job.

01:20:28.600 | Of course.

01:20:29.600 | Okay.

01:20:30.600 | So then it sounds like the key question is actually the money.

01:20:34.040 | Would it be crazy for me to spend money out of my own pocket to try to test to see if

01:20:39.360 | this other thing would work given that I'm spending money out of my own pocket for a

01:20:43.000 | company that hasn't actually even hired me?

01:20:44.920 | Is that the question?

01:20:47.920 | Yes.

01:20:48.920 | Okay.

01:20:49.920 | How much money would you need to invest in order for you to feel like you had done some

01:20:56.640 | amount of marketing to prove the concept?

01:21:00.760 | Right?

01:21:01.760 | How much are we talking?

01:21:02.760 | I don't think it would be substantial.

01:21:05.840 | I think, you know, even something simple like a Google AdWords campaign, maybe somewhere

01:21:11.120 | between five to $10,000.

01:21:13.640 | Okay.

01:21:14.640 | Nothing, but not going to break me by any means.

01:21:18.200 | And how much are you earning right now?

01:21:20.720 | A hundred thousand plus bonuses.

01:21:23.640 | So five to $10,000 is something like five to 10% of your annual income, a little bit

01:21:27.920 | less if we include bonuses.

01:21:29.920 | How much is your current net worth?

01:21:32.160 | $150,000.

01:21:33.160 | $150,000.

01:21:34.160 | So this is five to 10% also of your, or less, sorry, five to 7% of your net worth.

01:21:47.000 | Okay.

01:21:48.000 | And if you invested this money, what's your guess?

01:21:51.200 | Notice I said guess.

01:21:52.880 | What's your guess of how much that could generate?

01:21:55.680 | If it were successful, what's your guess of how much it could generate for you in terms

01:21:58.960 | of commissions?

01:21:59.960 | Well, I don't know because I guess, you know, that commission rate has been established

01:22:09.000 | because this is all very new to them.

01:22:12.560 | But I do know, you know, for every one client I bring on, that's going to bring them somewhere

01:22:17.600 | between $1,500 to $3,500 of revenue.

01:22:22.840 | And you know, not a very time intensive or resource intensive business.

01:22:29.920 | So the margins are pretty big.

01:22:31.120 | So I would say pretty good on each client that I would be able to attract.

01:22:35.720 | Now how much I can get from this kind of marketing, I really don't know.

01:22:40.040 | But even a couple clients would be enough for me to make it well worth my time and to

01:22:45.040 | recoup my whole investment.

01:22:47.360 | Right.

01:22:48.560 | So and let's say that your dream scenario, let's say that everything was successful,

01:22:54.920 | the marketing was successful, and you just, this thing went amazingly well and you said

01:23:01.360 | I'm all in, you went all in, you went and worked with the company.

01:23:04.560 | Give me a guess of a dream scenario of how much you could earn as a full time sales and

01:23:09.320 | marketing guy with this company.

01:23:12.040 | I have no doubt that even, you know, bringing in, that was even getting like 10 clients

01:23:17.880 | per month, which is very doable and they can easily handle right now.

01:23:21.880 | It could be a couple hundred thousand dollars per year or more.

01:23:27.880 | So as far as I'm concerned, this is a risk that is very much within your, within the

01:23:34.800 | kind of thing that you should do.

01:23:36.760 | This is five to ten thousand dollars.

01:23:39.160 | If, if you could test it successfully on five to ten thousand dollars, this is a modest

01:23:44.540 | amount of money compared to both your income and your net worth.

01:23:48.200 | As you said, it's not nothing, but it's a pretty modest amount of money.

01:23:53.380 | And if on the other side of it, you think that, that potentially there's a business

01:23:58.640 | where I could be making a couple hundred thousand dollars a year, then it seems like the kind

01:24:02.780 | of thing that is definitely worth testing.

01:24:05.420 | If I gave you the offer and I said, listen, if you'll give me today ten thousand dollars,

01:24:11.300 | then in say 18 months, I could give you, I could double your income.

01:24:14.960 | Instead of you making a hundred grand, you could make 200 grand.

01:24:18.460 | That sounds like a pretty good offer, right?

01:24:20.840 | It certainly does.

01:24:23.120 | Yeah.

01:24:24.120 | So if I, if I could say, invest into me as a career coach, or I'm going to be a personal

01:24:28.720 | style coach, I'm going to train you on how, I'm going to be your personal advisor in some

01:24:33.040 | manner and you invest at ten thousand dollars into me.

01:24:36.500 | And then at the light at the other end of the tunnel was, hey, we could potentially

01:24:40.400 | double your income.

01:24:41.400 | That just seems like a pretty good bet to make.

01:24:43.800 | And so I think it's, it's not, it's not your life savings.

01:24:48.240 | It's a, it's a modest portion.

01:24:51.040 | So I would just sketch out, okay, how is it going to feel if I lose ten thousand dollars

01:24:55.360 | and I don't sell anything?

01:24:56.960 | How would that feel?

01:24:58.760 | And get clear on that.

01:25:00.360 | Then once that's clear, then I would go back and I would say, how can I mitigate the risk?

01:25:04.920 | And so here are just two ideas, both of them fairly obvious.

01:25:09.340 | Idea number one is make sure that in your purchasing of the marketing and whatnot, you

01:25:15.220 | go slow and you make sure your funnels are working before you really go in and invest

01:25:20.020 | big time into it.

01:25:21.100 | That's the first thing.

01:25:22.580 | Then idea number two is I would go back to the company and say, tell you what, I'll put

01:25:27.300 | in five grand, you put in five grand.

01:25:29.420 | That way we have a full budget and we know we can test it.

01:25:32.020 | I'll put in five grand of my own money.

01:25:34.020 | That's how much I believe in it.

01:25:35.260 | You put in five grand from the company money.

01:25:37.480 | You match me dollar for dollar and then let's test these ideas that I have for marketing

01:25:41.760 | and sales and then see how it goes.

01:25:44.140 | I would think that the company could put up a few thousand dollars, right?

01:25:49.180 | >> Steven: Certainly, yeah.

01:25:52.540 | >> Tom: If they have a service that's generating that amount of revenue, even if they aren't

01:25:58.960 | willing to hire somebody at a hundred thousand dollars a year to work for them, I would think

01:26:04.340 | they could pretty easily write a check for five grand to do it.

01:26:08.980 | I would think that would be a good test for you to say, are they actually going to treat

01:26:12.460 | me fair?

01:26:13.460 | I can imagine and envision a good high quality startup that the founders are just overwhelmed,

01:26:22.660 | they can't hire anyone, they're not good at managing.

01:26:25.900 | I can imagine them not wanting to hire somebody and make an actual job offer, actual employees,

01:26:31.140 | etc.

01:26:32.140 | I can't imagine them coming along and saying, "We're not willing to pay five grand to somebody

01:26:37.260 | who's already sent business our way and somebody who's willing to put up five grand of his

01:26:42.420 | own money for an opportunity that's actually not even sketched out in detail yet."

01:26:46.620 | I can't imagine them not being willing to do that.

01:26:50.220 | I think that you could get them to put in five grand, you risk five grand, and I think

01:26:54.220 | it's a great bet to make.

01:26:58.140 | I don't know why I'm so hesitant about it.

01:27:05.620 | Have you ever done anything like that?

01:27:08.060 | Have you ever just taken a risk on yourself and your abilities?

01:27:12.020 | No, I think maybe I've taken more risk on my traditional 9-5 career path, moving companies

01:27:19.340 | and industries and things like that.

01:27:20.980 | This is just a little bit outside the purview of what I've done, but I don't know, the upside

01:27:25.780 | is too hard to ignore.

01:27:29.860 | I'm firmly convicted that this is a great business.

01:27:33.300 | They have a great business.

01:27:34.380 | I believe in what they do.

01:27:36.100 | I'm 110% in with it and I know if we can get in front of people that it's going to succeed.

01:27:43.820 | At least that's what I've made up my mind.

01:27:45.460 | Of course, I can't know for sure, but I am very convicted that it has as good of a chance

01:27:50.340 | as anything.

01:27:51.340 | Yeah.

01:27:52.340 | So from listening to you, without knowing anything about the business, I think you need

01:27:55.780 | to do it.

01:27:57.620 | Because one of the things that, the reason I ask the question is, have you done this

01:28:01.740 | before?

01:28:02.940 | What I have observed and learned from my own mistakes, the times that I've been far too

01:28:08.100 | hesitant is that being willing to take a risk on yourself and invest in yourself is a skill

01:28:14.580 | set that has to be honed.

01:28:16.780 | I spent too much of my life not doing it because I wasn't taught to do it.

01:28:21.060 | I wasn't trained to do it and I didn't understand my mistake.

01:28:26.460 | If you aren't in that accustomed to believing in yourself and following your hunches, following

01:28:32.300 | your own convictions, that's something that has to be gotten rid of.

01:28:36.580 | And so if it costs you five grand and it just lights on fire and makes you nothing, but

01:28:41.860 | you have actually done something that you believed in and I heard what you said, that

01:28:46.620 | you believe in this, then I believe for your own self-respect, you need to do it.

01:28:51.620 | Just to say, I believe in this.

01:28:53.620 | Because there's too many opportunities that if we don't cultivate that habit, that skill

01:28:58.100 | of believing in ourselves, believing in our own discernment, our own judgment and being

01:29:02.580 | willing to take action on it, no matter how many wonderful opportunities come along, we'll

01:29:08.380 | miss them all because we won't ever believe in ourselves.

01:29:11.160 | But on the flip side, if we cultivate and we believe in ourselves and we say, I see

01:29:16.360 | this, I'm going to do this thing, even if it turns out to fail, that's the basic skill

01:29:22.120 | that we have to do in order to succeed.

01:29:25.080 | And so I would rather you take this action, lose five grand.

01:29:28.860 | Six months from now, you find something else.

01:29:30.520 | Take action, lose five grand.

01:29:32.600 | Six months from now, do something else.

01:29:33.920 | Take action, lose 10 grand.

01:29:36.000 | But then the fourth time around or maybe the 40th time around, the taking action is where

01:29:40.320 | you hit something that flows, that works.

01:29:43.680 | And so I believe this is a skill that you need to practice and prove to yourself that

01:29:47.720 | I'm going to be willing to believe.

01:29:48.720 | And if this is the opportunity that's in front of you, you believe it.

01:29:51.760 | And having one of the old sales sayings, that sales is a transfer of belief.

01:29:56.480 | I think that if you believe in the product, you'll be able to transfer that belief to

01:29:59.680 | other people.

01:30:00.680 | And I don't think you're going to lose money and I think you should do it for your own

01:30:04.760 | self-respect.

01:30:06.160 | If you believe in something, you've got to put your money where your mouth is, just for

01:30:09.380 | your own self-respect as a man.

01:30:11.160 | It's funny that you say that because I think what's been gnawing away at me for I guess

01:30:18.400 | this entire time I've been considering it is not the fear of missing out whatever potential

01:30:22.240 | money I'm going to make.

01:30:23.800 | It's really been more about violating my own principles of not going after what I really

01:30:29.320 | want.

01:30:30.320 | Right.

01:30:31.320 | Right.

01:30:32.320 | Well, thank you, Joshua.

01:30:33.320 | I really appreciate it.

01:30:34.320 | My pleasure.

01:30:36.320 | And with that, we end today's Q&A call.

01:30:39.520 | It's a good note to end on.

01:30:41.480 | I'm not going to repeat the lesson I just shared there or tried to emphasize, but I

01:30:46.140 | would say that that is worthy of reflection.

01:30:52.120 | For me, it's been a big growth thing is that as I have started to believe in myself and

01:30:56.840 | then to take action on my convictions, even when I have been wrong, I have just been proud

01:31:04.400 | of myself and I've recognized that it changed me to actually believe in my convictions.

01:31:09.520 | I want that for you.

01:31:10.600 | I want that for all of us.

01:31:13.600 | I think we're better served as a people who knows how to believe in ourselves and how

01:31:21.160 | to press forward and take action when we're uncertain.

01:31:26.360 | If you look at every great success story, you will find that time at which a man or

01:31:31.920 | a woman had to step up and say, "Yes, I'm going to make this bet.

01:31:36.720 | I'm going to take this risk.

01:31:37.920 | I'm going to take my shot," whatever it is.

01:31:41.560 | And if you get knocked down, it's okay.

01:31:43.840 | That's why I love so much the Man in the Arena poem that when you recognize that character

01:31:52.400 | trait and you see it lacking in yourself and you start taking action on it, all of a sudden,

01:31:57.000 | it just changes how you see other people and you don't see people who are failures.

01:32:01.240 | I lost so many opportunities in too much of my life, but some of my life, thinking, "Oh,

01:32:07.600 | if other people will see me do something and I fail, then they'll see me as a failure."

01:32:12.200 | And I don't see people who fail as failures anymore.

01:32:15.880 | As I have been more diligent and consistent about taking action on my beliefs, then I've

01:32:20.840 | come to admire and respect people who take action on their beliefs.

01:32:24.720 | We can't guarantee success.

01:32:26.160 | We can try to control for it.

01:32:27.280 | We can try to control risk.

01:32:29.000 | We cannot guarantee success, but what we can do is we can, on a steady basis, we can focus

01:32:35.600 | ourselves on taking shots.

01:32:39.200 | Take enough shots, you hit some balls.

01:32:41.560 | Thank you for listening to today's show.

01:32:43.400 | Remember that I am running a summer sale on consulting.

01:32:45.640 | Go to consultwithjoshua.com, consultwithjoshua.com.

01:32:49.680 | If you would like to book me for a private consulting appointment at a substantially

01:32:53.120 | reduced rate, consultwithjoshua.com, and I'll be back with you very soon.

01:32:57.520 | Thanks for listening.

01:32:58.520 | I'm John Furrier.

01:32:59.520 | I'll see you next time.

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2022-05-26_Friday_QA