2022-10-28_Friday

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00:00:24.860 | Today on Radical Personal Finance, live Q&A.

00:00:30.780 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,

00:00:46.460 | skills, insight, and encouragement you need to live a rich and meaningful life now while

00:00:50.580 | building a plan for financial freedom in 10 years or less.

00:00:53.100 | My name is Joshua Sheets, I'm your host, and today is a live Q&A show.

00:00:59.980 | Call in, talk about anything that you want.

00:01:01.500 | We do this every single week when I can arrange the appropriate technology.

00:01:04.500 | If you want to talk about your plan to financial freedom in 10 years or less, I don't know

00:01:07.700 | a better place for you to do that.

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00:01:19.040 | about your problems, talk about your plans, talk about your goals, your situation, etc.,

00:01:24.100 | you can call in and talk about anything that you want.

00:01:26.460 | Agree with me, disagree with me.

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00:01:44.340 | We begin with Maggie in Pennsylvania.

00:01:45.740 | Maggie, welcome to the show.

00:01:46.740 | How can I serve you today?

00:01:47.740 | Hey, Joshua.

00:01:50.100 | Thank you for taking my call.

00:01:52.300 | I've gotten great advice from you in the past and I am hoping to get some great advice from

00:01:56.940 | you today.

00:01:57.940 | Great.

00:01:58.940 | My question is about, it's as always a mindset question.

00:02:04.420 | So I'm curious about your thoughts on how I can pivot my financial strategy.

00:02:11.180 | In the background is, two and a half years ago, I made a cross-country move for a job

00:02:15.780 | and general adventure, just life adventure growth.

00:02:20.060 | After living 52 years in the same place, my situation changed.

00:02:24.240 | People launched, some responsibilities left for other reasons, and I was able to just

00:02:28.460 | take a leap and it's been great.

00:02:31.020 | But my strategy to that point was stock investing for retirement and home ownership.

00:02:39.740 | And fast forward to now, I've been renting because I moved during a pandemic, buying

00:02:45.500 | a house here is just not an attractive option for me.

00:02:47.900 | It turns out I love renting, like you were totally right on that.

00:02:51.940 | Costs are too high anyway, I would have to put too much into it, too much time, money,

00:02:57.660 | energy, just not interested in that.

00:02:59.260 | So I'm happy with renting.

00:03:00.260 | So now I'm here two and a half years and I'm good at working on the income side, I'm good

00:03:06.820 | at saving.

00:03:07.820 | I'm thinking about the rest of it.

00:03:10.260 | I have a nut, I have 150K sitting in the bank that I could use for a down payment on a house.

00:03:19.380 | And I have family back on the East Coast.

00:03:22.980 | So I have a great job here.

00:03:25.820 | I'm always very secure.

00:03:28.180 | I don't know if I will still be with my employer in the next year, but I will be with a employer

00:03:33.220 | and things are well, like I'm not worried about that.

00:03:36.380 | And I also take your advice and try to double my income every so often.

00:03:41.580 | So I'm trying to double my income now.

00:03:44.300 | I also, being out here, I'm writing my first book, I have drafted it, I'm halfway through

00:03:49.140 | revision and I feel like that's something I'll continue to do is write books.

00:03:55.660 | I love that.

00:03:57.660 | And I may also start some consulting as well on the side.

00:04:02.020 | I do a little bit of that.

00:04:03.420 | So the income side of the equation is good.

00:04:07.700 | What about the investing side?

00:04:09.420 | So I'm trying to figure out housing.

00:04:12.220 | What do I do about housing?

00:04:13.540 | Maybe I could do, you know, maybe I could house tack and keep my rental here, giving

00:04:22.060 | me flexibility if I do change consultancies.

00:04:25.420 | One of the other consultancies I'm looking at is, it doesn't care where I live and they

00:04:29.140 | have customers all over the country, including East Coast.

00:04:33.620 | The one thing I thought, maybe I could buy like a duplex or something back in the, you

00:04:39.060 | know, where my family is.

00:04:40.460 | And then I could have a kind of like a landing pad when I go back, even though I have people

00:04:44.460 | to stay with, it would be nice to have my own landing pad and maybe run out the other

00:04:48.620 | half, something like that.

00:04:51.380 | That's one thought I have.

00:04:53.100 | And also just in general, what are your thoughts?

00:04:56.860 | What's wrong with stocks?

00:05:00.580 | For the, for the, for my, with the, Oh, you mean investing in the stock market with the

00:05:09.820 | cash capital that I have?

00:05:12.140 | Oh, I guess I, I guess in my head, I, you know, I'm, I'm from that generation where

00:05:20.940 | we were taught stock balance with real estate, you know, and feel like without having a real

00:05:26.700 | estate investment, I, I, like, that's like a safety net kind of, kind of thing.

00:05:33.500 | Yeah.

00:05:34.500 | Which, you know, which might be bad thinking.

00:05:36.380 | I mean, it might be old thinking.

00:05:38.740 | I don't know.

00:05:39.740 | I wouldn't say it's old thinking.

00:05:40.940 | I would simply question what is best for you.

00:05:45.780 | You said you like renting.

00:05:47.900 | And at first you said you don't really want to buy a house where you're living now and

00:05:50.880 | you like renting.

00:05:52.700 | And then you go back to real estate.

00:05:54.700 | And so let me state this very clearly.

00:05:58.140 | There's nothing wrong with buying a house.

00:06:00.100 | All of the ways of buying a house or houses or living units that you said are, are excellent

00:06:05.560 | ways to do it.

00:06:07.140 | There's probably any number of good solutions that you could put into place.

00:06:11.580 | I think that having a house is indeed a very valuable part of your overall financial plan.

00:06:18.760 | And it's an important part of your overall safety net.

00:06:21.640 | We all of us, I think, no matter how well things are going, we recognize that we could

00:06:26.200 | do some dumb things and wind up on the street.

00:06:28.700 | And so having a house, especially if you have a paid for house, gives you a significant

00:06:33.960 | amount of, of personal confidence to know at least I'm not going to be physically on

00:06:38.080 | the street.

00:06:39.460 | But that buying a house is not always the best move and it's not always the best move

00:06:43.840 | for every person.

00:06:45.520 | And so you'll want to think carefully about the way that you approach buying a house and

00:06:49.860 | make sure that it is indeed the best move for you and that it fits your, your lifestyle

00:06:55.260 | and your vision.

00:06:56.800 | So when I talk about, basically the larger question that you're asking is what should

00:07:00.900 | I invest my money in?

00:07:03.020 | Which is a worthy question with many answers.

00:07:05.780 | I'll give you a model that I use.

00:07:08.500 | But the, but the range of investments that is appropriate for you is probably fairly

00:07:16.300 | limited and it's probably limited to either investing into yourself or your own business

00:07:21.860 | or your own enterprise in some way, or it's limited to investing into the stock market,

00:07:27.980 | probably through just normal mutual funds, or it's limited to buying some form of real

00:07:33.620 | estate and that real estate might appear quite ordinary, right?

00:07:36.860 | It might be a single family home, it might be a duplex, you might house hack, you might

00:07:40.420 | do all of those things.

00:07:42.500 | But of course there are many other things that you could do, but you're probably going

00:07:47.420 | to choose from among those options unless you come across something that is, that is

00:07:51.980 | better and more worthy.

00:07:53.380 | So let's stick with just those three options.

00:07:55.620 | In terms of the most productive investment, the most productive investment that you can

00:08:00.220 | usually make is to invest in yourself, to invest in your skills, to invest in your,

00:08:05.260 | your competencies, to invest in your qualifications, your credentials in some way.

00:08:09.620 | That's why we tell people to go to college, that's why we say take a class on marketing

00:08:13.300 | or whatever.

00:08:14.300 | And a lot of times you need money to invest into something that you really want to do.

00:08:20.500 | You're gainfully employed and you're writing a book.

00:08:22.780 | Some people, the best thing they could do with their savings is simply live on it while

00:08:26.740 | they get their book done.

00:08:28.300 | And maybe you say, okay, I'm going to draw from my savings for the next six months so

00:08:31.620 | I can get my book done and get it published and that's going to be the start of my new

00:08:34.420 | career.

00:08:35.420 | So if you can see some way to profitably invest into yourself, you should normally do that

00:08:41.580 | first because that investment will make a bigger difference in the long run.

00:08:46.460 | Again, to use the example, that's why we tell young people go to college rather than buy

00:08:51.380 | a house first because we know that you can always buy houses and that's a good move,

00:08:55.460 | but you want to start by investing into yourself, especially if that investment can reflect

00:08:59.340 | an earning power.

00:09:00.340 | Now let's move on to, because you've, you've done that, right?

00:09:03.620 | You're doing that.

00:09:04.620 | You've done that and you probably maxed out.

00:09:07.620 | Yep.

00:09:08.620 | I do.

00:09:09.620 | I do regularly myself.

00:09:10.620 | I take courses.

00:09:11.620 | I do masterminds with other people that like I generate, I handpick because I'm at that

00:09:18.860 | point in my career where I can do some of that.

00:09:20.420 | So I agree with you 100%.

00:09:22.140 | It is the best thing I can do and this is what I continue to do.

00:09:26.100 | But this is after that, after that piece.

00:09:28.500 | Exactly.

00:09:29.500 | If someone is earning $3,000 a month and they've saved $3,000, they've saved $6,000 a month

00:09:34.580 | and what they should invest the money in is not a Roth IRA.

00:09:37.540 | They should invest the money into going from $3,000 a month to $6,000 a month through whatever

00:09:42.980 | is appropriate.

00:09:44.100 | But it gets very difficult.

00:09:45.540 | Once you've done that a few times, it becomes very difficult to actually spend the money

00:09:50.840 | back into yourself.

00:09:52.540 | And so you, you naturally wind up with a surplus.

00:09:55.940 | Once you've solved the income issues like you have done, then you say, okay, I've got

00:10:00.300 | more money left here.

00:10:02.180 | Now, there is another component of it.

00:10:06.460 | And again, this is not for you.

00:10:07.460 | I just want to make sure it's clear.

00:10:08.740 | There is a component in which you can invest into business.

00:10:12.420 | You can invest into your own business, something that you do.

00:10:16.100 | The problem for you is that will probably interfere too much with your career and it's

00:10:20.420 | not something that you're really interested in at the moment.

00:10:23.100 | So that's why we naturally move to investment choices that you're not particularly involved

00:10:29.020 | with on a daily basis.

00:10:30.820 | And that's where the two natural solutions are some kind of ordinary mutual fund portfolio,

00:10:36.180 | stock investing, et cetera, and real estate.

00:10:39.780 | You could do other things, right?

00:10:41.220 | If you had a real passion for antique watches, then you might go out and find the world's

00:10:46.780 | best deals on watches and refurbish them and flip them and sell them for lots or, you know,

00:10:51.920 | some other aspect of interesting little markets.

00:10:54.640 | But assuming that you don't have something like that, that's where you come to housing

00:10:58.740 | and to stocks.

00:11:00.100 | I think for most people, the answer is to do both.

00:11:03.060 | And the reason is in the American context, you can borrow a lot of money very safely

00:11:07.860 | on houses.

00:11:09.260 | And so when you're dealing with borrowed money, you have the potential for a much higher rate

00:11:13.980 | of return than if you're doing all the money out of your own pocket.

00:11:17.960 | And so if you need a place to live and you could go to the bank and you can borrow, say,

00:11:23.140 | $400,000 for a duplex, you put down $100,000, borrow $300,000 for, well, just make a 500,

00:11:29.700 | right?

00:11:30.700 | You go and you find a $500,000 duplex in a place that you want to live.

00:11:33.700 | And if you can borrow $400,000 from the bank and put $100,000 down out of your pocket and

00:11:38.340 | then have your tenants pay your mortgage off for you over a significant period of time

00:11:42.660 | because you have one roommate in your apartment and, you know, somebody in the other apartment,

00:11:47.860 | then basically you're dealing with, in essence, a form of free money.

00:11:51.960 | And so that's the big attraction of real estate is that it's relatively easy to borrow against

00:11:56.900 | and it provides something that you probably need and want, which is a place to live.

00:12:01.340 | Similarly, even if you do this in your own house, right, there's nothing-- it's a good

00:12:06.020 | thing for many people to buy a place to live.

00:12:08.580 | I need a place to live.

00:12:09.580 | And again, in the American context, I can borrow the money for it very easily at low

00:12:15.900 | fixed rates, which is very safe debt.

00:12:18.320 | And so I'll go and I'll buy the place to live.

00:12:20.020 | I'll live in it for many years.

00:12:21.440 | And then in the future, I'll be able to sell it in a tax-advantaged basis.

00:12:26.140 | So it is a good thing.

00:12:27.860 | The only time it's not a good thing is if it hinders your lifestyle in some significant

00:12:33.820 | way, right?

00:12:34.820 | This is why we tell young people who should keep themselves fairly mobile so they can

00:12:38.580 | move across the country for better job opportunity.

00:12:40.780 | We say, you know, it might be better for you to rent an apartment so you can quickly fold

00:12:43.940 | up shop and go for a better job opportunity.

00:12:46.060 | Because if you can job hop and go from making 60 here to another state making 100, then

00:12:52.180 | to go to a third state making 150, and then six years later, you're making 250 on the

00:12:56.820 | other side of the country because you strategically job hopped three or four times, that's going

00:13:02.060 | to pay off much more than if you stayed in your small town where you had limited opportunities,

00:13:07.940 | limited employers, and you made $50,000 a profit on your house.

00:13:14.100 | So if owning a house is a restriction on you in some way, then you're better off going

00:13:19.180 | to something else.

00:13:21.420 | And avoiding those lifestyle restrictions.

00:13:25.020 | The reason I said, you know, what's wrong with stocks is simply that we are fortunate

00:13:30.180 | to live in the year 2022, we live with one of the greatest wealth building assets of

00:13:35.400 | all time, which means a well run, very productive, publicly traded securities market that we

00:13:40.820 | can access on an exceedingly inexpensive basis.

00:13:44.700 | And these markets are wonderful investments.

00:13:48.760 | If I woke up and, you know, you picture yourself, I don't know what your number is, but maybe

00:13:54.060 | you woke up and you had $10 million in investments, and that $10 million gives you $400,000 a

00:14:02.820 | year that you can pull off on the 4% rule, the most perfect passive income lifestyle

00:14:07.700 | for your investments would be to have all that money in mutual funds, you just pull

00:14:11.380 | off your $200,000 to $400,000 a year of living expenses, you can vagabond around the world,

00:14:16.180 | and you've got one of the best, most productive, most diversified investment portfolios possible.

00:14:22.580 | And so it still would be, you would still buy an apartment or a house that you wanted

00:14:26.200 | to live in, and you would pay it off, and that would eliminate, you know, the risk of

00:14:30.380 | you being tossed out on your ear because you didn't make a mortgage payment, but it's not

00:14:34.700 | necessary.

00:14:35.920 | So I would say, look at the house first from a lifestyle perspective and ask yourself,

00:14:41.220 | do I want to be in this place for a significant amount of time to make it worth my buying

00:14:44.860 | a house?

00:14:45.860 | Is the kind of house that's accessible to me based upon my numbers, is it the kind of

00:14:50.780 | house that I want to have?

00:14:53.020 | And if so, then go ahead and buy the house because it's where you want to live for a

00:14:56.300 | long time.

00:14:57.420 | But if you don't actually want to get involved in real estate investing from the lifestyle

00:15:01.900 | perspective, etc., there's nothing wrong with putting, outside of cash savings, there's

00:15:07.460 | nothing wrong with putting all your money into your mutual funds.

00:15:10.980 | They're phenomenal investments, and as long as you have proper, again, emergency fund

00:15:16.020 | savings, some physical assets, etc., then there's nothing wrong with that approach as

00:15:20.940 | far as I can see.

00:15:22.340 | Yeah, that sounds really good.

00:15:25.300 | Yeah, I think, and that gives me really good thinking points because it is a place I would

00:15:31.860 | like to invest in, and I really like the idea of getting into real estate rentals for the

00:15:39.420 | long term in case, like you said, in case things do go south.

00:15:43.140 | I mean, I could do something stupid, the market could, so many things can go wrong, and things

00:15:48.180 | will go wrong, let's just face it.

00:15:51.060 | And it takes time to bounce back, or I mean, maybe there's a future in which I don't know

00:15:57.700 | what my time frame is that I don't want to bounce back, that I want to pivot and do something.

00:16:01.820 | Maybe I just want to, the book I'm writing right now is fiction, I have many fiction

00:16:05.620 | books in my mind.

00:16:06.620 | I also have technical books in my mind that I could write for my career, but I wouldn't

00:16:11.140 | get the return, really, there's no return on that, really, on writing books.

00:16:16.420 | So, that's another reason why I think real estate is attractive, that it can really be

00:16:23.900 | a great wealth generator, it can give you passive income to cover the day-to-day expenses

00:16:29.460 | before hitting retirement age and withdrawing and can add to all that.

00:16:33.900 | So, that's one reason it really is attractive to me, but I love what you said about, is

00:16:40.020 | it the type of house that I would want to live in?

00:16:42.340 | And that's like a great question.

00:16:44.860 | I don't know.

00:16:47.060 | And that's maybe something I need to investigate.

00:16:48.660 | I've got some great resources in that area, as far as real estate professionals that I'm

00:16:54.860 | closely connected with.

00:16:55.940 | So, maybe I can just take some time when I'm over there to look around and see if it is

00:17:01.980 | something I want to do, just make it a little bit more concrete by looking at property.

00:17:07.300 | I would say buying assets is very rarely the wrong thing to do.

00:17:14.700 | And real estate, buying real estate is very rarely the wrong thing to do.

00:17:19.700 | Really, the only things that make buying real estate the wrong thing to do are, number one,

00:17:25.460 | buying a house that you can't make the payments on in a time of duress.

00:17:31.140 | So, going too close to the edge in terms of what you can make the payments on.

00:17:35.300 | Number two, buying a house with too short of a time perspective in order to weather

00:17:41.420 | market fluctuations, etc.

00:17:44.420 | Or I guess in theory, buying something that you're just, that is just totally, you get

00:17:50.620 | scammed on.

00:17:51.620 | But that's hard to do if you go through the normal process.

00:17:53.460 | You actually have a house inspect.

00:17:54.820 | There's so many people involved.

00:17:56.160 | It's hard to get scammed in the normal retail real estate market.

00:18:00.260 | So, the two big mistakes are those things.

00:18:03.180 | Number one, when you buy a house, make sure that you buy it with reasonable assumptions,

00:18:07.620 | making sure that yes, I can afford these payments.

00:18:10.820 | And even if my worst case scenario happens, I can afford it in a reasonable manner.

00:18:19.220 | And then number two, buy a house that you're going to be in for, that you think you'll

00:18:24.140 | be happy with enough for the foreseeable future, so you don't have to sell it within six months.

00:18:30.220 | Right.

00:18:31.220 | And in 2000, I was a financial advisor in 2008 in the real estate crash in Florida.

00:18:36.300 | And the remarkable thing is we had a major real estate crash in 2008, 2009.

00:18:41.140 | A lot of people got hurt.

00:18:43.020 | But the people who got hurt were the ones who couldn't make their payments.

00:18:47.740 | Within I think it was six years, five to six years, the prices had completely recovered

00:18:54.260 | from the massive crash in 2008, 2009 in the South Florida marketplace.

00:18:59.780 | And in a decade, it felt like it was just completely gone.

00:19:04.700 | And so, anybody who could keep – all the people who were able to hang on to their house,

00:19:09.540 | who didn't have to sell because they did a stated income loan and FIB done all the

00:19:14.540 | numbers and one year later, they moved out.

00:19:18.100 | Anybody who could stay in their house for a period of time usually made money because

00:19:22.620 | the market recovered fairly quickly.

00:19:24.700 | And so, I think that with those guidelines to say that under all reasonable expectations,

00:19:29.220 | I should be able to afford this.

00:19:31.660 | And then number two, I'm not going to buy something where I have to move out in three

00:19:34.740 | months because then all the transaction costs eat up all of your potential for making it

00:19:39.940 | go and you lose all your money in transaction costs.

00:19:43.380 | But beyond that, it's very hard to go wrong in real estate even if there is a significant

00:19:47.880 | market change in your local market.

00:19:50.140 | Yeah, I really like that because I feel – I think that's really good advice.

00:19:55.740 | I like thinking about a five-year time horizon which is also why I don't want to buy in

00:19:59.820 | where I am now in Seattle because the market is so inflated and maybe it will keep going

00:20:04.780 | up and maybe not.

00:20:08.060 | And I don't have a strong feeling that I'll be here for that time frame, although I might

00:20:13.220 | be.

00:20:14.220 | It's just a maybe and it's not strong enough for me to buy in.

00:20:17.060 | But back even if I'm not living there, I have so many ties back there that I feel like

00:20:21.860 | I will always be visiting there.

00:20:25.220 | Another exit is just rent – if I get a place that I can rent, just rent both units or rent

00:20:29.780 | both places.

00:20:31.180 | And I love the idea of having a roommate.

00:20:32.700 | I feel like that's so smart because then the toilets are getting flushed.

00:20:37.500 | If there's a water leak, somebody is noticing it and I don't have to rely on friends and

00:20:41.740 | family to go by.

00:20:42.740 | I have a human there.

00:20:43.740 | So I think that's a great idea.

00:20:46.740 | Yeah, I like the idea but I think it needs to be more concrete.

00:20:50.500 | Otherwise, maybe the stock market just really is a good option for me and I should think

00:20:54.520 | about that too.

00:20:57.260 | Just recognize when you think about the stock market, recognize that you're fortunate to

00:21:01.660 | have it.

00:21:02.660 | It's a great option.

00:21:04.140 | And so when you compare your other opportunities to it, you should always compare it to what's

00:21:09.700 | available to you in the stock market.

00:21:12.060 | And then notice that I'm getting some other benefit from it.

00:21:15.900 | And I think the benefits you said are good.

00:21:17.580 | Years ago, I had a good friend.

00:21:19.460 | Years ago, basically has only ever made one smart financial decision which was to buy

00:21:24.700 | a duplex.

00:21:26.120 | And bought a duplex.

00:21:27.200 | On one side, there's a three-bedroom unit.

00:21:30.480 | That he rented out for income.

00:21:32.240 | On his side, he's got a two-bedroom unit.

00:21:33.880 | He traveled a lot, had a roommate in the unit with him.

00:21:37.880 | So when he travels, there's always somebody there in his house and on the other house.

00:21:42.080 | And the rental payment from that is sufficient to meet his mortgage payment.

00:21:47.360 | And so basically, he lives free for the risk of signing his name to the loan and the risk

00:21:52.420 | of property repairs and things like that along the way.

00:21:55.720 | And it's basically been the only smart financial decision he ever made and it has paid off

00:21:59.760 | significantly for him.

00:22:01.620 | So I think it's a great idea as long as it doesn't hinder something else that's important

00:22:06.240 | to you.

00:22:07.240 | As long as it doesn't hinder your going abroad or your living on the West Coast because you

00:22:12.440 | feel like now I have to go live on the East Coast.

00:22:15.040 | So as long as it's not hindering your lifestyle, I say go for it.

00:22:17.960 | Okay, it sounds really good.

00:22:19.960 | Yeah, and that's a good point too because I have a lead on living abroad as well.

00:22:26.160 | I'm making contact.

00:22:28.080 | I don't know where, you know, early.

00:22:29.440 | I don't know where things will lead but that is something I want to definitely do in the

00:22:34.560 | future, live in London or Berlin for a while for work if possible and I'm making this kind

00:22:41.760 | of contact.

00:22:42.760 | So yeah, that sounds great.

00:22:43.760 | Thank you so much, Joshua.

00:22:44.760 | Thanks for the mindset and the thought leadership.

00:22:47.160 | I really appreciate it.

00:22:48.440 | My pleasure.

00:22:49.440 | Keep in touch, Maggie.

00:22:50.440 | We go now to James in Georgia.

00:22:52.440 | James, welcome to the show.

00:22:54.000 | Oops, there we go.

00:22:55.000 | James in Georgia, welcome to the show.

00:22:56.000 | How can I serve you today?

00:22:57.600 | Hey, Joshua.

00:22:59.100 | My question is also on house buying.

00:23:02.160 | My wife and I have been married for about three months now and we're looking at buying

00:23:06.600 | our first house and my question is pretty simple but just wanted to get an expert opinion

00:23:13.220 | on it is based on where our money is invested now, where to pull the money from for the

00:23:22.400 | down payment.

00:23:25.080 | So we've got about a hundred thousand total, about half in cash and half in mutual funds

00:23:34.760 | and we want to target about 40 to 50,000 for the down payment.

00:23:40.000 | And so I think the simple answer is to take about half the cash and keep maybe about 20,000

00:23:48.840 | as an emergency fund and then sell off from the mutual funds however much we need to make

00:23:54.580 | up the rest of the down payment.

00:23:56.560 | But just wanted to ask you, is there anything that I'm missing there, any ways to think

00:24:00.720 | about it that I don't know or really any other thoughts you have on that?

00:24:05.840 | Have you already identified a specific house that you're planning to buy?

00:24:10.120 | We have not, we're still looking for the house.

00:24:14.320 | So have you already undergone pre-qualification for a mortgage lender?

00:24:19.560 | Yes.

00:24:20.560 | Alright, so your first thing that you want to do is when you're talking with your mortgage

00:24:25.080 | lender, you want to keep your mortgage lender in the loop on all of the stuff that you're

00:24:29.780 | doing with your cash.

00:24:31.480 | So if your mortgage lender knows, usually they'll want to see that the money in your

00:24:36.020 | bank account has been seasoned.

00:24:37.800 | They'll want to see that it's been there for a little while.

00:24:40.280 | And so if you're going to be pulling money from a mutual fund and it's going to show

00:24:44.060 | up in the bank account, make sure that you're talking with your underwriter that yes, that'll

00:24:47.820 | be fine as long as you can show us the mutual fund statements, etc.

00:24:51.800 | Because in the end, the answer to your question is it probably doesn't matter where you pull

00:24:56.680 | the cash.

00:24:57.680 | We'll talk in a moment about taxes, etc.

00:24:59.760 | But it probably doesn't matter.

00:25:00.840 | You just use the cash.

00:25:03.160 | But the key thing is to make sure that you can smooth the process with your mortgage

00:25:08.040 | lender and follow your mortgage lender's technical requirements.

00:25:11.360 | That's important.

00:25:12.440 | Now the mutual funds that you own, do they have significant amounts of gain such that

00:25:17.320 | you will be incurring taxation when you sell them?

00:25:21.200 | They will.

00:25:22.720 | One of these mutual funds I've had basically was given to me when I was born.

00:25:27.720 | And then same with the other one.

00:25:29.760 | So they've been kind of in my name, kind of growing for 20 odd years.

00:25:36.800 | So the next thing you do is look at your statements from the mutual fund company and calculate

00:25:44.720 | the tax liability that you will owe if you sell those funds.

00:25:48.720 | So if they've grown a lot for a long period of time, then there would be a significant

00:25:53.720 | tax liability on the sale of those funds.

00:25:56.720 | So you need to first understand the number.

00:25:59.680 | Let's say you took $50,000 from the mutual funds and you kept all the money in the cash.

00:26:03.720 | What would be the cost of selling those funds in terms of the tax liability?

00:26:08.680 | Then the next thing you do to make the decision is you ask yourself, do I still want to own

00:26:13.920 | these funds?

00:26:15.360 | If they're good quality funds that you've had for a long time, then the answer might

00:26:19.880 | be very well, yeah, I still want to own these funds.

00:26:22.080 | Ideally, they're good investments.

00:26:23.400 | They've done well for me.

00:26:25.680 | All of the costs are sunk costs.

00:26:27.960 | They were probably sales charges when they were bought for you, and so all those commissions

00:26:32.320 | are paid, et cetera.

00:26:33.880 | And so you might say, I'd like to own these funds still.

00:26:36.320 | They're good funds.

00:26:37.320 | They've been good to me.

00:26:38.320 | They've made money, and I'm happy owning them.

00:26:40.080 | On the other hand, if your answer is the opposite, or you say, no, I actually don't want to own

00:26:45.360 | these funds, well, now this is your excuse to sell them.

00:26:48.880 | But you have to understand what the cost of selling them is going to be.

00:26:53.480 | You have to understand if I go ahead and sell them, then I'm going to lose 15% or whatever

00:27:00.960 | the number is of the value in taxes.

00:27:05.840 | So ask yourself, do I want to keep them?

00:27:07.880 | In an ideal world, do I want to keep them or do I want to get rid of them?

00:27:10.920 | And if it's clear that you want to keep them, that'll make your decision relatively easy.

00:27:15.420 | If it's clear that you want to get rid of them, that'll make your decision relatively

00:27:18.360 | easy.

00:27:19.360 | And then the next question is, when is the best time for me to sell these funds and to

00:27:24.600 | incur this tax liability?

00:27:26.500 | So right now, for example, you might have a high household income.

00:27:30.520 | You and your wife are making tons of money.

00:27:32.800 | You've been saving hard, and so your income is high.

00:27:36.000 | But you might look forward and say, hey, four years from now, for whatever reason, my wife's

00:27:40.540 | income is going to go away because we're having a baby, or I'm going to take a job transfer

00:27:45.880 | and our income is going to be lower.

00:27:47.220 | So we'll go ahead and sell these in the future when we're in a lower tax bracket.

00:27:51.000 | So you need to understand if something's going to change strategically with those mutual

00:27:56.400 | funds.

00:27:58.080 | How much is your current household income, and what do you expect your mortgage payment

00:28:02.520 | to be on the kind of houses that you're looking at right now?

00:28:05.880 | Yeah, right now, between my wife and I, we make about $135,000 per year.

00:28:13.440 | But we want to buy a house where our living expenses really don't need more than about

00:28:22.200 | my income and half my wife's income for covering that.

00:28:26.640 | So looking at a little bit of not stretching as far as you might be able to, but to answer

00:28:32.200 | your question about the monthly payment, somewhere between $2,000 and $2,500 a month.

00:28:37.440 | Okay.

00:28:38.440 | So that seems very reasonable based upon those numbers.

00:28:41.200 | So I don't think you need to worry too much about keeping that much cash on hand.

00:28:49.280 | Even if you drained all of your savings and you just identified that if I had an emergency,

00:28:54.360 | then I would sell my mutual funds or I would borrow against the mutual funds.

00:28:59.040 | I don't think it'd be a huge problem for you just to spend the money that you have in cash

00:29:03.560 | savings on the house down payment and then replenish it.

00:29:07.980 | You should be able to save money after you buy the house at that income.

00:29:13.280 | And if you're shopping in that range, you should still be able to save plenty of money

00:29:16.600 | and quickly replenish your emergency fund.

00:29:19.000 | And if you did genuinely have an emergency, you can always sell your mutual funds down

00:29:23.440 | the road.

00:29:24.500 | So unless you actually want to sell them, from what you're saying, I would just keep

00:29:28.640 | them.

00:29:29.640 | Why pay the tax on them now if you want to keep owning them, let them continue to grow.

00:29:34.040 | Take the money from your bank account, drain your bank accounts.

00:29:37.440 | If you have an emergency, you can put the emergency expenses on a 0% credit card and

00:29:43.600 | then pay that off.

00:29:44.680 | Or you can withdraw money from the mutual funds later and pay it that way.

00:29:50.280 | Your big risk with that approach would simply be, what if I have an emergency and simultaneously

00:29:57.000 | the value of my mutual funds is declined by 20%?

00:30:01.080 | But I can't tell you whether that's likely or not to me unless it's probably unlikely.

00:30:07.400 | So and especially if you can buttress what you're doing with a credit card or something

00:30:13.400 | like that to cover an emergency for six months until you could pay it off, I think I would

00:30:17.400 | just spend the money in my bank account on the house.

00:30:19.960 | Okay, that makes sense.

00:30:22.400 | Thank you.

00:30:23.400 | Yeah, my pleasure.

00:30:24.400 | Remember that, again, with the exception of market risk, the maintaining an emergency

00:30:35.020 | fund is very important for non-wealthy people.

00:30:41.640 | Once you start to build wealth, the need for an emergency fund per se declines significantly.

00:30:51.220 | Your mutual funds can serve very effectively as a component of your overall emergency fund,

00:30:59.560 | especially if you can dampen any fluctuations with saying, if I had an emergency, I would

00:31:05.140 | use a credit card and I would get a 0% credit card for 12 months and I would use that to

00:31:12.260 | pay for the emergency.

00:31:13.880 | And then if I couldn't pay it off within 12 months, then I would drain for the mutual

00:31:18.260 | funds.

00:31:19.260 | So if you have significant tax liability and if you want to keep owning them, I don't see

00:31:23.620 | why you should sell good investments just to make a house down payment when you can

00:31:27.900 | pretty quickly save up again your $20,000 emergency fund after you buy the house.

00:31:33.660 | And the thing I like about that also is it'll keep you on budget, which I think will be

00:31:37.180 | great because as you look at houses, it's so tempting to stretch your budget.

00:31:41.600 | And if you just stick to the cash that you have in your bank account, that's a good way

00:31:44.540 | of keeping yourself on budget.

00:31:48.020 | That's another good way to think about it, Joshua.

00:31:49.920 | Thank you.

00:31:50.920 | Thanks for calling in, James.

00:31:51.920 | We move on to Dan.

00:31:52.920 | Dan, welcome to the show.

00:31:53.920 | How can I serve you today?

00:31:54.920 | Dan, you're up.

00:31:55.920 | Dan going once.

00:31:56.920 | All right, move on.

00:31:57.920 | Dan, I'll come back to you in a minute.

00:31:58.920 | We'll go on to Mike in Washington.

00:31:59.920 | Mike, welcome to the show.

00:32:00.920 | How can I serve you today?

00:32:01.920 | Hey, Joshua.

00:32:02.920 | Can you hear me well?

00:32:03.920 | Sounds great.

00:32:04.920 | Perfect.

00:32:05.920 | Thank you, Joshua.

00:32:06.920 | I had a question to you about the financial planning for children.

00:32:07.920 | So myself and my wife, we are very new to the United States.

00:32:08.920 | We just moved earlier this year.

00:32:09.920 | Welcome.

00:32:10.920 | And we actually have a lot of kids in the United States.

00:32:11.920 | So we're very excited to be here.

00:32:12.920 | And we're going to be talking about the financial planning for children.

00:32:13.920 | So we're going to be talking about the financial planning for children.

00:32:14.920 | So we're going to be talking about the financial planning for children.

00:32:15.920 | So we're going to be talking about the financial planning for children.

00:32:29.920 | And I started to understand there are probably a few things I need to start thinking about,

00:32:33.920 | financially speaking, as my baby will be born.

00:32:36.920 | I understand, actually, your previous question from James, he mentioned he was given mutual

00:32:40.920 | funding, his name when he was born.

00:32:42.920 | I've heard about other things like maybe opening a bank account for my kid or, I don't know,

00:32:48.920 | any steps like that.

00:32:49.920 | Again, they're quite different in the US versus Europe.

00:32:52.920 | And I wanted to ask your perspective, what are the steps I need to think about right

00:32:56.920 | now?

00:32:57.920 | Or actually, it's too early and it's better to do when, I don't know, my kid will be five

00:33:00.920 | years old or even later.

00:33:02.920 | Yeah.

00:33:03.920 | Which country in Europe did you move from?

00:33:05.920 | We moved from London.

00:33:07.920 | And how did you get into the United States?

00:33:11.920 | So we're here for work.

00:33:14.920 | And at the moment, we plan to stay in the United States for foreseeable future.

00:33:18.920 | But yeah, it's very hard to predict for how long we would live here for multiple dozens

00:33:25.920 | of years.

00:33:26.920 | Or we may decide to two years from now to move back.

00:33:30.920 | And obviously, our kid will travel with us.

00:33:33.920 | Of course.

00:33:34.920 | So the first question is, do you want your child to be an American citizen by being born

00:33:38.920 | in the United States?

00:33:40.920 | Yes.

00:33:41.920 | Okay.

00:33:42.920 | So if you clearly want that, then that's your first financial question.

00:33:48.920 | The vast majority of times that's seen as an advantage.

00:33:52.920 | There are a few times in which it's seen as a disadvantage.

00:33:55.920 | So you've answered it quickly, clearly.

00:33:58.920 | That's done.

00:33:59.920 | Second thing is, as an American citizen, so do you maintain your financial life in the

00:34:07.920 | United Kingdom, or have you moved it all to the United States?

00:34:12.920 | Yeah, predominantly move it here to the United States.

00:34:15.920 | So that's the other kind of complication, is what will be complicated for your child

00:34:21.920 | by being an American citizen is that his or her life will be most easily handled in the

00:34:29.920 | United States.

00:34:30.920 | Because as an American citizen, he or she will forever be an American taxpayer.

00:34:36.920 | He or she will forever have limitations and reporting requirements on bank accounts held

00:34:42.920 | abroad, et cetera.

00:34:44.920 | And so thinking about that and setting that stuff up in the United States intentionally

00:34:50.920 | will keep the accounting simpler for down the road.

00:34:54.920 | And it's something to be aware of if you do leave in the future.

00:34:58.920 | And that's why it's such a big deal to think about, do I want my child to be an American

00:35:05.920 | citizen, born on American soil?

00:35:07.920 | Do I want his or her passport, even his or her British passport, to say born in the United

00:35:12.920 | States, et cetera?

00:35:14.920 | Because that financial life follows you for a very long time.

00:35:20.920 | So after that, there's not really anything that needs to be done or should be done or

00:35:26.920 | has to be done for a child's finances.

00:35:31.920 | All of the things that you can do for a child are basically mental games for you as a parent.

00:35:38.920 | And some people find those mental games to be motivating.

00:35:42.920 | But there's no fundamentally superior thing that you can do for a child.

00:35:48.920 | In general-- and I'll expand and give examples in a moment-- but because this is true, I

00:35:55.920 | advise you to focus first and foremost on you doing the right things financially and

00:36:01.920 | on you getting rich.

00:36:03.920 | Because by you-- or getting richer, right, if you already are-- by you being wealthy

00:36:10.920 | and increasing your wealth, you will be able to offer to your child more and more of the

00:36:18.920 | things that will make a big difference in his life.

00:36:21.920 | So if we compare options, and let's say that you can either give your child a great education

00:36:30.920 | or you can put aside $1,000 in a mutual fund, the education will be incomparably better

00:36:36.920 | and incomparably more valuable.

00:36:38.920 | So all of the normal things that parents do for their children, these are the things that

00:36:43.920 | pay off.

00:36:44.920 | I'll use another example, right?

00:36:46.920 | The social class that your child is a part of.

00:36:50.920 | If you live in a-- let's say that you have a choice, right?

00:36:55.920 | I've got, I don't know, $15,000.

00:36:57.920 | And I can either put this $15,000 into a college savings account for my child, or I can put

00:37:05.920 | this $15,000 with my other money, and I can move our family into a posher neighborhood

00:37:11.920 | with a higher class of neighbors where my child will naturally go to the high class

00:37:18.920 | school where all of the local wealthy elite people send their children.

00:37:22.920 | The access to the higher social class, I think, will pay off much, much more than any kind

00:37:29.920 | of investment into a college fund or something like that.

00:37:33.920 | So if you are looking at something, and if you have to sacrifice on any of those things

00:37:39.920 | in order to set aside money specifically for your child, I think it's generally better

00:37:45.920 | to make sure that you're in a better social class, make sure that your child is better

00:37:49.920 | provided for developmentally, in terms of education, resources, hobbies, good neighbors,

00:37:56.920 | et cetera.

00:37:57.920 | So I don't look at that.

00:37:59.920 | And I've gone through this.

00:38:00.920 | I've developed my own list of things that are important for me to do for my own children.

00:38:05.920 | And I almost never come out the other side with any kind of specific investment for the

00:38:11.920 | child, although there are a few things you can do.

00:38:13.920 | And I'll go over them.

00:38:15.920 | But let me give an example.

00:38:16.920 | My wife is a stay-at-home mother.

00:38:18.920 | I am convinced that having a full-time stay-at-home mom will make a much, much bigger difference

00:38:25.920 | in my children's formation of their character, their intelligence, everything about it, by

00:38:31.920 | having a full-time mother than anything I could buy for them.

00:38:36.920 | And so that's a major cost, of course, to forego a dual-income household.

00:38:40.920 | But I see it as a massive investment into our children.

00:38:44.920 | We choose to homeschool.

00:38:46.920 | And I look at that as, again, I can provide with homeschooling.

00:38:50.920 | I can provide what an elite private school paying $100,000 a year in tuition can't provide.

00:38:57.920 | I can do that pretty easily in homeschooling.

00:38:59.920 | But it comes with a significant investment into books, materials, resources, et cetera,

00:39:06.920 | as well as diverting my wife's and my time and attention to help with the appropriate tutoring.

00:39:12.920 | I spend money on tutors and teachers and people who come to the house and teach.

00:39:17.920 | I spend money on classes.

00:39:19.920 | We do a good amount of world schooling.

00:39:21.920 | And so I spend money to travel around the world and show my children interesting things.

00:39:26.920 | And I do that because, as I look at it, I want to invest into the child's human value,

00:39:31.920 | human resources.

00:39:33.920 | Because money for somebody who is--money is relatively easy to make in the modern era

00:39:40.920 | for somebody who is disciplined, who has good character, who is employable, who has good skills,

00:39:45.920 | who has good social skills, et cetera.

00:39:48.920 | Money is easy to have.

00:39:51.920 | But if I had all the money in the world and I didn't invest into my child's education,

00:39:56.920 | into character, et cetera, then no matter how big the fortune,

00:40:01.920 | very quickly that fortune can be squandered.

00:40:04.920 | And so if I ever have to choose between one or the other,

00:40:07.920 | setting aside money for my child is probably the least impactful,

00:40:11.920 | least important thing that I can do as compared to all these other things.

00:40:16.920 | And so this is one of the reasons why I, of course, have such a deep passion for educational topics,

00:40:20.920 | et cetera.

00:40:22.920 | But if you look at it, to me, the payoff is 50 times greater than any kind of investment can return.

00:40:29.920 | When I talk about college funding, I like to give this example.

00:40:32.920 | The data is crystal--yeah, I think crystal clear is not an excess.

00:40:36.920 | The data seems very evident, very clear of what study I can find,

00:40:42.920 | what academic evidence I can find for an evidence-based approach to child education.

00:40:49.920 | But simple things like the amount that you read aloud to your child at an early age

00:40:56.920 | will make a massive difference in all academic performance.

00:41:01.920 | This is, again, why I'm so passionate about things like having a stay-at-home mom, homeschooling, et cetera,

00:41:06.920 | because if my children are read aloud for two to four hours a day,

00:41:11.920 | then I know that basically all academics for the rest of their life will be easy.

00:41:18.920 | But if I neglect that, if I ignore that, right, I stick them in a daycare somewhere where they watch cartoons,

00:41:24.920 | then I might be spending thousands and thousands of dollars on special tutors when they're high school age

00:41:31.920 | to try to squeak through an SAT, and I can't get an academic scholarship for college,

00:41:36.920 | or in your system, they can't pass their A-levels.

00:41:39.920 | And so then everything is destroyed from a college perspective as well,

00:41:42.920 | and I wind up paying huge checks out of pocket to try to finish off a college education.

00:41:47.920 | The return on investment for all of those things is absolutely huge

00:41:52.920 | compared to setting aside money for college funds, et cetera.

00:41:56.920 | Now, let's assume that your income and your wealth allows you to do all of the things that you can imagine

00:42:04.920 | being appropriate and helpful for your child.

00:42:07.920 | You've put your child in the best environment.

00:42:10.920 | You've chosen the best neighborhood.

00:42:12.920 | You've integrated yourself into the best local social class where your child has high-class neighbors

00:42:18.920 | and friends and peers that are going to be a positive influence, et cetera.

00:42:21.920 | And you still have money that's available for your child.

00:42:25.920 | Well, now we just basically get into either mental tricks that are helpful for motivating you to make more,

00:42:31.920 | or we get into things that are simply intelligent tax planning because why not?

00:42:36.920 | We can do it.

00:42:37.920 | So let's talk about mental tricks.

00:42:39.920 | People who have a specific goal of something they want to do for their child

00:42:44.920 | will often work extra in order to accomplish it,

00:42:48.920 | and that extra work can add to your family wealth because it's extra work.

00:42:53.920 | So for years I've thought about and talked about and had a target of,

00:42:59.920 | "Okay, I want to give each of my children a house."

00:43:02.920 | And so this can be a clarifying concept for someone.

00:43:06.920 | Let's assume that you're kind of a normal middle-class, upper-middle-class, wage-earning person.

00:43:12.920 | You say, "I'm going to give each of my children a house."

00:43:14.920 | And so for every child now I need to come up with a down payment or the cash to buy a house,

00:43:19.920 | and this is so-and-so's house, and this is the house that's going to pay for college.

00:43:24.920 | You can do that for yourself, and you can do it for your child,

00:43:29.920 | but we often as parents find our children to be more motivating.

00:43:32.920 | So whereas if it were just for yourself, you might have said,

00:43:35.920 | "Let's just go blow the money and spend it on silly, frivolous things

00:43:38.920 | because I know I could buy a house every year, a rental house every year, but I'm not going to do it."

00:43:42.920 | But all of a sudden now I've got a child, I'm going to buy the rental house this year.

00:43:46.920 | This is the rental house that is going to be paid off by the time my child is in college.

00:43:50.920 | The rents from this house are going to pay for his or her college tuition, and so I'm done."

00:43:56.920 | And so it motivates people to do extra actions.

00:43:59.920 | Or say something like opening a Roth IRA for your child.

00:44:03.920 | You say, "I'm going to fund this Roth IRA every year,

00:44:06.920 | and it's going to motivate me to minimize my overall spending in order to fund that account."

00:44:14.920 | And so as long as the other stuff is being attended to,

00:44:20.920 | the right schools, the right education, the right camps,

00:44:24.920 | or the right books and resources and toys, etc.,

00:44:28.920 | as long as all that stuff is being attended to, then yeah, working extra,

00:44:31.920 | using it as a mental trick, a motivating mental trick is a powerful thing.

00:44:35.920 | And then in terms of just intelligent tax savings, etc., or intelligent planning,

00:44:40.920 | if you're going to enroll your child in, say, an expensive private university,

00:44:44.920 | and you know that that's going to have a $300,000 tuition bill down the road,

00:44:49.920 | and if you've got the money sitting in a bank account,

00:44:51.920 | and you could put it in the American system into a 529 account,

00:44:55.920 | and you could just make a lump sum payment of $500,000,

00:44:58.920 | and you calculate that in 18 years this is going to be available for tuition,

00:45:01.920 | and then it's going to be done, yeah, that's a good thing to do.

00:45:04.920 | It's absolutely a great--it's a perfect situation for using a 529 account.

00:45:09.920 | Or if you can arrange for your child to generate some amount of earned income

00:45:15.920 | so that you can fund a Roth IRA,

00:45:21.920 | you can match the child's earned income with whatever the child's able to generate,

00:45:25.920 | and you can fund a Roth IRA, that's a great thing to do,

00:45:28.920 | because you're generating the time value of money.

00:45:31.920 | You're really building--setting aside money early that's available for your children.

00:45:37.920 | But again, this is basically all just mental tricks,

00:45:40.920 | because it would be just as productive for you to put the money into your investment accounts 10 years ago,

00:45:47.920 | and now you would have 10 years plus 18 years,

00:45:50.920 | and you could make a bigger gift to your child as well.

00:45:52.920 | So there's no one thing that you need to do

00:45:55.920 | or that has a magic kind of solution for your child's planning.

00:46:01.920 | Any amount of money that gets set aside, and any money that can grow,

00:46:05.920 | it's better if it happens for--you want your money to grow for the longest time possible

00:46:10.920 | at the highest rate available to you,

00:46:12.920 | and you want it to grow in the most tax-effective, tax-deferred manner.

00:46:16.920 | My answer to all of those things is the best investments you can make

00:46:20.920 | are going to be into education,

00:46:22.920 | and you want to make those as early as possible,

00:46:24.920 | and those are the things that are not taxed.

00:46:26.920 | They fit everything better,

00:46:29.920 | and they will result in your child being positioned for far more success

00:46:33.920 | than if you only set aside money.

00:46:36.920 | So first attend to all of that stuff,

00:46:38.920 | and if it requires you to move, to move into a better house,

00:46:42.920 | to get better neighbors, have a higher social class,

00:46:44.920 | or better access to a better school, or whatever it is,

00:46:48.920 | those things all need to be attended first.

00:46:50.920 | But then after that's done, yeah, you can go and you can buy a house for your child,

00:46:53.920 | you can fund a Roth IRA for your child if he has earned income,

00:46:57.920 | you can open a 529 account, etc.

00:47:00.920 | There's no--other than that,

00:47:04.920 | there's really not anything else that you want to do.

00:47:07.920 | Stay away--in the American system, you hear people have--

00:47:10.920 | there's what are called UTMA accounts or UGMA accounts,

00:47:13.920 | it stands for Uniform Transfer to Minor Acts or Uniform Gift to Minor Acts.

00:47:17.920 | Stay away from those.

00:47:19.920 | If you have substantial wealth,

00:47:21.920 | you can always set it aside and make your child a beneficiary on a trust.

00:47:24.920 | That can be useful, but it's not necessary,

00:47:27.920 | and none of that stuff needs to happen when your child is very young.

00:47:31.920 | Final comment is I'm a big fan of buying small life insurance--

00:47:36.920 | well, appropriately sized life insurance policies,

00:47:39.920 | which for most people means smallish life insurance policies

00:47:42.920 | for children when they're very young.

00:47:44.920 | So for all my children, right when they're about--

00:47:46.920 | I think it's 15 days old or a month old,

00:47:49.920 | basically when they're all about a month or so old,

00:47:51.920 | I buy them a permanent life insurance policy,

00:47:54.920 | but that's not going to grow to be worth very much money.

00:47:58.920 | That's just something I do so that they have some insurance,

00:48:01.920 | and by doing it really young,

00:48:03.920 | you can basically avoid all medical underwriting

00:48:05.920 | and you can set aside and have some insurance for them.

00:48:08.920 | I do that because I value the insurance,

00:48:10.920 | and those policies are not very productive

00:48:12.920 | when it comes to growing from investment value.

00:48:15.920 | All the other stuff is much better from an investment value perspective.

00:48:18.920 | So that's my overall answer.

00:48:20.920 | - That's awesome. Thanks a lot, Joshua.

00:48:22.920 | Just one quick question on the list you just finished,

00:48:25.920 | on the life insurance.

00:48:26.920 | You're saying you actually doing that when your kids are very young.

00:48:31.920 | Are there any substantial benefits to do it now

00:48:34.920 | versus two years from now, five years from now?

00:48:36.920 | - Well, the child has to be born first.

00:48:39.920 | So is your child born?

00:48:42.920 | - Not yet. - Yeah.

00:48:43.920 | So the child has to be born.

00:48:44.920 | You can't buy a policy until the child's born.

00:48:46.920 | And then the insurance companies will generally all have different rules.

00:48:50.920 | I think--this has been--I'm getting long in the tooth now.

00:48:53.920 | I can't even remember.

00:48:55.920 | I think it's something--usually something like two weeks might be a week,

00:48:59.920 | two weeks.

00:49:00.920 | But basically the benefit to doing it when a child is, say, a month old

00:49:05.920 | is that unless there's been something that has--

00:49:09.920 | you have a very low chance of anything physical emerging or expressing itself.

00:49:14.920 | Unless the child has some deformity or some handicap or illness

00:49:18.920 | that is obvious from birth,

00:49:21.920 | as long as the baby passes all of his initial infant scores

00:49:25.920 | and everything is good and height is good, weight is good,

00:49:28.920 | and all of the initial kind of infant scores are good,

00:49:31.920 | then you can get a preferred or premier--

00:49:37.920 | depending on what the company calls it--the highest-rated life insurance policy

00:49:42.920 | with no medical underwriting, et cetera.

00:49:44.920 | And there's been no time for anything to develop or emerge

00:49:47.920 | of any medically questionable thing.

00:49:50.920 | And so I love doing that, and I do it because the kinds of policies I own,

00:49:56.920 | they have huge additional purchase benefits on them,

00:49:58.920 | and they all have waivers of premium on them, et cetera, that apply for the--

00:50:01.920 | so if the child were ever disabled, it protects the child's insurance.

00:50:05.920 | And it doesn't cost that much.

00:50:07.920 | Again, those policies, when you get them at zero years old,

00:50:11.920 | you're just getting the cleanest, simplest approach across the board

00:50:14.920 | that gets you some life insurance for your child, and that's what I do.

00:50:18.920 | I'm a little biased because, obviously, I'm a former insurance agent,

00:50:22.920 | but I saw the power of it, and it's something that,

00:50:24.920 | even though I don't make commissions on insurance

00:50:26.920 | because I'm not an insurance agent anymore, I continue to buy for my children.

00:50:30.920 | Got it. Okay. Thank you very much, Joshua. I really appreciate the advice.

00:50:32.920 | My pleasure. All right. We move on. Let's try James in California.

00:50:37.920 | James, welcome to the show. How can I serve you today?

00:50:40.920 | Well, how are you, Joshua?

00:50:42.920 | Very well, sir.

00:50:44.920 | So I was calling in, like, kind of commentary on the show you did a few weeks ago

00:50:48.920 | on the coming famine in America, kind of threw out responses to that.

00:50:54.920 | I mean, I'm a farmer. I have a food business.

00:50:58.920 | We're integrated from farming to retail sales.

00:51:02.920 | And we have-- it seemed like we have an abundance of food

00:51:08.920 | and have a lot of issues with the pricing.

00:51:13.920 | It's been extremely difficult, about six, seven years at this point.

00:51:18.920 | And so the temptation on the one hand to basically shut things down

00:51:23.920 | because rates of return and whatnot, not that we have to,

00:51:26.920 | we're not going broke or anything, but it's not great.

00:51:29.920 | Maybe we're productive doing something else.

00:51:31.920 | On the other hand, it's like, well, I don't really want to shut food production down

00:51:33.920 | if there's a big famine coming.

00:51:35.920 | So it's just kind of your thoughts, or if there's any additional thoughts you had on that subject

00:51:41.920 | since that show or other things that have come up since then.

00:51:47.920 | So, yeah, I'm probably not-- I mean, I'm not the best person to ask about this

00:51:55.920 | because it's not something that I follow very closely.

00:51:59.920 | I think one of the-- so you would be the person that I would come to and ask,

00:52:04.920 | but first, the big unknown has simply-- especially when I released that show,

00:52:09.920 | which is going on a month and a half, two months ago, something like that.

00:52:14.920 | The big unknown was what were going to be the 2022 crop reports for this season on a global basis.

00:52:24.920 | My impression has been that the crop reports in the United States have been really good.

00:52:29.920 | Is that right? Do you think I'm right on that?

00:52:33.920 | Yeah, I think you have.

00:52:35.920 | I'm in California mostly in specialty nuts, vegetable crops, and then tree nuts,

00:52:39.920 | so I know well, and they've had a good crop.

00:52:42.920 | The reports I've had from the cereal grains is they have had a decent crop.

00:52:46.920 | There's big logistics issues, which probably will get resolved without spoilage

00:52:51.920 | in the Mississippi Basin because the--

00:52:53.920 | Yeah, the river's low.

00:52:55.920 | But beyond that, I've not heard of any major issues.

00:52:59.920 | So I think that that is great news, especially for an American marketplace,

00:53:05.920 | at least if we consider the abundance of food to be great news.

00:53:09.920 | It's not great news if you want your prices to go up so you can make more money, unfortunately,

00:53:13.920 | but it is great news for the abundance of food because if the U.S. crop reports are really good,

00:53:20.920 | then that, again, leads to the United States being really well-positioned.

00:53:25.920 | On a global basis, I--again, I don't pay--I'm not super tuned in.

00:53:30.920 | I've heard that about the American markets.

00:53:32.920 | I don't know what the global crop reports are looking like as far as what they're starting to look like

00:53:37.920 | as they come in, and I haven't looked into it over the last couple of weeks.

00:53:41.920 | But my--and I tried to say this in the show--I think that when we talked about the possibility

00:53:49.920 | or probability of global famine, I believe that that is going to be felt most acutely on a global basis.

00:54:00.920 | And while it can affect the United States, I don't expect the worst of conditions to be in the United States

00:54:06.920 | simply because the United States is such a massive producer and exporter of food around the world.

00:54:12.920 | But around the world, we continue--I mean, the use of the F-word is absolutely appropriate.

00:54:20.920 | I don't pay attention to--I don't track this stuff all over the world on a daily basis,

00:54:26.920 | but enough of the stories make their way across my desk, even from personal contacts,

00:54:30.920 | that people are experiencing famine right now.

00:54:35.920 | I have a good amount of contact with some of the crisis zones around the world, right?

00:54:41.920 | There continues to be famine in Venezuela for poor people.

00:54:44.920 | There's a massive refugee crisis of refugees flowing out of Venezuela,

00:54:49.920 | most of them heading to the United States.

00:54:53.920 | It's dire there.

00:54:55.920 | I continue to have contact with people through some Christian mission work in Kenya,

00:55:02.920 | and there are people that are starving, and it's bad.

00:55:05.920 | But again, it's distributed in places where most Americans don't see,

00:55:10.920 | and so it's already happening.

00:55:12.920 | And if I look at the impact of the Russia-Ukraine war,

00:55:16.920 | the complete destruction of their exports and their crops,

00:55:22.920 | and how that is harming all of the places that have bought their wheat over the many years,

00:55:28.920 | the use of famine is not hyperbole, nor is it wrong in this context.

00:55:34.920 | I was never as worried about famine in the American context as I was on a global basis,

00:55:42.920 | and today, especially with the good crop reports, I'm not as worried as I was a few weeks ago,

00:55:49.920 | especially from an American context.

00:55:51.920 | So it's a moving market.

00:55:53.920 | I do not have any specialized insight, though,

00:55:57.920 | that I could say what would be appropriate for your agriculture and food-related business,

00:56:03.920 | because my knowledge is very general.

00:56:06.920 | Okay.

00:56:08.920 | Well, thanks for the response.

00:56:11.920 | It certainly is a concern, especially the areas that were very dependent on the Russian-Ukrainian wheat supply,

00:56:19.920 | but largely because of logistics issues.

00:56:21.920 | There's abundance of food, say, here, but it's mostly specialty crops,

00:56:27.920 | and by the time they're shipped to these areas in famine,

00:56:30.920 | there are people there who can't afford to buy them, even if they're, in some cases, not being harvested here,

00:56:35.920 | because they're worth less than the cost of harvesting.

00:56:37.920 | Right. Right. Right.

00:56:39.920 | I think there will be big changes in the years to come with all of that,

00:56:43.920 | but as far as the trend that I see is probable,

00:56:47.920 | it's that the United States is going to serve its own market much, much more effectively.

00:56:58.920 | The United States produces all the specialty crops and all of the main cereal crops in abundance,

00:57:04.920 | and if you bring in Canada into the picture, then you have everything available.

00:57:08.920 | So North America not only does it have the best geography, the best weather, the best technology, etc.,

00:57:15.920 | but it just has the best production on a global basis.

00:57:18.920 | So I think that North America will be largely insulated from those things on a global basis.

00:57:24.920 | The reason I did the show on famine and talked about it is I believe in the modern era,

00:57:31.920 | we have such a tremendous amount of "who-breeze" of basically saying, "Oh, it can't happen here. It can't happen to us."

00:57:38.920 | And so it's simply wise to recognize that since time immemorial, crop failures have led to massive cataclysmic change.

00:57:49.920 | I go over and one of the things I love about homeschooling is I get to relearn all of my history,

00:57:54.920 | and I go through these old books with my children and we listen to them,

00:57:57.920 | and you hear again and again and again, "Hey, here was the Nile River, but for two years the Nile River didn't flood."

00:58:02.920 | And guess what? That civilization disappeared.

00:58:05.920 | And so it leads to massive uncertainty, etc.

00:58:08.920 | And while I'm exceedingly grateful for how good we've gotten at producing massive amounts of food,

00:58:17.920 | our ability to do that is based upon petroleum-based fertilizers and high technology.

00:58:24.920 | And as we talked about in that show, the increase in fertilizer prices, etc., can have a very quick effect,

00:58:37.920 | and it can cause a market to collapse.

00:58:39.920 | I personally, and even as I did that show with Steven, I think it was obvious for anyone who made it to the end,

00:58:45.920 | that I personally resist at this point many of the worst-case scenarios,

00:58:51.920 | because I think that human ingenuity can often find a way.

00:58:56.920 | I think it's so remarkable if we look at the gas shortage across Europe.

00:59:01.920 | Just this last week, three or four weeks ago, we're looking at people saying,

00:59:07.920 | "My price for heating is going to be $10,000 a month equivalent. It's unaffordable."

00:59:14.920 | But then this last week, all of a sudden, there are stories coming out that,

00:59:19.920 | "Well, the price of natural gas in Europe will be zero, because you have too many tankers piling up,

00:59:24.920 | because there's nowhere to put the gas from all the gases coming in all around the world."

00:59:28.920 | And so Nassim Taleb has a saying that he says, "I've never seen a shortage not followed by a glut."

00:59:37.920 | And so if we think about that, it reflects significantly on human nature.

00:59:43.920 | If you observe this in Florida, in hurricane country, where there's a hurricane that's coming,

00:59:49.920 | and all of a sudden there's a giant shortage, you can't find bottled water,

00:59:52.920 | and you can't find bread, etc. And then two days later, there's a glut, and it's everywhere.

00:59:56.920 | So the appropriate way to handle this, I think, for individuals, in a business,

01:00:03.920 | you project what you think the market is going to do, and then you head your downside

01:00:08.920 | by buying insurance against what if you're wrong.

01:00:11.920 | And for an individual, I think that protection generally involves just an appropriate food storage program

01:00:17.920 | for the average person, so that if you get a temporary disruption due to significant levels of famine,

01:00:24.920 | you have enough resources for you to survive while you wait for the market to fill in around the edges.

01:00:34.920 | Yeah, I agree with that. Good quote by Nassim Taleb. I don't remember that one, but it's a good point.

01:00:44.920 | It's true. I wish I had better insight for you, but I've been encouraged by the good news of the Good Crop Report,

01:00:52.920 | deeply encouraged by that, and I just hope it continues.

01:00:55.920 | And I hope that the famine prediction turns out to be completely wrong.

01:01:00.920 | I'd be thrilled for that to be the case. So we will see.

01:01:04.920 | All right. I do, too.

01:01:06.920 | Absolutely. All right, James, thank you so much.

01:01:09.920 | We move on to our final caller of the day, Dan in Alberta.

01:01:12.920 | Dan, welcome to the show. How can I serve you today?

01:01:15.920 | Hello, Joshua. My question today is how do we build a portfolio of ethical, diverse, and sustainable farms?

01:01:26.920 | So some definitions. Ethical, I want it to be equitable for the places I'm farming in.

01:01:31.920 | I don't want to be like a Canadian mining company that just extracts all the gold out of the country

01:01:37.920 | and just pays a couple minimum wage jobs, animal welfare and that sort of stuff.

01:01:42.920 | Sustainable, I want it to be financially sustainable.

01:01:45.920 | So it would be a business, but like I said, I want it to be ethical.

01:01:50.920 | And then environmentally sustainable and diverse. I want to be in diverse climate zones,

01:01:56.920 | diverse geopolitical zones and diverse crops. And then, yeah, I can go into a bit about myself.

01:02:06.920 | Net worth right now is about 200,000 American. I do have a plot of land in Canada.

01:02:18.920 | It's definitely on the cold side of the diversity of climate.

01:02:26.920 | And my income varies from about 30,000 to 70,000, depending on how much overtime I get and how much I work.

01:02:35.920 | And then my expenses right now are between 12 and 18,000 a year American US dollars.

01:02:47.920 | I currently don't pay rent anywhere, kind of travel, live at my seasonal job and then travel and live in a van and that sort of stuff.

01:03:00.920 | So, yeah, how do I build a portfolio of ethical, diverse and sustainable farms?

01:03:07.920 | I love the question. It's a very inspiring question and I'll give you my answer.

01:03:15.920 | But I would say that my answer will not be nearly as important as somebody who has done it.

01:03:21.920 | So I'm going to give you my answer and I'm good at systems thinking and I think I'll give you some useful points.

01:03:26.920 | But the first way that you can learn how to do that is to go and find somebody who has done it.

01:03:34.920 | So you have to find a mentor or a hero or somebody out there who has done something like what you are thinking about doing.

01:03:45.920 | And then you need to consume every bit of information you can find related to how they did it.

01:03:53.920 | And then think about how you would translate that into your own context.

01:03:57.920 | I think the obvious first place to start would be Joel Salatin.

01:04:02.920 | He's the biggest name that I know of in that space who has succeeded in developing a portfolio of ethical, diverse, sustainable farms.

01:04:11.920 | His farming operations would tick the box on all of those factors.

01:04:18.920 | And so the good thing is he's prolific with his writing, with his speaking, with his interviews, etc.

01:04:29.920 | And so I would imagine you've probably already done it, but the first step would be go and order every single book that he's written.

01:04:36.920 | Go to YouTube and make a playlist of every single talk you can find of his that's been recorded, videoed.

01:04:43.920 | Find every podcast you can find and spend two or three hundred hours studying Joel Salatin.

01:04:50.920 | Along the way, then you'll start to study the bibliography that he has and you'll start to find who inspired him.

01:04:57.920 | I think, for example, years ago I subscribed to a sustainable regenerative agriculture publication called Acres USA.

01:05:05.920 | I don't know if they're still published. This was almost five or ten years ago that I used to subscribe to them.

01:05:10.920 | But go and look for publications like that, publications or organizations of people who are committed to sustainable farming.

01:05:24.920 | "Sustainable farming," "regenerative agriculture" I think is the appropriate word that's used as a good label.

01:05:33.920 | And then what you do again is you go through their list of contributors.

01:05:40.920 | Buy a couple years worth of back issues if you can. Go through their website.

01:05:45.920 | And your job is to mine the names.

01:05:49.920 | And so you need to find the names of all of these people. And then you search to see what each of the contributors to the publications has available for you.

01:06:00.920 | I'll do some names. I'm not current on this space anymore. I haven't had a deep interest in this for a number of years.

01:06:07.920 | This is going back. But it's Joel Salatin, it's Greg Judy, it's... Who's the South African guy? Amazing guy.

01:06:14.920 | Alan Savory. I think he's in Zimbabwe. Anyway, it's Alan Savory or whomever else.

01:06:22.920 | And the other 30 names of people. A guy like Paul Wheaton has spent years working on this stuff.

01:06:30.920 | And he's got a forum. So you go onto the... What is it? Permies.com, I think is Paul Wheaton's forum.

01:06:36.920 | And you go and he lives in Montana, right? So go visit him. Call him up, tell him what you're doing, go visit him.

01:06:42.920 | And so you have to begin with education and you have to find out what other people have done that has worked and what other people has done that hasn't worked.

01:06:52.920 | And so that's your market research project. And if you go and you read, you know, 100, 200 books written by people,

01:07:00.920 | you listen to a thousand or so hours of the podcasts that are produced, you listen to a thousand or so hours of their YouTube commentary, you read their articles, etc.

01:07:11.920 | And then if you go and visit about, say, you know, a dozen of these guys who are doing something like what you've done,

01:07:17.920 | that is where your most important information is going to come from. And that's step one.

01:07:24.920 | And so you'll invest the time into finding the information. And basically you have to create for yourself a master's degree program

01:07:36.920 | of people who are involved in ethical, diverse, sustainable farming. And it begins with using the information that has been published.

01:07:49.920 | And by published, I include print, but I also include more modern media, audio and video.

01:07:57.920 | And then you use the published information to make contacts with the people who are doing it.

01:08:04.920 | And you find out what they're doing that has gone well for you and you make contact with them.

01:08:10.920 | And those people, what you'll find is if you analyze the marketplace, there will be, say, 6 to 10, I'm making that number up, but you'll gain access.

01:08:21.920 | If you consume the work of a few dozen people, there's dozens of podcasts on this subject, there's online forums that you can access,

01:08:30.920 | and you consume the work, you'll find 5 or 10 people who are super connectors in that business.

01:08:37.920 | Justin Rhodes is a super connector in that business because of his media platform.

01:08:42.920 | And so if you meet Justin Rhodes and you describe your question or your problem or what you're facing to him,

01:08:49.920 | he'll know the specific person to send you to because he's a super connector.

01:08:53.920 | Joel Salatin, super connector. Paul Wheaton, super connector. Because they usually relate to something relating to media.

01:09:00.920 | So that's where you begin is by consuming their information.

01:09:03.920 | And then as you're consuming it, you have to solve the big problems of the business.

01:09:08.920 | And so I would say that when you described your question to me, I jotted down three things.

01:09:15.920 | So the question is, "How do I build a portfolio of ethical, diversible, sustainable farms?"

01:09:22.920 | So that's a very well-phrased question.

01:09:26.920 | The first thing about it is it's big.

01:09:29.920 | Saying, "How do I develop a portfolio?" puts your head in a very different space than, "How do I buy a farm?" or "How do I become a farmer?"

01:09:38.920 | So the first thing you're going to have to solve is you're going to have to solve access to capital.

01:09:43.920 | How do I build a portfolio of farms?

01:09:45.920 | And you're going to have to think about and make a list of all of the different ways that you personally can access capital.

01:09:52.920 | So can you do this on rented land or does it have to be owned land?

01:09:56.920 | There are many people who have pioneered farming operations and shown how you can actually do much better on rented land or on borrowed land than you can on owned land.

01:10:06.920 | But there's also unique things about the model that only works in some places.

01:10:12.920 | I had a client of mine.

01:10:14.920 | I spent a lot of time talking with him.

01:10:16.920 | He was a student, Greg Judy, I think is the name.

01:10:18.920 | He's a cattle farmer or a cattle grower out of Missouri, I think.

01:10:23.920 | And one of the things that's remarkable about him was he started when he was totally broke and bankrupt.

01:10:27.920 | He'd gotten divorced, lost all his money, didn't have much to start with.

01:10:31.920 | And due to circumstances, he was forced to start with basically nothing.

01:10:35.920 | And so he started doing everything on rented land.

01:10:38.920 | And he used his cattle operations and he sold the fact that his cattle were going to improve the quality of the land for the landowner as a way to get him access to grazing land on the cheap.

01:10:48.920 | And so he pioneered this whole model doing it all with rented, borrowed land and him making his money on managing the herd.

01:10:55.920 | And so you can find models that are inspiring of people who do everything on rented land.

01:11:01.920 | If you could build a model that doesn't require you to purchase land and you could figure out a way to do that within an Alberta context or whatever market you're going to live and work in,

01:11:11.920 | then that will mean that you need millions of dollars less to do what you want to do than otherwise.

01:11:19.920 | If you have to buy the land, then you have to figure out how am I going to gain access to this capital.

01:11:23.920 | And that's obviously a classically difficult thing.

01:11:26.920 | How do I come up with millions of dollars?

01:11:28.920 | In studying it and talking to people, you'll have to figure out how do I have access to capital.

01:11:33.920 | The second thing that you'll have to face is if you're going to have a portfolio of farms, you're not going to be able to do the work yourself.

01:11:41.920 | And so from day one, you're going to need to figure out a system that operates without you being involved in it.

01:11:49.920 | And so you're going to have to figure out who do we actually need to do the work?

01:11:54.920 | How many people do we need?

01:11:56.920 | Can we get rid of the people?

01:11:57.920 | Can we make the cows do the work?

01:11:59.920 | Or can we make the automated GPS-driven tractors do the work?

01:12:03.920 | I don't know, but you're going to have to have-- or do we need the people?

01:12:05.920 | And if we need the people, what kind of model would we need to offer to the people to be able to attract them?

01:12:10.920 | How would we manage them?

01:12:11.920 | How would we do it?

01:12:13.920 | Et cetera.

01:12:14.920 | But you're going to have to figure out the model for people.

01:12:16.920 | And that's, again, a famously difficult thing related to farming, but it's not insurmountable.

01:12:22.920 | I just think it's difficult.

01:12:24.920 | And you'll want to think about that.

01:12:25.920 | And then you'll want to think about what your food systems are in terms of what you're actually producing.

01:12:31.920 | Because I think in this space, especially with regard to the sustainable aspect of what you said and the diversity, right, diversity of crops, et cetera,

01:12:45.920 | if you're trying to build a diverse farming operation, you have to-- that diversity is often going to-- you're going to have to often sacrifice efficiency for diversity.

01:12:55.920 | It might be very cold where you are, but you'll want to-- years ago, I interviewed, actually, Ben Falk, who was a big inspiration for me, F-A-L-K.

01:13:04.920 | And I interviewed him on Radical Personal Finance.

01:13:07.920 | And one of the things that I loved about Ben and his work in the Northeast of the United States was that he modeled what I think of as appropriate planning.

01:13:16.920 | So he had his homestead that he worked on, but he had put into that-- he planted foods, crops, for climate zones, two climate zones higher and two climate zones lower in terms of temperature, or at least one.

01:13:33.920 | Two might be an exaggeration.

01:13:34.920 | At least one.

01:13:35.920 | The point being that we can't predict what the local weather patterns are going to be.

01:13:40.920 | And so we don't know whether the local weather is going to get warmer or whether it's going to get colder.

01:13:46.920 | And so he planted crops that would flourish if the weather got warmer or if the weather got colder.

01:13:51.920 | That way, if there was-- if the climate changed significantly, then his entire operation wouldn't fall apart.

01:13:59.920 | So I love that-- the planner in me loves that forethought, that thinking, that ability to adapt to it.

01:14:09.920 | And the idea behind that is, I think, what you're looking for.

01:14:18.920 | The problem is when you do that, you're going to be sacrificing efficiency.

01:14:22.920 | You're going to be dedicating land to crops that aren't going to produce unless the climate warms.

01:14:29.920 | And then they'll produce, and you're ahead of things, but they're not going to produce if they-- it's not going to work, and it's going to sacrifice efficiency.

01:14:38.920 | So you have to make sure that you're in a model where that's actually a good thing.

01:14:42.920 | Another example that I found with regard to diversity would say you've got to figure out what kind of diverse resources would work for generating revenue on an ongoing basis.

01:14:59.920 | Years ago-- and again, I'm many years out of date, so I don't know who the leader is in this space anymore.

01:15:04.920 | But years ago, I read Mark Shepard's book on forest permaculture or something like that.

01:15:13.920 | I can't remember the name of it now.

01:15:15.920 | But Mark Shepard was a guy who had a deep interest in sustainable agriculture, et cetera.

01:15:20.920 | And he looked at it, and he said, you know, all these guys piddling around in their garden with their little, you know, tenth of an acre food forest.

01:15:27.920 | Like, this is a joke.

01:15:28.920 | You can't feed the masses with a couple of fruit trees in your front yard that you call permaculture.

01:15:34.920 | And so he said, we have to have calorie crops, and we have to have an appropriate-- we have to be able to produce food that's mass calorie crop, and it has to be done on a broad scale.

01:15:45.920 | And so he bought a farm, and he focused on tree crops and, you know, oaks and walnuts and hickories and all the tree crops.

01:15:54.920 | But in order to make it work, because you're going to plant thousands and thousands of trees, you have to make sure that you have money.

01:16:01.920 | And so he row cropped the tree crops that are going to be the ultimate, like, perfectly sustainable system of forest agriculture producing calorie crops with the interplanting annuals that are going to be harvested that are going to give us money now that we can keep the farm alive.

01:16:20.920 | And so I think thinking about it in terms of a multiple year factor is going to be important as well.

01:16:29.920 | What's the system?

01:16:30.920 | And what's the overall system that you think fulfills this structure of ethical, diverse, sustainable, et cetera?

01:16:40.920 | So I've reached the end of my knowledge and of my examples.

01:16:43.920 | Again, my examples are old.

01:16:44.920 | I was really into this five to ten years ago.

01:16:46.920 | I haven't been into it at all for the last five to ten years.

01:16:49.920 | So this is just old memories of old names and books and things that I read when I was into it.

01:16:54.920 | But the most important thing of what I've said is what I said at first, that you have to become the expert on this and you have to find the people that have the answer to the question, which I don't have.

01:17:06.920 | But you have to find them and then pose your question to them.

01:17:09.920 | And in order for that to work, right, you'll build your vision with as much specificity and then you'll ask specific questions to those experts.

01:17:21.920 | This is my final comment that's hopefully helpful.

01:17:25.920 | The better the question, the better the answer.

01:17:27.920 | Your question is excellent.

01:17:29.920 | I love the way that you phrased it.

01:17:31.920 | You've clearly been thinking about it.

01:17:32.920 | I love the way you defined the terms to make sure we were on the same page.

01:17:35.920 | I hope we're on the same page and I didn't just bloviate for an extended period of time and not provide anything helpful.

01:17:42.920 | But I love the way that you phrased it.

01:17:44.920 | So as you progress forward, what you'll want to do is you'll want to ask increasingly clarifying specific questions to the experts.

01:17:55.920 | So you'll find an expert in the space and you'll say, "What are the models that you have heard of that have worked in the farming business that allowed people to farm but didn't require them to buy millions and millions of dollars worth of land?"

01:18:12.920 | And a good question like that will then take an expert in the field and they'll say, "Well, so-and-so did it this way, so-and-so did it that way, so-and-so did it this other way."

01:18:21.920 | And then you'll ask yourself which of those would work in your Alberta context, etc.

01:18:26.920 | So I don't have the answers, but that's how you're going to find them.

01:18:30.920 | And I've dropped as many names and as many resources of people that have inspired me that hopefully will give you a good start.

01:18:37.920 | Okay. Yeah, that's great.

01:18:42.920 | I think I could have asked the next question I had, maybe for another show, but I have done a fair bit of that.

01:18:57.920 | The YouTubing, I'll have to rearrange how I consume YouTube because it would often just be their daily vlog, and so that kind of became repetitive.

01:19:09.920 | I think building a playlist of talks with those people you mentioned would kind of help me learn.

01:19:18.920 | I went to a conference last year and was able to connect with a farmer and I worked with him for a couple months.

01:19:23.920 | That was good.

01:19:28.920 | The business side of it, I definitely have a lot to learn there.

01:19:33.920 | And yeah, just more serious research I can do.

01:19:38.920 | I think maybe next time I would ask a question that you maybe do have a bit more expertise in.

01:19:47.920 | My three other ways of framing the question was how should I invest in real estate, how do I become a farmer, and then how do I pursue flag theory?

01:19:57.920 | So perhaps a more specific clarifying question for you that I think you're a bit more of an expert in is how do I buy investment property in other countries?

01:20:15.920 | So that is an interesting question and I would love for you to call in next week and pitch one of those and we'll talk more about it.

01:20:21.920 | What I would say is from the farming perspective, if there's any possible way that you can design a system that is not dependent upon your acquiring significant amounts of real estate, I think that is clearly the winning move.

01:20:40.920 | And I've heard this, I don't know how to do that, but I think that the problem, we'll talk about it in another show, but I guess my challenge is buying land is the most significant impediment to your overall operation.

01:21:03.920 | So can you find and develop ways to accomplish your goal without buying land? And if you can do that, you will get to your goals much more quickly because anything you can do to dematerialize your plan is going to move you on the pathway faster.

01:21:25.920 | And this follows the overall trend that we see in the world. The owners of Airbnb have gotten much wealthier than any other real estate investor because they didn't have to buy a bunch of land in order for them to make their money.

01:21:45.920 | So there's this constant press towards digitalization and dematerialization. Now there is a limit, right? There has to be something involved with ultimately, right? People who buy at Airbnb are ultimately staying in houses, they're sleeping in physical beds.

01:22:03.920 | There's going to be a physical component to the production of your food. But moving away from the material world as much as possible removes one of the biggest constraints on human progress. And you see this in virtually every area of human endeavor.

01:22:23.920 | Anything you can do, and this is a constant throughout time. If you went back to when radio was invented, broadcast radio, broadcast radio transformed the world because it eliminated the need for someone to be physically present to hear a talk, hear a speech, hear a debate, etc.

01:22:43.920 | So that trend is of course continued with what you and I are doing right now using the internet, but it's the continuance of that overall trend. And it results in much faster progress. And so back to some of those guys, right?

01:22:57.920 | So Hamilton talks about this, that all of your infrastructure should be movable. That guys who buy a bunch of land and build big barns, they basically wind up not expanding as fast.

01:23:13.920 | So if all of your infrastructure can be loaded on a bunch of semis and transported from one place to another, now you have a really, really powerful system. So at its core, if you can minimize the need to own land, then that will allow you to accomplish your goals much more quickly versus having to buy all the land.

01:23:39.920 | Okay, yeah, that's interesting. I've kind of been looking at it from the opposite perspective. I guess the bare minimum of accomplishing my dream is buying a house, a rural house in a rural town.

01:23:57.920 | They're quite cheap in some places and just having a big garden with chickens and being able to eat the majority of my groceries from my yard. And then that just, yeah, more of a hobby farm.

01:24:17.920 | And my income would mostly be from investments in the stock market. And then, yeah, I've kind of wanted to aim with my, I didn't think I mentioned I had a paddle with someone following that Greg Judy model of not trying to own less so that their income and their wealth are not tied up in their own farm because that makes them vulnerable.

01:24:43.920 | So I feel like a wealthy and that my wealth kind of inspired by you, I want to ethically, I want to be a, how did you phrase it? A good steward, an ethical steward of my wealth. So that's where the purchase of the land and the cattle came from.

01:25:07.920 | And, yeah, they're kind of two different goals I have. One is to invest ethically and then one is to have the lifestyle I want. So, yeah, those are some interesting things to ponder about.

01:25:23.920 | How can I achieve this without land? Because I've more been thinking about ways where I could, like, there'd be smaller plots of land and in places where land is cheaper. But I had been looking at buying land as a good way to invest my wealth.

01:25:41.920 | Right. If you have the wealth, then buying land can be productive. But I don't think that it is, I don't think it usually should be the first spot. I think that wealthy people should buy land when they have more money and they can't find other ways to invest it.

01:26:01.920 | But most of the time, buying land is not going to be your best investment. I won't go on anymore with example after example, but if you look around the world, owning land is definitely a good idea. The question is when do you want to own the land?

01:26:19.920 | And if owning land is necessary, which in many models it may be, then you have to own the land. But if you can get by without owning the land, you can gain access to a very different perspective on the world.

01:26:39.920 | So I can't give you specifics here today of what you should or shouldn't do, of course, and it's going to depend on the specific circumstances, whether you own the land or whether you need to own the land or not. Again, Mark Shepard, my forest agriculture guy, you got to own the land. He had to buy a farm, bought a hundred acre farm, because you're going to put the trees on there.

01:27:01.920 | This is a 50-year plan. And so owning the land in that scenario was essential. But owning land is not essential to becoming a farmer. Or owning land is not essential to growing your groceries in your backyard. There are ways that you can get to that faster.

01:27:21.920 | I think the best advice I can give you is the clearer you are on what your actual goal is, the easier it will be for you to achieve it. If your actual goal is for you to live in the country and have a productive garden and a dozen cows in your backyard and some chickens, etc., and do the homesteading thing, probably the fastest way to achieve that is not in an agriculture business.

01:27:50.920 | But rather learning how to get employed online in some way, shape, or form, be it your own business or a job, which is easy to come by today, and you just simply work on your job online. That gives you the money, and then you have your homestead that you tend in your spare time.

01:28:09.920 | And that model is great. You could be there a year from now, no matter where you're from. And I think especially with inexpensive housing in rural areas, Starlink is revolutionizing the world right now because it has taken the single biggest impediment to people moving to those rural plots, which has been good, stable internet access that allows people to work online, and it's eliminated that.

01:28:34.920 | So now anybody who wants to, who wants to live in a rural area, can go to one of these rural areas, buy cheap land, cheap house, and get good, stable internet, which allows them to earn normal wages using some kind of online job, online employment.

01:28:54.920 | And that's the fastest path to that. So if that's your goal, then your path is very clear and direct. If your goal is to revolutionize food production on a global basis, well now it's not, the path to that is not nearly as clear and direct, but it is going to go in the direction of digitalization of some kind, because that's what ultimately is going to revolutionize, right?

01:29:17.920 | You look at Jeff Lawton, for example. Jeff Lawton is revolutionizing the world because he's taking his specific unique expertise, and he's not trying to do it all. He's using it with education. And that's the path, right? Preaching the gospel is the most effective way to transform the world, because you don't have to do it all.

01:29:39.920 | You'd have to create a self-replicating system where, and so this is the, I use the term preaching the gospel to invoke a religious reference. If I preach the gospel to someone and that person believes, and I say, "Now you need to go out and you need to tell someone else this until they believe," then pretty quickly we can fill the world with the message, right?

01:29:59.920 | You look at, in my context of course, look at Christianity, right? It took us, it took 2,000 years to go from zero Christians on the world to today, one in seven. And so that's, it's an amazingly fast transformation of the world. So the same thing happens with ideas. And so those ideas, if you want to, if you could find the ideas and spread them, then that can often accomplish the change that you want.

01:30:24.920 | Go back in the United States, right? Go back to 1950, and the highways in the United States were covered with litter. And yet somebody came up with an idea and said, "We're going to solve this litter problem. Let's get rid of the garbage and the trash." And today you drive across the highway and there's no litter. It's great. And so you can solve problems.

01:30:42.920 | Right now, within yours and my lifetime, in the last 10 years, we're making massive progress towards solving the Great Pacific Garbage Patch issues. We're making progress. And so as we continue this, the key is, if you can get clear on what the goal is that you want to solve, you'll see where the physical world is necessary for that goal. But any place that the physical world is necessary, it's going to slow you down.

01:31:09.920 | So if you can accomplish your goal with something that's digitized, dematerialized, you can often get there faster.

01:31:19.920 | Okay.

01:31:20.920 | All right.

01:31:21.920 | Yeah.

01:31:22.920 | Call in next week with one of those other questions and we'll chat about it then.

01:31:26.920 | Excellent.

01:31:27.920 | Wonderful.

01:31:28.920 | All right. Thanks for your time.

01:31:29.920 | My pleasure. And with that, we round out today's Q&A show. As always, we're here every week that I can arrange the appropriate technology to be in front of the microphone and I would love to have you with me next week. Go to patreon.com/radicalpersonalfinance. Sign up to support the show on Patreon. I simply use that to screen the callers so that I get a workable number of callers for a year, for an hour, two hours, something like that, rather than having simply too many.

01:31:53.920 | So I'd love to have you there. Go to patreon.com/radicalpersonalfinance. I hope this show has been useful to you. Have a wonderful weekend and I'll be back with you very soon.

01:32:01.920 | Oh, remember, final days of the October sale on the Bitcoin Privacy Course. Go to bitcoinprivacycourse.com. Final days of the October sale, bitcoinprivacycourse.com.

01:32:13.920 | [music]

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