2023-09-15_Friday

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00:00:28.300 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insights, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less.

00:00:40.300 | My name is Joshua Sheets. I am your host. Today is Friday, September 15, 2023.

00:00:45.300 | And on this Friday, as we do every Friday, in which I can arrange the relevant recording technology, we do live Q&A.

00:00:51.300 | It works just like call-in talk radio. Call in, ask about anything you want, raise any topic of conversation, raise any argument that you want, ask me any question that you want.

00:00:59.300 | You can join one of these Friday Q&A shows by becoming a patron of the show at patreon.com/radicalpersonalfinance.

00:01:05.300 | Patreon.com/radicalpersonalfinance. By the way, I encourage you that this is probably the cheapest and easiest way to talk to me.

00:01:10.300 | We don't talk about a ton of personal stuff, of course, but if you want to talk to me, this is one of your simplest and cheapest ways to do that.

00:01:16.300 | So, patreon.com/radicalpersonalfinance.

00:01:18.300 | We begin with Matt in Florida. Matt, welcome to the show. How can I serve you today?

00:01:22.300 | Thanks, Joshua. It's my first time calling in, but a long-time listener. I appreciate all the work that you do.

00:01:29.300 | My pleasure.

00:01:30.300 | My question is surrounding pursuing business versus being more involved in raising my young kids.

00:01:39.300 | We have a two-and-a-half-year-old that is currently in daycare three days a week and then a six-month-old that we're looking at childcare options and trying to hold off until she's at least a year old.

00:01:52.300 | I currently run my own business, been in it about two years and I'm almost part-time, maybe like 35 hours a week so I can spend time with my kids.

00:02:04.300 | We have my older daughter in daycare part-time and kind of at this impasse as we have a part-time nanny as well for the younger one and trying to figure out whether I should pursue growing my business more or I should take a step back and spend more time with my kids at this pivotal age.

00:02:29.300 | That's what I'm wrestling with. Not a specific question, but just figured I'd throw that out there for you.

00:02:37.300 | It's a super important one. One of the basic reasons we work generally for parents is to be able to provide for our children.

00:02:46.300 | The challenging interplay between should I work more in order to generate more money and invest that money into them or do I need time? How do I invest time versus money, etc.?

00:02:55.300 | How do I get more money? How do I get more money? And I think that's a really important question.

00:02:59.300 | She has a full-time job. She does not want to stay home with kids and her job is she is in office three days a week and then Monday and Friday she is at home and we can't… She is very involved when she is home with child care.

00:03:22.300 | Sure, of course. And how much money does she earn per year?

00:03:25.300 | Roughly $90,000.

00:03:29.300 | Your business is generating about how much profit per year?

00:03:32.300 | About $100,000.

00:03:34.300 | And what are your household expenses?

00:03:37.300 | Let's see. All it's between with daycare and everything probably in the $60,000 range.

00:03:53.300 | Okay. Well, the basic problem here is not a problem of kind of what would be best for the children. The basic problem that you have is going to be how do my wife and I work this out in our relationship?

00:04:10.300 | And then how long does this work? Let me ask just a couple more questions. Tell me a little bit about your vision. You've got very young children. Tell me a little bit about your vision for your 8-year-old, your 12-year-old, your 18-year-old. What's your vision as a father?

00:04:26.300 | I don't necessarily see myself as like a full-time homeschooler as they get older. But I mean like something we would like to do is maybe live abroad for a year and homeschool for like that single year and then have them either in a charter school or private school once they get to school age.

00:04:51.300 | Okay.

00:04:52.300 | And of course want to be very involved with all their extracurriculars and homeschooling them when they come home from school.

00:05:00.300 | Right, right. Your job or your business right now demands about 35 hours a week from you. Do those hours have to occur during a certain time or is there any flexibility there about when that occurs?

00:05:11.300 | It's 100% flexible.

00:05:14.300 | Okay. Well, I will try to give you my opinion as straightforwardly as possible. I'll identify what is my opinion versus what I think is research kind of borne out by the experience of other people.

00:05:29.300 | But it's going to come down to what can you do in your situation and what seems best to do given all the factors. And no other man is going to be able to tell you specifically what to do.

00:05:46.300 | It seems to me with every piece of research I've ever read, every article I've ever read, every bit of… I can't point to any evidence that would say that you get any better outcome with your children and their formation versus your children having a full-time parent involved in their lives or a full-time loved one, a full-time family member.

00:06:14.300 | One of the things that's super interesting to me is that this is just not talked about.

00:06:19.300 | This last week I was on Twitter and I got served up a Twitter ad. I forget what it was for, but it was something about teachers investing into how teachers in a classroom could solve behavioral issues in their children, etc.

00:06:38.300 | And I made a snarky comment before clicking on the ad. I said, "I'm going to go click on the ad, but what's not going to be in the article…" I'm going to click on that. I can't remember what the ad was for. It was an article.

00:06:47.300 | I said, "What's not going to be in the article is simply any discussion of parental involvement and emotional regulation that children have based upon being with their children."

00:06:57.300 | And so, of course, I went and I clicked on the article and lo and behold, there was not a bit of a mention of it.

00:07:01.300 | And so, these teachers are talking about nonviolent communication techniques and how we can teach all these psychological techniques and tendencies to children.

00:07:10.300 | And there's no discussion of the underlying cause, which is that very young children are routinely taken away from their parents and this causes psychological harm and damage in a child's life.

00:07:24.300 | I can't see any way around that. I'm not an expert in this. I have no psychology degree, but everything I've ever read indicates that the primary source, the primary font of emotional regulation, stability, etc. for a child is his parents, primarily his mother, especially in the early days.

00:07:48.300 | This is well proven at the infant level. Everything, you know, skin-to-skin contact. It's just demonstrated again and again that everything from the way that a baby regulates his breathing and the mother's and the baby's breathing in sync and the heartbeat in sync, the baby's emotional regulation with the proximity of his mother, etc.

00:08:07.300 | It's obvious at a fundamental biological level that the very best situation for a baby to be in is to be very, very close to his mother at all times.

00:08:23.300 | And, you know, dads are nice for babies. It's nice to be around. I enjoy my babies, especially when they get to about six months old.

00:08:29.300 | But at the end of the day, dads can't do much for babies. And what's funny is that we've joked about this so long that people don't even see it.

00:08:38.300 | You go back to, what was that movie? I think it was when I was in high school, Meet the Fuckers, where they, you know, the guy's got an artificial breast there that he puts the bottle underneath, etc.

00:08:47.300 | Like you could try to do things, but at the end of the day, we should acknowledge the fact that the fundamental thing that a child needs is his mother.

00:08:56.300 | Now, when does a child stop needing his mother? Well, there's a biological point at which a child doesn't need his mother.

00:09:02.300 | And again, there's ways to assess this. You know, if a mother dies during childbirth, thank God for amazing formula and ways that we can keep the child alive, etc.

00:09:11.300 | But at the end of the day, everything needs to be viewed as kind of a step off of the ideal, which is constant communication, constant presence.

00:09:21.300 | So how do you do that interplay between a mother and a father? Well, I think that if a child can't have his mother, then he definitely should have his father. Why?

00:09:33.300 | Well, there's no one else in the world other than the child's mother who's going to take a greater interest in the child, who's going to pay more attention to the child, who's going to care about the child more at a deeper level.

00:09:43.300 | And so anything that a father can do to be with his children and to encourage them and to be their presence is fundamental to the formation of the child.

00:09:53.300 | Everything I've ever learned about kind of early childhood formation indicates that most of who a child is gets built in the first years of a child's life.

00:10:05.300 | I can't quote all of the data off the top of my head as I would like to, but vocabulary acquisition is largely set in place by the time a child is a few years old.

00:10:17.300 | Values, the way that you interact with people, all of these things are set in place in a child's first few years.

00:10:25.300 | And everything about that is fundamental to who your children ultimately wind up being.

00:10:32.300 | If your children are touched a lot, have lots of physical comfort, lots of hugs, lots of snuggles, it fundamentally affects them.

00:10:41.300 | It affects their growth rates.

00:10:42.300 | You can go and you can find studies in orphanages where the children are just left in a crib and they're not touched and they're not snuggled and they're not played with.

00:10:49.300 | And it just stunts their growth.

00:10:51.300 | It stunts their intellectual capacity.

00:10:52.300 | It stunts their physical capacity.

00:10:53.300 | I've never seen a single bit of research that would argue with the common sense understanding we have that children need their parents, primarily their mother, in the beginning years.

00:11:07.300 | Now, it has been a fact and remains a fact throughout human history that we can't always have "perfection."

00:11:17.300 | We can't always have that.

00:11:19.300 | And so if we're going to come off of that ideal standard, for some reason, we have to then say, "What's the best that we can create in these circumstances?"

00:11:29.300 | So probably the perfect standard, if we were looking for perfection, would be that a child would be with his mother and his father in the home with his grandmother and his grandfather right there and surrounded by community 168 hours a week.

00:11:44.300 | That would probably be perfect.

00:11:45.300 | Well, of course, that's not going to happen.

00:11:46.300 | Even if mom is a full-time mom, mom needs a break.

00:11:49.300 | Mom needs to sleep, et cetera.

00:11:51.300 | So I take my babies for lots of time so that mom can have a break.

00:11:55.300 | Moms and dads need breaks.

00:11:57.300 | And so, you know, having a chance where there's other people involved.

00:12:00.300 | But we want to get as close to that as is possible given the various constraints that we face in our situation.

00:12:08.300 | Mom and dad can't be there all the time.

00:12:10.300 | Somebody has to earn income.

00:12:11.300 | Otherwise, we all starve and go hungry.

00:12:13.300 | There may be some variation of that.

00:12:16.300 | So if we're going to introduce variation to that, we want to do it in the smartest way possible.

00:12:21.300 | So, you know, moms and dads have jobs and have businesses.

00:12:25.300 | Well, we want to get as close to that loving environment as we can.

00:12:29.300 | So is there a grandparent who can come into the home and the child's in his own home where he's comfortable, where everything is there, and yet he's together with a grandparent?

00:12:38.300 | Why?

00:12:39.300 | Because a grandparent is going to care a lot more about the child on a deep fundamental level than as a paid caregiver.

00:12:45.300 | If we're going to institutionalize the child, we should be very careful about that and only do it when it's necessary and only to the highest level possible.

00:12:54.300 | The problem is that it's almost impossible to institutionalize a child and get anywhere near the high level of care and the high level of input that a child can receive at home simply due to the economics of institutionalization.

00:13:11.300 | Any parent who has two children knows that when you have two children, your attention and your ability to serve both children simultaneously is now distracted.

00:13:20.300 | You can't provide the same focused attention.

00:13:23.300 | And so there should be some kind of offsetting comparison.

00:13:27.300 | By this argument, by the way, we could point out, "Oh, maybe it wouldn't be smart for anyone to have more than one child."

00:13:32.300 | I don't agree with that because I think children gain more from peer relationships within the family.

00:13:37.300 | But at the end of the day, we should look at it through that lens.

00:13:41.300 | And so if we take a child and we go to the fanciest daycare in our town and you say, "Here's the best institutionalized daycare I can find.

00:13:50.300 | It's going to be for six hours a day and they have eight students and two teachers, et cetera."

00:13:55.300 | Well, who's teaching that teacher?

00:13:57.300 | Most of, you know, I have a master's degree.

00:14:00.300 | My wife has a bachelor's degree and she could easily do any degree that she wants to.

00:14:06.300 | We're both very intelligent, very thoughtful, very patient people, et cetera.

00:14:12.300 | I'm not going to go out in the world and be able to find a daycare that's with eight children and two people who are highly educated,

00:14:20.300 | have high standards for their personal behavior, et cetera, and provide the same level of care.

00:14:26.300 | It's much more likely that the people then caring for my child are going to be less educated, less intelligent, less under emotional control.

00:14:33.300 | They may or may not represent the basic values that I hold, that my wife holds.

00:14:38.300 | They're certainly not going to be able to take the same amount of time and invest into the children,

00:14:42.300 | and they're not going to be able to do it in the focused way that we might be able to do it.

00:14:47.300 | And so if we begin with the idea and the very clear understanding that to me anything except that standard is subpar,

00:14:56.300 | then we can come back and figure out, well, how do we deal with it?

00:14:59.300 | Because we all accept subpar results in our lives in some ways.

00:15:03.300 | So in your specific situation, a lot of what you choose to do is going to be based, number one,

00:15:10.300 | on how you and your wife can work together and what your vision is for your children and how important this is to you.

00:15:18.300 | There are plenty of perfectly reasonable, contented, well-adjusted adults who have been raised in institutionalized settings.

00:15:25.300 | And so I don't think that you're a failure as a man if this is what you have to do.

00:15:30.300 | Better for you to keep your marriage intact and find the best nanny for your home that you possibly can,

00:15:37.300 | and better for you to find the best daycare for your elder child that you possibly can and keep your marriage intact,

00:15:44.300 | than for you to kind of go to your wife and say, "Woman, stay at home with the children. I don't care how you feel. I don't care."

00:15:50.300 | That's not a recipe for success. That's not good, proper masculine leadership in your home.

00:15:55.300 | And so you have to make sure that you find something.

00:15:58.300 | But at the end of the day, it's going to probably come down to the level of your personal conviction and what you share.

00:16:05.300 | I have a very intense level of personal conviction about these things.

00:16:11.300 | And this goes on from not only early childhood, but it goes on from early childhood to education.

00:16:19.300 | I have had the conviction for decades.

00:16:21.300 | I mean, and I'm not exaggerating when I say decades.

00:16:23.300 | No, I mean, since I was a teenager, I had the conviction that I cared deeply about the education of my children.

00:16:30.300 | I cared deeply about their academics.

00:16:32.300 | I cared deeply about their social formation, their spiritual formation, et cetera.

00:16:36.300 | And I've had the conviction that if my wife was dead, if my wife divorced me, if my wife couldn't do it,

00:16:43.300 | if I had to have a job, I would move to a cheaper place.

00:16:46.300 | I'd live in a smaller apartment.

00:16:48.300 | I'd work in the nights and on the weekends.

00:16:50.300 | I'm going to be involved in some way, or I'm going to find care that's at a very high level for my child.

00:16:57.300 | So maybe I can have a grandparent come in and help.

00:17:00.300 | Maybe I can bring someone in, or I can find another family that shares our values.

00:17:05.300 | And instead of my child being institutionalized with eight other children all of the same age,

00:17:10.300 | maybe there's a family that I could just pay, you know, a wonderful homeschooling mother that I could pay

00:17:17.300 | for our two children in that kind of home environment because I respect it.

00:17:20.300 | I'm going to find the very best care and the very best solutions that I can.

00:17:24.300 | And again, this is common to all parents.

00:17:26.300 | This is why parents look around for what's the best school.

00:17:29.300 | And these words are subjective.

00:17:30.300 | We have to argue about what do they actually mean.

00:17:32.300 | What is the best school?

00:17:33.300 | What is the best education?

00:17:35.300 | But at its core, we're all looking for the best with these basic factors around.

00:17:42.300 | Now, the hard thing that you're asking me about is what is the influence at an early age versus at a later age?

00:17:49.300 | So, for example, I have strong convictions about schooling and education.

00:17:54.300 | I believe that we can do so much more for our children from an academic perspective, from a schooling perspective, etc.

00:18:02.300 | But I want to hasten to add that that's different at different ages.

00:18:08.300 | It's one thing at six years old.

00:18:10.300 | It's another thing at 16 years old.

00:18:12.300 | I think that many 16-year-olds can thrive in an institutionalized school setting.

00:18:18.300 | You can find a great school.

00:18:19.300 | There may be great government schools, great private schools.

00:18:22.300 | Many, many students in that space can thrive.

00:18:25.300 | Excuse me just one moment.

00:18:29.300 | So we don't have to argue that, you know, this is the same at all ages.

00:18:34.300 | But I think those early years are really, really core.

00:18:38.300 | So but what I'm pointing out is that what matters is going to be your level of conviction personally.

00:18:45.300 | So if I woke up in your shoes, because I have a high level of conviction about these topics, I would first try to see,

00:18:53.300 | is there a wonderful family member or a wonderful nanny or someone who could be involved in our household so that we could both maintain our income in some way?

00:19:05.300 | So let's say that if your wife is working from home on Monday and Friday and she's out of the house on Tuesday, Wednesday and Thursday,

00:19:12.300 | I would look and I would see, is there a wonderful nanny that we could find that could be very focused on the children and support them to the highest level,

00:19:21.300 | almost like a mother, but do it within the constraints of our own home and do it in such a way that we could provide for our income?

00:19:30.300 | And I think that's probably the best way to do it, because for you to walk away entirely from your income to be Mr. Dad,

00:19:37.300 | that's probably not a great move for the long term welfare of your family.

00:19:43.300 | It's also probably not a great move for your marriage.

00:19:47.300 | It's a very unusual marriage that I think that would continue in for that would continue to be healthy for a long time.

00:19:55.300 | It can happen. I've known a few families that seem to have navigated that and that seems to be really work well,

00:20:01.300 | but that's unusual in kind of male-female dynamics for that to be something that's going to continue.

00:20:08.300 | So I would look for that and then I would just say, how could I adjust and adapt my schedule around these particular needs that my family has?

00:20:19.300 | And if you have a flexible work environment, then I would change my hours so that when that nanny wasn't available,

00:20:28.300 | then I could work around my children in some way and still be very, very close to them.

00:20:34.300 | Now, that's for these years, kind of preschool, pre-schooling years.

00:20:38.300 | When you get to schooling, in order for you not to just simply find a very high-level, high-quality private school or something,

00:20:45.300 | which is where your income is going to be important, in order for you not to just find a very high-level private school,

00:20:50.300 | you would have to have some kind of vision or indication around education broadly.

00:20:55.300 | You'd have to develop your own commitment.

00:20:58.300 | My schooling of my children has come with a significant cost to my time, to my business, etc.

00:21:06.300 | I continue to do it because I care very deeply about it and I believe that it's the right decision for me.

00:21:11.300 | But I also recognize I have a very high level of conviction and it seems to be working well with my children.

00:21:17.300 | And so I think that's a decision that you could make kind of around the edges.

00:21:21.300 | I don't know – I don't think it would be impossible for you to maintain your business and do a great job with your children.

00:21:28.300 | I would just fight like crazy to make sure that on Tuesday, Wednesday, and Thursday,

00:21:33.300 | when my wife is at her job, that if there's a nanny in our home for say four to six hours or whatever it is that you work out,

00:21:43.300 | that I'm aware of what's going on while I'm doing my work in the other room and working it out flexibly.

00:21:49.300 | And then ideally, if she's willing to be – she can be there on Monday and Friday when her job is there,

00:21:55.300 | then – and again, if it's in our home, we can eliminate a lot of the separation issues,

00:21:59.300 | we can eliminate a lot of the dynamics of a bunch of children of the same age being pushed together

00:22:04.300 | and all of the bad things that come out of that.

00:22:06.300 | We can eliminate not knowing what's going on in terms of the low quality attention and/or outright abuse

00:22:13.300 | that can occur in an institutionalized setting, etc. And that seems probably the best way to balance it.

00:22:19.300 | But I don't know that that gives you any direction, but I think if I woke up in your shoes,

00:22:25.300 | I would keep a flexible business, I would try to increase my effectiveness at work.

00:22:30.300 | Remember that it's quality of time at work that counts for results and quantity of time at home that counts.

00:22:37.300 | And so there is no such thing as quality time when it comes to parenting and family relationships.

00:22:43.300 | That was a myth that was made up in the 1980s by guilty – parents with a guilty conscience that said,

00:22:50.300 | "Well, I may not have much time with my children, but I have quality time." It's nonsense.

00:22:54.300 | There's no such thing as quality time with children. Children just want your presence and your attention, etc.

00:23:00.300 | But with work, it's all about quality time. So it's quality of time at work that counts and quantity of time at home

00:23:07.300 | that makes the difference. And so if you can – with the benefits of having your own business,

00:23:11.300 | especially one that's profitable, if you can manipulate your hours a little bit,

00:23:15.300 | and maybe you go from 35 to 25 hours, but you keep 80% of your results, and that frees you up,

00:23:20.300 | when combined with bringing in somebody to the home or finding a family member,

00:23:25.300 | grandma and grandpa or a neighbor or somebody kind of close to you that's not in a strictly institutional setting,

00:23:31.300 | you make plenty of money, and I think that that would pay off well in terms of the investment over these years.

00:23:37.300 | And then as your children get into school-age years, then I think it's a lot simpler

00:23:40.300 | because there are some really wonderful schools that you could find that work much better than daycares.

00:23:47.300 | Daycares are an evil necessity of a broken world with broken relationships and families

00:23:55.300 | that can't provide what the family is designed to do. They are an evil necessity.

00:24:00.300 | Schools, I think, can be looked at differently. And so if you could find a very high quality –

00:24:05.300 | if you invested this way over the next three, four years, and your children reach that point

00:24:10.300 | at which they can go into school and they're emotionally stable, you've imparted that confidence to them

00:24:16.300 | that comes from a close, intimate relationship with mother and father,

00:24:20.300 | then the school, I think, can be your aid as long as it's carefully chosen by you,

00:24:25.300 | and then you would be free to go back to your business and kind of work more conventional hours, etc.

00:24:30.300 | So that would be my general approach.

00:24:35.300 | Yeah, that's very helpful.

00:24:38.300 | Yeah, I've noticed the negative effects of my toddler being in daycare, even though it's only three days a week,

00:24:44.300 | and that's really what's – you know, we've had a part-time nanny for the baby right now,

00:24:50.300 | and that's been the situation where I'm kind of listening to see how they're doing,

00:24:54.300 | and if I hear, "Well, too much fuss in this," I jump up and see what's up.

00:25:00.300 | And she does a really good job with them.

00:25:03.300 | And I think that's what I'm constantly playing out is do we pull our toddler out of that daycare

00:25:08.300 | and just have a nanny at home where I can still work a little bit, bring in some money,

00:25:14.300 | but also have plenty of time with my kids.

00:25:19.300 | So that was very helpful.

00:25:21.300 | Yeah. It's not an easy situation you're in, but just remember that you have a responsibility to keep your family intact,

00:25:29.300 | which means you are responsible to care for your wife and for her needs.

00:25:33.300 | There's an element of leadership that's involved in that.

00:25:35.300 | I think many mothers don't understand at a deep level the importance of their presence and their work in their children's lives.

00:25:46.300 | Not all mothers seem to be emotionally connected to their children, and so there are exceptions.

00:25:53.300 | But I think a lot of times one of the biggest challenges that mothers have in our intensely feminist culture

00:25:59.300 | is that they don't have any vision or experience of what it means to be a mother.

00:26:04.300 | And this to me is perfectly understandable.

00:26:07.300 | If a woman has spent 25 years of her life being fed the doctrine that her success in life is based upon how much money she makes,

00:26:17.300 | her career ambitions, her job, etc., then for her to just spin on a dime and all of a sudden say,

00:26:23.300 | "Well, now I'm going to be a mom and bake cookies," etc., that can feel like a very empty and hollow thing.

00:26:30.300 | And if she doesn't understand or have a vision for her children, that's the kind of thing that can take time.

00:26:36.300 | So I would say one is I would ask, "Have you really invested into your wife? Have you really raised her vision?

00:26:43.300 | Have you established a family vision of what your personal vision is as a father?"

00:26:48.300 | That's your job is to cast the vision and then to bring your wife into that.

00:26:52.300 | And that's not a fast or easy process sometimes.

00:26:57.300 | Obviously, that's quite personal and in a public format like this, I wouldn't go any farther than what I've said.

00:27:02.300 | But you need to be the one who casts the vision for your family of here's what it is.

00:27:08.300 | And you should see your work as a father and she should see her work as a mother as one of those foundational things that contributes massively to society.

00:27:18.300 | Children are not just accessories.

00:27:20.300 | They are the next generation and your children are the key to a better future.

00:27:27.300 | And as all of us individually invest deeply into our children and do that, then we can build in the most powerful way possible the kind of world that we want our great-great-great-grandchildren to be born into.

00:27:39.300 | It doesn't have to be 100%.

00:27:41.300 | Again, it's not just saying that anything less than 168 hours is the wrong decision.

00:27:45.300 | But in terms of the vision, you want to be one of those who's building a vision and not just kind of randomly going through life.

00:27:52.300 | And if you don't have that, then you spend some time getting it.

00:27:56.300 | And then when you're together with your children, when you're together with your wife, etc.

00:28:00.300 | But keep your family together.

00:28:03.300 | So that means you need to be very sensitive to her needs, etc.

00:28:06.300 | But as a father, it's your ultimate responsibility how your children turn out and you do not want to have any regrets, any "wished I could have done this."

00:28:16.300 | And you can always make more money.

00:28:18.300 | You will never always be able to go back and get this particular time back with your children.

00:28:23.300 | And I'm repeating for about the fifth time.

00:28:26.300 | It's not that the number of hours per week is the key metric.

00:28:33.300 | Fathers have always had to go away.

00:28:35.300 | Mothers have always had to go away, etc.

00:28:37.300 | It's not the number of hours that is the key metric.

00:28:40.300 | But you want to make sure that your child is in the kind of environment that is going to lead to success, lead to strength in the nature, in the person that that child is.

00:28:54.300 | Because otherwise, you may spend, as many parents do, the rest of your life working to try to undo something that if you could have just avoided it in the first place, it would have solved all kinds of things.

00:29:06.300 | And when you look at the long-lasting impact of traumatic experiences, etc., on the person that child becomes, for me, it has become an obsession to say, "I need to make certain that my job is to protect my children from these experiences so that they become the most robust people possible."

00:29:33.300 | And that very much means that I'm not going to take a two-year-old and drop him at a classroom and he's screaming on the other side of the door and his mother and I are walking away, as I saw a TikTok video that was shared over the last week or two.

00:29:49.300 | Those things that happen in those beginning years affect quite literally the rest of a child's life.

00:29:57.300 | And so they're very, very important.

00:29:59.300 | And so you can work with them, etc., but just recognize that we don't try to teach mental toughness to a three-year-old.

00:30:07.300 | Thirteen-year-old, absolutely.

00:30:09.300 | We teach mental toughness.

00:30:11.300 | We teach difficult situations.

00:30:12.300 | We want to establish grit in a thirteen-year-old.

00:30:14.300 | Three-year-old, not the time, not the place.

00:30:17.300 | So may God give you wisdom as you continue to seek how to do it.

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00:30:52.300 | We go to a thankful listener in the great state of Kansas.

00:30:55.300 | Welcome, thankful listener.

00:30:57.300 | Thank you very much, Joshua.

00:30:59.300 | So first and foremost, I'll thank you very much for your war communication this week.

00:31:05.300 | My pleasure.

00:31:06.300 | That's probably the clearest explanation that I've tried to share with others.

00:31:10.300 | So thank you for sharing that.

00:31:11.300 | Appreciate that very much.

00:31:12.300 | My pleasure.

00:31:13.300 | So general background, mid-50s, believe in the never going to retire concept, have a W2 job consistently, but also have started some business coaching.

00:31:26.300 | Like some outside feedback, really three business models, time and material, retainer, and then what I would call upside, which would be the ability to basically strike a deal on the growth of a business and your contribution to that.

00:31:44.300 | That's a business model that I'd love to grow in, but it takes a lot of trust and a lot of success maybe.

00:31:54.300 | First time caller for myself too, so maybe I'm a little jumbled in trying to present.

00:31:59.300 | But just retainer model, time material model, and then an upside model where you benefit as the business that you're coaching benefits.

00:32:08.300 | Any thoughts or experience that you could share with me?

00:32:11.300 | I would think it would depend a lot on the nature of the business and the nature of your contribution.

00:32:17.300 | Can you tell me any more about any prospective clients that you've been working with and the kind of consulting services so we could clarify or do you want me to lay out the framework?

00:32:28.300 | Mostly independent smaller businesses.

00:32:32.300 | Most of them, it's really been around business growth.

00:32:35.300 | Could be cost control, could be revenue growth, could be increasing pricing.

00:32:41.300 | Some of it's about establishing the confidence to move forward.

00:32:45.300 | Some growth, 50,000 to 100,000 to a million a year in revenue growth based on the feedback and coaching.

00:32:55.300 | It's a very general question, of course, and so I don't know that I could do much more than give a general answer.

00:33:04.300 | But I would say that it should be based upon the nature of the business, what you think you can contribute, and your needs for overall compensation, etc.

00:33:14.300 | You mentioned I have a W2 job and this is on the side at the moment, although your long-term ambition is to continue to contribute in this sense.

00:33:21.300 | So I would say the first thing is you can always work for free.

00:33:24.300 | Time and material would be a component of that, I guess.

00:33:27.300 | But if you just need experience, you need testimonials, and you need to prove to yourself to build your confidence, working for free, I think, is a great solution in many situations.

00:33:38.300 | Working for free is a great way to get a job.

00:33:40.300 | Working for free is a great way to get hired as a consultant.

00:33:43.300 | It can make a tremendous difference.

00:33:45.300 | And so if you think you have something cool to offer in an area of consulting or service or marketing implementation or design, etc., and if you're worried at all about the money, then just offer to work for free or just the cost of your materials or whatever it is that you do.

00:34:02.300 | And then collect some results and collect some testimonials.

00:34:06.300 | Because if you had a portfolio of, say, five clients that you have worked with, and each of those clients has had double-digit profit growth, and you can directly, in the last 12 months, and you can directly see how your activities and your consulting has led to that double-digit growth, you will feel much more confident then going forward and making an arrangement for an upside percent of the profits, a percent of the increase.

00:34:33.300 | Whereas if you haven't yet accumulated that portfolio of success, then you might feel ashamed even of a retainer model, because how much do I get involved?

00:34:45.300 | How much do I charge for things?

00:34:48.300 | I think of these options, the retainer model is going to be your hardest one to get started until you have clear results.

00:34:59.300 | There are plenty of business consultants who will come in and charge, I mean, $100,000 a day for a top-level marketing consultant is a very reasonable and frequently charged price.

00:35:10.300 | But those are people who can command a retainer or a direct charge price because of the publicity that they have and the way that they have worked to develop their presence.

00:35:26.300 | And so the retainer model becomes easy when you have built the results, but it's not so easy for someone to just pay you $5,000 for a day when you don't even have those results.

00:35:40.300 | One of the challenges of any kind of consulting model is making sure that your ideas get implemented.

00:35:47.300 | So, you have to weed out the implementers from the others in some way.

00:35:55.300 | So, if you're working on an upside model, you want to make sure that you are working with someone that you know is an implementer,

00:36:05.300 | or you want to be certain that you are given the authority to make sure that plans are followed through on.

00:36:11.300 | And not all business people will be amenable to that, and not all businesses will that really work in.

00:36:19.300 | But for those who do, it's your most direct path to big money because if you can come in and either have some kind of share in the profits,

00:36:28.300 | or have some kind of minority stake in the business, or some ownership arrangement, or some phantom stock arrangement perhaps,

00:36:35.300 | that allows you to generate and be paid purely based upon results, that's your biggest money opportunity and your biggest long-term impact.

00:36:45.300 | But you're going to have to have a connection where you make sure that that gets implemented.

00:36:53.300 | I guess what occurs to me in my final comments is that you should generally work your way up the value chain.

00:37:02.300 | And your service, your best customers will often come from people who have paid you a little bit of money.

00:37:15.300 | So, probably the most interesting model would be the DIY, DWI, and DFY model.

00:37:28.300 | I think this is a useful mental framework.

00:37:30.300 | So, DIY is do-it-yourself.

00:37:32.300 | So, as a consultant, you have a certain view of the world, a certain amount of intellectual property, etc.

00:37:39.300 | And so, you should craft some kind of do-it-yourself package, some way that you put together your consulting services,

00:37:46.300 | and you present that to somebody, and you offer it to them and say, "Here, you can buy my information package.

00:37:54.300 | You can buy my seminar. You can buy my hour of consulting or my 10 hours of consulting, and you can implement it.

00:38:01.300 | You can do it yourself."

00:38:02.300 | And that will usually be your lowest price point because somebody can access your work,

00:38:08.300 | and they can then take it and implement it themselves.

00:38:12.300 | Your DWI model would be your done-with-you model.

00:38:15.300 | So, this is a model where maybe the retainer model would fit this.

00:38:20.300 | And so, you would craft your solution in an area where you are doing it with them.

00:38:27.300 | You're there for the implementation, but you're not doing it for them.

00:38:30.300 | And then the DFY model, the done-for-you model, is your most expensive package in terms of the amount of money that you can make,

00:38:38.300 | but it's the one where you're going to just come in and do it for them.

00:38:41.300 | And that do-it-for-your model would kind of align with the upside arrangement in some way.

00:38:47.300 | What I think is interesting is you will have different numbers of clients who will purchase at different levels.

00:38:52.300 | So, ordinarily, your DIY information package would be consumed by perhaps 100 people.

00:38:58.300 | Your DWI model would be consumed by your perhaps 20 percent, 20 out of 100.

00:39:06.300 | And then your done-for-you model would be consumed by, say, 4 out of the 100, right?

00:39:11.300 | And I'm just doing an 80/20 analysis for lack of any more clear data.

00:39:15.300 | So, 4 out of 100 will buy your done-for-you model.

00:39:18.300 | And that would be ideal because you can't work with more than 4 customers.

00:39:22.300 | But I would bet you that in the fullness of time, you would make 80 percent of your income and profits from those done-for-you

00:39:29.300 | because those are your biggest opportunities.

00:39:31.300 | But I don't know that you would get to those without working your way up the value chain

00:39:35.300 | because you need the 100 people to find out about your ideas in order to attract the 20 people who want to buy your mid-range,

00:39:42.300 | done-with-you product coaching package in order for you to attract those business owners that are such believers in your value

00:39:51.300 | that they will come along and purchase your done-for-you services where they allow you to purchase part of the company.

00:39:59.300 | They set up a phantom stock agreement or a profit-sharing agreement, et cetera, for percentage of the increase.

00:40:03.300 | And they pay you out over an extended period of time.

00:40:06.300 | So, I would say that's probably the most useful way to think about it.

00:40:09.300 | I've always loved that DIY, DWI, and DFY framework as a way to conceptualize your services to serve different people effectively.

00:40:21.300 | Fantastic. Thank you. That's a different perspective that I had never considered. So, thank you.

00:40:26.300 | Good. My pleasure.

00:40:27.300 | And just remember that publicity goes a long way. A guy who's a consultant who all of his work and all of his publicity has come kind of just of his own work

00:40:40.300 | is going to have a much harder time than a guy who gets a lot of word-of-mouth results, who can point to a good portfolio, et cetera.

00:40:46.300 | And so, again, don't be scared to work for free if that's something that is part of your long-term plan.

00:40:52.300 | We go to Arkansas. Welcome to the show. How can I serve you today?

00:40:57.300 | Hi. This is Bob in Arkansas. And I had a question about starting a lifestyle business.

00:41:04.300 | I've been a W2 employee all my adult life, but I was an entrepreneur as a child.

00:41:08.300 | And I'm kind of interested in entrepreneurship again, particularly from a lifestyle business perspective.

00:41:14.300 | But I sort of struggle with kind of the non-substantive parts of getting started.

00:41:21.300 | So, I'm familiar with the various tax structures, but I'm not sure which one would be best for my particular situation.

00:41:29.300 | I was just curious if you have references for someone who's thinking about starting a business for the non-substantive parts of the business, kind of like all the other pieces.

00:41:39.300 | When you say non-substantive, I don't understand your use of that word. You mentioned taxes or structure. What else do you mean by that?

00:41:46.300 | So, I don't know. It might be easier for me to just tell you kind of what the business is.

00:41:52.300 | So, the idea for the business is to buy property in Arkansas that has the potential to be great wetland habitat in the winter for ducks.

00:42:06.300 | And then to take that property and take it from a place that has the potential to that to a place that is that.

00:42:15.300 | Ducks and geese love it, flock into it, and then sell that property to people who are interested in duck hunting and then repeat the process if I'm still in a physical position to do it.

00:42:32.300 | So, like trying to do like-kind exchanges, obviously, to minimize taxes on that part.

00:42:38.300 | But obviously, I would be spending a lot of money on the front end and getting minimal returns for a number of years as trees grow, as I make other improvements to the property.

00:42:49.300 | And so, is it better for me to try to set up a structure where I could take those losses potentially against other income I have, or is that even possible?

00:42:59.300 | And then to be able to do the like-kind exchange down the road for, again, more properties that have potential versus one that now is beyond potential to actually is the real thing.

00:43:12.300 | Right. Well, if you're buying the property, ordinarily, you're not going to have any losses.

00:43:18.300 | And this is not going to matter from a corporate structure perspective.

00:43:23.300 | So, first, when you're dealing with land, you have no depreciation. Land is not depreciated. Only improvements to land gets depreciated.

00:43:31.300 | And in addition, your losses would be, in that sense, capital losses rather than active or passive income losses.

00:43:40.300 | And capital losses are deductible, but only when they're actually realized.

00:43:46.300 | So, that's very different than going and starting a business where you're going to have business startup costs, etc., and you may lose $30,000 in the first year that you would offset other income against other earned income because it's an active business where corporate structure makes sense.

00:44:02.300 | And what you're describing, the corporate structure isn't going to matter because you're just going to have gains.

00:44:08.300 | And as you said, ideally, you're going to have gains. And those gains could be sheltered primarily through a like-kind exchange.

00:44:17.300 | And regardless, those gains are probably going to be a long-term capital gain, which, again, be taxed lightly.

00:44:22.300 | And your pathway to do that tax-efficiently is going to be a long-term capital gain.

00:44:27.300 | So, I don't see any – from what you're describing to me, I don't see any kind of big winner or any brilliant idea from a corporate structure perspective.

00:44:40.300 | I would imagine – I mean, obviously, you're going to be buying some trees and whatnot, but I think you'd be fine just to do it in your own name and save the simplicity of any corporate formalities of what you're describing.

00:44:56.300 | What I would say is, though, that you shouldn't ignore – kind of almost in a way analogous to what I was just talking about.

00:45:07.300 | You shouldn't ignore those consulting services that you might have.

00:45:11.300 | And you possibly shouldn't ignore having your own active business that's associated with this.

00:45:18.300 | So, let's say that you have the expertise required to take a worn-out piece of land, terraform it in some way, bring more water onto the property, plant the right type of habitat and cover for the ducks, and make it much more attractive.

00:45:33.300 | Well, that's something that can be sold at multiple levels.

00:45:37.300 | So, that can be sold at an information package level.

00:45:40.300 | That can be sold at a consultant level.

00:45:43.300 | That can be sold at a contractor level.

00:45:45.300 | And that can be sold at the level of the land.

00:45:48.300 | And so, I don't know what your personal capacity would be to do all those things and keep your job, but it would seem to me that if that's a real interest and desire, I wouldn't automatically go for the long/slow plan before I would implement some of these other things.

00:46:05.300 | And I don't know anything about your competition.

00:46:07.300 | I don't even know anything about consultants who are out there doing that.

00:46:10.300 | But I would think that that would be something that you could press forward on all levels and that you could probably do it beyond Arkansas specifically.

00:46:21.300 | And you would in so doing, meaning that in creating consulting work, in creating a YouTube channel, explaining how to do it, and becoming a designer and doing designs for people, I think that that's something that, again, probably has broad application beyond just doing it on land that you own.

00:46:41.300 | And you would make income from that if there's a market for those services from before your own land becomes saleable.

00:46:51.300 | Have you thought about those other aspects of the business?

00:46:54.300 | I have.

00:46:55.300 | It seems like the rub would be that I've never done this before.

00:46:59.300 | So, I believe I have a lot of expertise, but I don't think a person who looked at me would say, "I'm just going to trust your expertise."

00:47:08.300 | So, part of it is demonstrating it can be done with the first property.

00:47:12.300 | And then after proving it can be done, I think then there'd be the opportunity to springboard the way you say and all those other ways.

00:47:20.300 | I mean, I guess there's a potential along the way as I'm doing it to have a YouTube channel and to monetize the process even before I've proven it.

00:47:27.300 | But in terms of consulting and that sort of thing, I think I would have to prove that I was worthy of it before someone would hire me.

00:47:36.300 | Well, sure. But I mean, having inside knowledge where you save somebody a lot of time, I mean, is there an element of proof to it? Sure.

00:47:43.300 | Is there right now, are you aware of, do you follow, do you learn from other people who are experts in the subject of creating wetlands for duck habitat?

00:47:53.300 | Are there people out there doing that?

00:47:56.300 | I've started exploring that a little bit and I haven't found a lot.

00:48:00.300 | There are people doing that, but they don't, they more talk about their motivations.

00:48:06.300 | They kind of come at it from other angles.

00:48:10.300 | And they seem to just be doing it for their properties that they do guided hunts on.

00:48:17.300 | Right, right.

00:48:18.300 | Well, so I'm making this up on the spot with zero market research, drawing on a couple of pieces of information that I know from my background of things that I've had an interest in.

00:48:29.300 | First of all, there are lots of people who have gone out and done what you are doing.

00:48:35.300 | I know, if no one else has done it, I know Phil Robertson has done it because I read his book or something years ago and he talked about his land.

00:48:43.300 | I can't remember. I watched a video of his land where he had taken his kind of worn out piece of property in Louisiana and he turned the whole thing into duck heaven.

00:48:53.300 | So I'm sure that at least there's some people out there that have done it.

00:48:56.300 | And if this is something that guys like the Robertsons care about, then that's a good place to start.

00:49:03.300 | Meaning, how did they do it, profile the results, etc.

00:49:07.300 | Now, obviously, they have all the experience with a film cruise and everything, but something specialized like this, showing people how to take their worn out hunting property or worn out rural land and revitalize it, I think it's useful.

00:49:22.300 | You can always start with this stuff by just simply being an observer, a journalist.

00:49:29.300 | I can't relate all the models, but there's people out there that teach info product development.

00:49:34.300 | And what you often see is that the very first stage is to be a journalist, is not someone who is a self-professed expert, but someone who is a student on the subject.

00:49:43.300 | And in today's world, you can chronicle your learning in any number of formats.

00:49:50.300 | So running a duck central Twitter account might be ideal.

00:49:56.300 | Video is certainly where the power is today, is creating high quality video and sharing that with others.

00:50:03.300 | And so if you became, even at a rudimentary level, a video journalist or an actual journalist, taking pictures, etc., and then going out and observing the successful transformations that have been done, this is really, really compelling.

00:50:19.300 | The other, I was going to mention, kind of the model that I've most appreciated over the years, the person I've learned the most from is Jeff Lawton, the Australian permaculture designer.

00:50:31.300 | Jeff spelled G-E-O-F-F in the British style.

00:50:34.300 | And the very first video that I ever saw of Jeff Lawton was the video that he did of, it was called Greening the Desert.

00:50:44.300 | And basically, he was involved with this permaculture design project in the Death, not the Death Valley, but near the Dead Sea.

00:50:54.300 | And it was just a horrific piece of property.

00:50:56.300 | But he came in and he terraformed it.

00:50:59.300 | He didn't own it, but he came in and he installed some swales, built some permaculture design, installed some cover crops, some nitrogen fixing trees, etc., and just completely transformed the environment.

00:51:11.300 | And then he came back some years later and filmed, basically, they showed the process of what he was doing and then he showed what had been done.

00:51:19.300 | And this was a decade or more ago that I first saw that.

00:51:23.300 | And yet, that video demonstrated to me that I'm now persuaded that we can green any desert in the world that we want to.

00:51:31.300 | Quite literally, any desert in the world could be greened.

00:51:33.300 | Now, some take more resources than others.

00:51:35.300 | We should start with the ones that are easiest to green, but we can do it.

00:51:38.300 | And so, something like that where you come and you document a piece of property and you work with the landowner and you provide it, that can be something that you do.

00:51:48.300 | Other aspects of the developmental process would be just simply you're sharing your learnings.

00:51:53.300 | And so, being a journalist and saying, "Let me read about ducks. What are the things that ducks do? Let me read about wetland restoration."

00:51:59.300 | There's all kinds of stuff that this is a professional classification of wetland restoration.

00:52:03.300 | So, let me study the projects and try to find what's applicable to ducks.

00:52:07.300 | When they restore the wet Everglades, what did they do there that worked?

00:52:10.300 | What did they do that didn't work?

00:52:11.300 | How could this be applied to Arkansas and our nature?

00:52:13.300 | And if you become a student of it and you just share your lessons along the way, that starts to create a brand for you.

00:52:20.300 | And what you most need in anything like that is some kind of brand, some way that people who are interested in the subject can find out about your stuff.

00:52:28.300 | Jeff Lawton, for all I know, could have been the world's greatest permaculture designer, but I found out about him because of his YouTube video.

00:52:35.300 | And I wouldn't have found out about him if he had never made that YouTube video.

00:52:40.300 | Now, he went on over the years and he built a massive movement based upon his skills.

00:52:47.300 | So, he has his farm where he has lived.

00:52:49.300 | He has his projects that he manages.

00:52:51.300 | He has his classes that he teaches for other people who want to learn how to do it.

00:52:56.300 | He has his consulting services where he goes and provides consulting.

00:52:59.300 | He doesn't limit himself to just having a farm and that's all and just doing it on his own land.

00:53:04.300 | But all of it works together synergistically because the publicity that he's able to build with his media projects adds value to the land.

00:53:13.300 | If he went and sold – and to be clear, I have not followed Jeff in five years.

00:53:16.300 | This was a past interest of mine.

00:53:18.300 | I've moved on to other interests.

00:53:19.300 | I'm not really involved in that space.

00:53:21.300 | But maybe for all I know, he's sold his farm in Australia.

00:53:26.300 | But if he hasn't, and I doubt he has, but the day he goes to sell his farm in Australia, it will command double the value of what it would have commanded because of what is there

00:53:39.300 | and because he has shown over a long period of time what is actually there and what's actually been done on the property.

00:53:46.300 | One of the things that is so powerful that people can do today is they can increase the value of their things based upon documenting them along the way.

00:53:54.300 | You see this with people who have a sailing channel and then they sell their sailboat or a motorhome channel and they sell their motorhome or a bus conversion thing and then they sell their bus.

00:54:02.300 | The documentation of this stuff builds buyer's confidence and people are willing to pay more money to buy their motorhome or buy their thing.

00:54:11.300 | It creates a quick marketing funnel where they can get rid of it quickly.

00:54:15.300 | I see no reason why that principle wouldn't be easily applied to what you're describing there, that you go ahead and you get a piece of land and you document everything you're doing.

00:54:22.300 | It creates good content.

00:54:23.300 | It starts to build the possibility of you yourself being hired as a consultant or providing some insight on something.

00:54:31.300 | But at the end of the day, 10 years from now, it will provide a much bigger market for your land and it will sell faster and at a higher price if that whole process of transformation has been documented along the way.

00:54:43.300 | I just think that you should be considering what you're capable of or what you're interested in those areas in addition to just doing it with the land because if you just do it with the land, you're going to be waiting so long to create profit while walking away from the money flowing through the gutters next to you.

00:55:03.300 | If money is flowing through the gutters, reach down and pick it up.

00:55:05.300 | I think that if you have this interest, there's probably other people that have this interest and you might as well share your learning in this space.

00:55:12.300 | And the last comment on it would be I would guess that this would probably be in line even just with your non-financial goals.

00:55:21.300 | I would imagine that you would love to see the entire south turned in, restored to a wetland habitat and the population of ducks doubled.

00:55:29.300 | And so if you care about that longer-term conservationist ideal in addition to your own personal profit motives, that will guide you and you'll get farther down the path towards fulfilling that ideal if you incorporate other things rather than just flipping land using this method.

00:55:49.300 | That all makes sense.

00:55:53.300 | So thank you for that.

00:55:54.300 | Just one other real basic question kind of back to the beginning again.

00:55:58.300 | You didn't seem to think it would cost a lot for the initial improvements.

00:56:03.300 | My take is a little different.

00:56:05.300 | I think it would cost a fair amount for the earthworks, the trees, the planting, all that kind of stuff, the water portion.

00:56:14.300 | And so I'm just kind of trying to think through the tax aspects of having income that's being taxed and then having this business that's going to be money down the drain for a while and whether there's a way to offset those two depending on either no corporate structure or corporate structure.

00:56:35.300 | So I don't know the answer to that.

00:56:37.300 | You are right that there would be expenses.

00:56:39.300 | And I do not remember how land improvement costs are treated in the tax code.

00:56:53.300 | I would need to check some reference books on that.

00:56:55.300 | And I'm sorry I don't have them handy.

00:56:58.300 | So just point me towards them.

00:56:59.300 | I'll be checking.

00:57:00.300 | What I would search if I weren't on a live show here with you, what I would search would be how do I deduct capital improvements to land or investments in the land.

00:57:13.300 | That would be something like the term that you would need to find out because this is the same basic problem that any developer has.

00:57:20.300 | A developer goes and buys a piece of land and he needs to install sewer systems and roads and all of that.

00:57:27.300 | I don't know how that stuff is treated.

00:57:29.300 | All I remember in that space of tax planning is simply that land itself is not depreciable but certainly you would be able to deduct your expenses.

00:57:42.300 | But I can't make it come together in my head of how that works.

00:57:47.300 | So forgive me but it's not working in my head.

00:57:51.300 | I don't have the information.

00:57:52.300 | So I don't remember how those expenses would be amortized.

00:57:58.300 | But I would start with a web search for how are capital land improvements deducted because it would be dealing with something like what any property developer faces.

00:58:13.300 | And I can't remember the answer to that.

00:58:17.300 | But that's how I would search for it.

00:58:19.300 | Okay.

00:58:20.300 | Thank you.

00:58:21.300 | Very good.

00:58:22.300 | My pleasure.

00:58:23.300 | And I hope you do it.

00:58:24.300 | I would love to see it.

00:58:25.300 | I care a lot about conservation so I hope that you are successful in your efforts.

00:58:29.300 | I believe we can green every desert in the world.

00:58:31.300 | I believe we can reclaim almost any piece of land and I would love to see it done widely and us to really enhance the own individual properties that we have.

00:58:40.300 | I would love to see us enhance their attractiveness and really be flourishing.

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00:59:13.300 | Offer ends soon. See dealer for details.

00:59:16.300 | Go to the state of California. Welcome to the show. How can I serve you today?

00:59:20.300 | Hi Joshua. This is Thomas.

00:59:24.300 | About a month ago you mentioned that there's a new potential use for old 529 accounts.

00:59:32.300 | I had some questions surrounding that.

00:59:34.300 | Okay.

00:59:35.300 | So question one. I was just wondering.

00:59:40.300 | I know that the money given to a 529 account in the name of another beneficiary that constitutes a complete gift.

00:59:48.300 | But I was just wondering, does changing that beneficiary constitute another form of gift?

00:59:55.300 | Before I answer that, do you have or is the situation that you're evolving in,

01:00:03.300 | is your estate or the estate of the person that you're asking about,

01:00:06.300 | is it so significant that we need to deal with estate tax planning in any way?

01:00:14.300 | The person that originally made the gift?

01:00:17.300 | No. So the reason I ask is because the whole concept of a completed gift really only matters

01:00:22.300 | if somebody is trying to move money outside of his or her estate.

01:00:25.300 | That's the only real context in which that makes any difference.

01:00:28.300 | So let's not get bogged down in a bunch of details if it doesn't matter.

01:00:35.300 | So does it matter in the situation that you're thinking of yourself?

01:00:38.300 | Yeah.

01:00:40.300 | Okay. So you're dealing with a wealthy person or a wealthy individual.

01:00:44.300 | And that wealthy individual wants to make sure that his taxable estate is managed.

01:00:52.300 | Let's assume he's trying to reduce the size of his taxable estate.

01:00:54.300 | So he's going to make a large transfer to a 529.

01:00:57.300 | He's going to be making that transfer.

01:00:59.300 | That transfer for the purpose of gift purposes and estate tax purposes,

01:01:03.300 | that transfer is a completed gift. It is now done.

01:01:07.300 | However, as I explained in the show, what is unique about a 529 is that unlike a transfer to various trusts,

01:01:14.300 | the individual who is making the transfer actually still has legal control over the money.

01:01:20.300 | So from an estate tax perspective, it's a completed gift.

01:01:23.300 | It's gone. It's out of the estate.

01:01:24.300 | That person can still change beneficiaries, et cetera.

01:01:27.300 | So now, I think the question you asked me was can they change beneficiaries.

01:01:31.300 | Is that the question you said?

01:01:34.300 | I know that they can change beneficiaries.

01:01:37.300 | It's just a question of whether that change in beneficiaries constitutes another gift for either them or someone else.

01:01:45.300 | I would say no.

01:01:47.300 | It's not a gift.

01:01:48.300 | It's a transfer.

01:01:49.300 | So there's no gift tax.

01:01:51.300 | The transfer is a gift.

01:01:52.300 | It's a transfer of the money that's made at the time that the 529 account is created and funded.

01:01:58.300 | Okay, and to be clear, there's no gift tax implications here from the perspective of current tax.

01:02:06.300 | So we're not getting into gift taxing rules.

01:02:09.300 | We're just saying that the money is no longer – if the money is in the 529 account and it's in the name of grandchild A

01:02:16.300 | or grandchild B, it's a gift to the individual.

01:02:19.300 | Okay.

01:02:21.300 | Yeah, that is what I was curious of.

01:02:25.300 | In this case, it's basically there's someone that made a gift for college education.

01:02:33.300 | Most of it was used.

01:02:34.300 | Some of it was not.

01:02:35.300 | And when the next generation comes, if that account is kept alive, right, it needs to be 15 years that it was open for

01:02:45.300 | seeded, right, changing that over to another beneficiary and being able to basically start a Roth IRA for a newborn,

01:02:54.300 | that was, as you mentioned, this is something we need to look into.

01:02:59.300 | Yeah, it really is a great option for that.

01:03:02.300 | Right.

01:03:04.300 | Follow-up question, Scott.

01:03:06.300 | Is there any sort of limit or restriction on how often that beneficiary can change?

01:03:17.300 | I don't –

01:03:18.300 | So, for example, if there were multiple great-grandchildren, would they be able to make multiple changes and rollovers from that account in the same year?

01:03:33.300 | I don't remember the answer to that question, and I don't think it matters, meaning that I think – I can't see why it would matter.

01:03:45.300 | In any kind of normal situation, I can't see why the answer to that question would matter.

01:03:50.300 | If somebody has a 529 account and they have a grandchild, they would go ahead and establish the grandchild as a beneficiary.

01:03:57.300 | And then if three years later the grandchild is doing drugs and they don't want – they realize this grandchild is killing himself, he's never going to college,

01:04:05.300 | they would transfer – they would make the grandchild be the beneficiary.

01:04:08.300 | But I can't – I don't understand why it wouldn't matter not making multiple beneficiary changes per year.

01:04:15.300 | So is there some specific application or is this just a kind of a knowledge question you're trying to figure out?

01:04:24.300 | It's a little bit of both. For the example, there's multiple grandchildren that they want to basically move, be able to contribute money to,

01:04:35.300 | have them start a Roth IRA account, then knowing that each child can only have a certain amount contributed per year,

01:04:46.300 | I thought it would change to multiple beneficiaries in the same year, then it could more quickly disseminate the fund from the left over 529.

01:04:58.300 | I'm not aware of any rule or restriction that would say how often you can change a beneficiary of a 529 plan.

01:05:08.300 | As always, I don't have a perfect memory of this stuff and the IRS code is enormous,

01:05:15.300 | but I'm not aware of any legal restriction on how often you can change a beneficiary.

01:05:21.300 | So I would not be concerned about that.

01:05:24.300 | The restriction is on who can be the beneficiary based upon those IRS rules and as we've discussed, those are quite broad.

01:05:31.300 | The other question would just be fundamentally, does my plan provider or my custodian have some kind of restriction that I need to be aware of that I can't break?

01:05:43.300 | Then that would be something that I would think about.

01:05:47.300 | But beyond that, I'm not aware of any restriction and so I would say just change as many times as you need to accomplish your goals.

01:05:54.300 | Right. Okay.

01:05:56.300 | I'm sorry. I'm not trying to be vague or evasive. It's just that that's a very detailed question.

01:06:01.300 | And so since I don't yet understand why it matters, I would need to lay out the family tree, the chart, and then understand why that question would matter to give any more insight.

01:06:13.300 | So I'm not aware of any rule of law that would say you can't change it as many times as you want.

01:06:17.300 | And so I would just say, yeah, you can change as many times as you want.

01:06:20.300 | So go on that basis.

01:06:23.300 | Right. Yeah. And it was more so just something where I hadn't read or seen anything about a limit on how many times that beneficiary could change.

01:06:34.300 | And because of this apparent change, there's some extra benefits to obtaining this if you can change it multiple times, right?

01:06:44.300 | Right.

01:06:45.300 | Within a certain year.

01:06:46.300 | Right.

01:06:47.300 | Okay. Yeah. That's all.

01:06:48.300 | Yeah. I don't feel like I've done a very good job, but I've done my best. Anything else?

01:06:52.300 | No. That was the main question.

01:06:57.300 | So I guess if I were just to add a summary statement to it for the benefit of listeners, that I think these new rules that I talked about of the conversion of 529 accounts to Roth IRAs make 529 accounts even more attractive than they were.

01:07:12.300 | 529 accounts have always been attractive.

01:07:15.300 | Not perfect, but always been attractive, especially for wealthy people.

01:07:20.300 | And these rules make them even more attractive.

01:07:25.300 | And because 529 accounts are now so flexible, you can basically build them as a dynasty 529 account for the whole family.

01:07:34.300 | And they're infinitely cheaper to manage and more flexible, as long as we're okay with the rules that are on them, than going and setting up some kind of family trust that we then have to retain professional management for and trustees, etc.

01:07:49.300 | 529 accounts are simple, and I think they're a really wonderful tool for wealthy families who want to make sure that there's a giant amount of money that's available for school, for private school, for K-12, for homeschooling, for college, with huge amounts of money.

01:08:03.300 | And then this ability then to go ahead and move the funds to a Roth IRA makes them even more attractive.

01:08:10.300 | So I think there's a great rule, and we'll serve a lot of wealthy people.

01:08:15.300 | We go to the state of Colorado. Sorry. We were in California.

01:08:18.300 | Colorado, how can I serve you today? Welcome to the show.

01:08:22.300 | Hey, Joshua. Just a quick question.

01:08:25.300 | I'm curious what you're using for water filtration these days, if you guys are still using a Berkey or something else.

01:08:34.300 | So at the moment, I don't have a water filtration system at the moment.

01:08:40.300 | So that's not a good thing.

01:08:42.300 | I have a purification system in an emergency, but at the moment, we're just drinking straight tap water.

01:08:47.300 | And I'm not going to do that myself because just this week, I have been working on getting the components together to install a system in my house because I don't want to just be drinking straight tap water, etc.

01:09:00.300 | And so I think that the Berkey continues to be just a simple and straightforward solution that can solve it for a lot of people.

01:09:07.300 | It's not perfect.

01:09:08.300 | It doesn't give the very highest level of filtration.

01:09:12.300 | I want to educate myself on this topic and build kind of an even higher end system for myself.

01:09:18.300 | So call me back in a month and see what I've learned would be better than my answering that today.

01:09:25.300 | That's why I laugh is because you've caught me in an in-between area where I literally have a project going to try to fix this and make sure that we have better water quality and that there's no chance in our daily drinking water of some kind of toxin being in it.

01:09:41.300 | But it's not yet built.

01:09:42.300 | All right.

01:09:44.300 | Fair enough.

01:09:45.300 | Can I ask another one?

01:09:46.300 | Go for it.

01:09:47.300 | I have an uncle who would like to give a monetary gift to my children up to the annual tax exclusion.

01:09:58.300 | Do I need to set up a separate checking account or anything for them or can you give that gift to me and then I just broadly spend it on them?

01:10:08.300 | Yeah.

01:10:11.300 | Option B. There's no need to do anything else.

01:10:13.300 | And the reason is simply that there is no – when you're dealing with an amount of a gift underneath the amount of the annual exclusion amount, the dollar limits just are what they are.

01:10:28.300 | And so he's going to give it to you.

01:10:30.300 | Your children are legal minors.

01:10:31.300 | They can't do anything with the money.

01:10:33.300 | And so it's just a gift to your children that you are the custodian of.

01:10:36.300 | And if his purpose in doing that is that you spend it on them and invest it into them in some way that you deem fit, then it's just done.

01:10:44.300 | Put it in a checking account.

01:10:45.300 | For your own peace of mind and for your own accounting, meaning for your own ability to give an account for your own actions, I think it's a smart idea, of course, for you to put it in a separate account.

01:10:55.300 | I find that no matter my best intentions, if I don't do that, then it becomes hard sometimes to go back years later.

01:11:01.300 | And I think you would want to honor him also by just giving him a report of what you're doing with it.

01:11:06.300 | So if he's given a $15,000 gift to each child and you say, "Look, we went ahead and spent $2,000 this year on summer camps.

01:11:13.300 | I spent $1,000 to take them on this adventure.

01:11:16.300 | I spent an extra $2,000 on music lessons, et cetera, or $6,000 this year on music lessons," just want to say thank you and here are some of the results of it.

01:11:25.300 | If you want more gifts to come, always go back to the gift giver and give them a good report.

01:11:29.300 | That's your job as a steward is to give a good report.

01:11:31.300 | But legally speaking, I wouldn't complicate anything.

01:11:34.300 | I'd just stick it in a separate checking account that you then use for your children.

01:11:39.300 | >> So that checking account that I have, if I'm the only person on it and he gives, say, $30,000 for two children, that's not a problem even though I'm the only recipient?

01:11:49.300 | >> No, no.

01:11:50.300 | So remember this.

01:11:53.300 | Those of us who want to be law followers, et cetera, always think about these legal questions.

01:11:58.300 | But these laws and rules are broken all the time.

01:12:01.300 | There is -- I want to say millions.

01:12:04.300 | I don't want to exaggerate.

01:12:06.300 | But there's hundreds of thousands of families all around the world that give their kids a $70,000 car, all across the United States, that give their kids a $70,000 car.

01:12:15.300 | Guess what?

01:12:16.300 | They're supposed to file a gift tax return on the gift of a $70,000 car to their child.

01:12:21.300 | Do they do that?

01:12:22.300 | Absolutely not.

01:12:23.300 | So this stuff is -- this area of gifts is the loosest, least enforced, least scrutinized area ever.

01:12:32.300 | I mean, give someone a Rolex and it's not a huge gift, but technically there's supposed to be a whole chain of paperwork.

01:12:38.300 | So don't get too wrapped up in this.

01:12:40.300 | This is -- this world is -- this is probably the most -- one of the more abused forms of law.

01:12:47.300 | And so it's not a big deal in any way.

01:12:51.300 | Where would it be -- ever be a big deal?

01:12:54.300 | It would only ever be a big deal if your uncle is under full audit by the IRS and they've got an entire team on him and they think that he's trying to escape with his other billions of dollars and this little $15,000 or $30,000 gift is a big deal.

01:13:15.300 | Or if he's -- you're accused of money laundering and he's financing terrorism or something like that.

01:13:20.300 | But it's just not a big deal.

01:13:22.300 | Like it doesn't really matter all that much.

01:13:24.300 | And so to protect yourself, have your uncle write a little letter and say, you know, I'm giving a gift to child A and -- $15,000 gift to child A, giving a $15,000 gift to child B, have him write a check.

01:13:37.300 | Then you go and the check is to you for the benefit of the child because, of course, you're your children's custodian -- the name -- the word has left me -- guardian.

01:13:49.300 | You're your child's guardian.

01:13:51.300 | And you just go and open a separate checking account in your name, pop it in there, and then spend the money out of it.

01:13:56.300 | But this is not an area where it really matters.

01:14:00.300 | This is different -- just to be clear, like that's different than let's say your uncle has tens of millions of dollars and he's spent tens of thousands of dollars to establish all kinds of fancy trusts and whatnot.

01:14:13.300 | And he's going to gift those trusts $15,000 every single year for a period of time in order to reduce his estate by millions of dollars.

01:14:21.300 | Well, there, yes, of course, the paperwork matters.

01:14:23.300 | But a one-time gift to children is not a big deal in any way.

01:14:27.300 | Okay.

01:14:29.300 | So follow the rules of the ethical, but don't worry about it.

01:14:31.300 | Yeah, exactly.

01:14:32.300 | It's just -- I mean, these are -- again, I'm speaking off the cuff here, but these are some of the most abused rules that I know of in terms of actual impact.

01:14:48.300 | The letter of the law is this.

01:14:51.300 | Of course, parents can take care of their minor children, but the letter of the law states that any time an individual gives another individual a monetary gift or a gift that has a monetary value of more than the annual exclusion amount, there should be gift tax forms filed for that.

01:15:10.300 | And those gift taxes will then be applied up to the gift tax exclusion amount based upon current law.

01:15:16.300 | The only exceptions to that for an individual to give another individual money or a gift that is not treated in that way is payments made directly to an educational institution or directly to a medical establishment.

01:15:32.300 | So if your child goes to a $100,000 university and your child's uncle wants to write a check of $100,000 directly to the school, that is exempt from annual exclusion amounts, gift tax reporting amounts, et cetera.

01:15:45.300 | But everything else, all other financial interactions beyond that are subject to these rules.

01:15:52.300 | And you know as well as I do that nobody who gives their kid a car is going and doing that.

01:15:57.300 | So it's just not a big deal.

01:16:00.300 | It's one of those things where you should have records just in case, where did the money come from, et cetera.

01:16:05.300 | But you're more likely to have an issue with your bank freezing your account because all of a sudden you got $15,000 and your banker is worried about money laundering than you are with anything from a gift tax perspective.

01:16:16.300 | Okay. Thank you very much.

01:16:19.300 | My pleasure.

01:16:20.300 | All right.

01:16:21.300 | That concludes our callers.

01:16:23.300 | I'll make one more comment.

01:16:25.300 | There's a question that came in that says this, "Joshua, when would you give up on a country?

01:16:35.300 | I'm from Brazil and I feel it is getting worse every year.

01:16:38.300 | I'm afraid that Brazil may become a Venezuela and my real estate become worthless."

01:16:42.300 | And I mentioned this question because it's just kind of an interesting – it's an interesting question that affects a lot of us.

01:16:52.300 | I don't think you should ever give up on a country.

01:16:55.300 | I don't think that's the right mindset.

01:16:57.300 | I think you should actively see if it's better somewhere else and if it's better somewhere else, go there.

01:17:04.300 | I don't think that countries collapse or decline so quickly that they can be predicted in any kind of short-term scenario.

01:17:11.300 | And so the idea of Brazil collapsing or Brazil following the path of Venezuela, could they?

01:17:18.300 | Anything is possible.

01:17:20.300 | Is it probable?

01:17:21.300 | I would say probably not.

01:17:23.300 | Brazil has major economic challenges, kind of a crazy political system, but I think there's enough lessons that I wouldn't have any problem of considering to be in Brazil.

01:17:34.300 | At the end of the day, the only way that you can answer kind of hypothetical questions is if you have something better lined up.

01:17:42.300 | So the best example for this from just a thinking perspective would be, all right, is it better for me to go from Brazil to Venezuela?

01:17:50.300 | Probably not.

01:17:51.300 | Brazil is better than Venezuela.

01:17:53.300 | But should I go from Brazil to Argentina?

01:17:56.300 | Well, do you have a job in Argentina?

01:17:58.300 | Do you have friends in Argentina?

01:18:00.300 | Do you speak Spanish, et cetera?

01:18:02.300 | I would argue that Argentina has a much better long-term future geopolitically because of their infrastructure and land, et cetera, that they probably should do – they should do better than Brazil in the long term.

01:18:15.300 | But Argentina figures out its own ways of screwing things up, and they have for decades.

01:18:19.300 | And so you can't – these kind of hypothetical questions are not useful, generally speaking, because it's just a way of thinking about it, meaning it's not helpful to just imagine, well, should I leave my country?

01:18:34.300 | Go out, engage in the exercise of leaving your country, and then when you have an actual opportunity in hand, compare that to where you are right now and then decide whether that's something that you should or should not do.

01:18:48.300 | But if you come to me and say, "Joshua, should I leave my country?"

01:18:50.300 | If you got no job, you got no options, no other country, the answer is no, you shouldn't leave your country.

01:18:55.300 | You should stay where you are and focus on getting an alternative.

01:18:59.300 | But if you get a job and you are offered a job for $250,000 a year working in Dubai, go to Dubai.

01:19:05.300 | You don't have to decide if Dubai is a better future than Brazil.

01:19:09.300 | Just go based upon what you actually have and what actually improves your circumstances.

01:19:14.300 | So I hope that's clear, trying to answer that quickly.

01:19:16.300 | Thank you for listening to today's Friday Q&A show.

01:19:18.300 | I remind you of a couple things as we go, that if you'd like to gain access to one of these shows, go to patreon.com/radicalpersonalfinance, patreon.com/radicalpersonalfinance.

01:19:26.300 | Sign up to support the show there, and you'll gain access to one of these live Friday Q&A shows.

01:19:30.300 | Also, remember that in January of 2024, if you'd like to come and hang out with me in Panama, I will be hanging out in Panama doing a Panama investment tour and kind of a broad-scale internationalization discussion with my friends Mikkel Thorup and Gabe.

01:19:45.300 | If you would like to do that, join us at expatmoney.com/radical.

01:19:53.300 | Link in the show notes for that event, expatmoney.com/radical.

01:19:57.300 | Be back with you very soon.

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01:20:12.300 | And with a money-back quality guarantee, every dish is sure to be a favorite.

01:20:17.300 | [music]

01:20:20.300 | Whether you shop delivery, pickup, or in-store, Kroger Brand has all your favorite things.

01:20:27.300 | Ralph's. Fresh for everyone.

01:20:29.300 | everyone.

01:20:29.860 | (closing music)

2023-09-15_Friday_QA