2024-07-19_Friday

00:00:00.000 | At Cox Mobile, we know you're smart.

00:00:02.160 | You brush your teeth in the shower to save time,

00:00:05.160 | make coffee ice cubes for your cold brew,

00:00:07.360 | and wear goggles to cut onions.

00:00:09.520 | You also added Cox Mobile.

00:00:11.040 | So smart.

00:00:11.800 | Now you're running on the network

00:00:13.240 | with unbeatable 5G reliability and saving

00:00:16.000 | on your Cox internet.

00:00:17.040 | It's ingenious, just like you.

00:00:18.720 | Aw, thanks.

00:00:19.520 | Cox Mobile, the smart way to mobile.

00:00:21.480 | Cox Postpaid internet required.

00:00:22.800 | Cox Mobile runs on the network with unbeatable 5G

00:00:24.680 | reliability as measured by Ookla LLC in the US 2H 2023.

00:00:27.640 | When other restrictions apply, learn more at cox.com/mobile.

00:00:31.080 | Today on Radical Personal Finance, live Q&A.

00:00:49.240 | Welcome to Radical Personal Finance,

00:00:50.440 | a show dedicated to providing you with knowledge, skills,

00:00:52.480 | insight, and encouragement you need to live a rich and

00:00:54.760 | meaningful life now, while building a plan for financial

00:00:57.280 | freedom in 10 years or less.

00:00:58.840 | My name is Joshua Sheets.

00:00:59.880 | Today is Friday, July 19, 2024.

00:01:03.560 | And on this Friday, as we do on any Friday,

00:01:05.480 | when the computers are working and the internet is working

00:01:07.640 | and all of the microphones are hooked up and all of that,

00:01:09.960 | we do live Q&A.

00:01:11.600 | You set the show for today.

00:01:12.880 | If you're new to here Radical Personal Finance, welcome.

00:01:23.240 | I'm glad that you are here.

00:01:24.440 | And I'm glad that you can join me on a live Q&A show.

00:01:26.600 | These are open line shows.

00:01:28.160 | You get to call in, talk about anything that you want.

00:01:29.960 | You set the agenda.

00:01:30.760 | You ask any question.

00:01:31.680 | You raise any topic.

00:01:33.160 | We can talk about your personal situation,

00:01:34.880 | discuss some question or challenge that you're thinking.

00:01:37.320 | We can talk about some philosophical consideration.

00:01:40.000 | That's all up to you.

00:01:40.680 | If you'd like to join me for one of these Friday Q&A shows,

00:01:42.800 | you can do that by going to patreon.com/radicalpersonalfinance.

00:01:46.480 | Patreon.com/radicalpersonalfinance.

00:01:49.520 | Sign up to support the show on Patreon,

00:01:51.840 | and that will gain access for you to one of these Friday Q&A

00:01:55.920 | shows.

00:01:56.680 | I do that to allow me to just simply meter

00:01:58.880 | the flow of callers a little bit,

00:02:00.360 | keep it to a manageable four, five, six, something

00:02:02.640 | like that, which really works out for a one to three hour

00:02:05.040 | show.

00:02:05.960 | And so you can, again, go to patreon.com/radicalpersonalfinance

00:02:09.240 | if you would like to join me on a future show.

00:02:11.680 | Just in beginning, as I record this on Friday, July 19,

00:02:15.200 | I just want to point out, obviously,

00:02:16.920 | hopefully you are aware of the large IT outage

00:02:20.720 | all around the world.

00:02:21.920 | Quite interesting to see.

00:02:22.920 | Huge disruptions in the travel industry,

00:02:24.960 | significant disruptions in all kinds of businesses.

00:02:28.080 | Many just normal businesses finding themselves

00:02:30.960 | unable to do work, unable to process admissions,

00:02:34.000 | credit card machines down, all kinds

00:02:35.600 | of issues around the world.

00:02:37.040 | The extent of the situation is not particularly yet clear.

00:02:41.720 | There seems to be some improvements going on,

00:02:43.740 | which is great.

00:02:44.400 | And so hopefully it'll just turn out to be a minor blip,

00:02:47.200 | and we'll be able to get back to kind of life as normal.

00:02:50.800 | However, one of my core philosophies

00:02:53.520 | that I urge you to consider accepting for yourself

00:02:55.760 | is simply, when something bad goes wrong,

00:02:58.520 | assume that it happened to you.

00:02:59.800 | And what would that look like?

00:03:02.400 | So if something bad happens to someone else,

00:03:04.800 | and you're not affected, then just ask yourself, all right,

00:03:07.600 | well, if that happened to me, how would I be affected?

00:03:10.440 | And by just systematically doing that over time

00:03:12.480 | and then putting in plans to mitigate

00:03:14.360 | whatever the long-term consequences of a bad situation

00:03:16.880 | would be, you'll build yourself into a much more prepared

00:03:19.720 | individual, much more resilient, and you'll

00:03:22.480 | be prepared to go through difficult times

00:03:25.200 | with less disruption to your life, to your business,

00:03:28.400 | and also to be able to help people who are not

00:03:30.520 | as fortunate.

00:03:31.600 | So as you look at--

00:03:33.000 | I'm sure that some of you are affected by the current events.

00:03:35.880 | As you look at computers not working,

00:03:37.880 | just ask yourself, if my computer didn't work,

00:03:39.920 | do I have backup plans?

00:03:41.460 | If everything was corrupted forever,

00:03:42.960 | if my computer shut off today and I couldn't get anything,

00:03:46.480 | is there a backup plan?

00:03:47.600 | Do I have the ability to go and get my data?

00:03:50.120 | Do I have my data backed up?

00:03:51.280 | It's a good thing to ask.

00:03:53.160 | Think about how you would collect payment

00:03:55.080 | if you're running a business.

00:03:56.280 | Do we have an alternate form of payment?

00:03:58.480 | Think about what would happen if the electricity went out.

00:04:02.160 | I saw one quote from some professed expert

00:04:05.680 | who said that this is much more like what we were expecting on--

00:04:10.920 | what was it called?

00:04:11.840 | Y2K.

00:04:13.400 | Much more what we were expecting from Y2K

00:04:15.320 | than Y2K itself turned out to be.

00:04:17.280 | So what would you do if the power went off for two weeks?

00:04:20.200 | There's been hurricanes recently where

00:04:21.760 | people are going through a week without power.

00:04:23.680 | What would you do if you just had no electricity

00:04:25.760 | for a couple of weeks?

00:04:26.680 | Do you have some plans in place for that?

00:04:28.920 | So just use these examples and try to learn from them

00:04:31.640 | in order to position yourself for future success.

00:04:34.680 | With that, we go to the phones.

00:04:35.760 | Seth in Nebraska, welcome to the show.

00:04:37.400 | How can I serve you today, sir?

00:04:39.440 | Hey, Joshua.

00:04:39.980 | Can you hear me?

00:04:40.640 | Sounds good, yes.

00:04:42.320 | Great.

00:04:42.820 | So yeah, so I've been listening to you since 2016.

00:04:46.280 | That was my summer after my sophomore year of college.

00:04:49.160 | I was 20 at the time.

00:04:50.240 | I'm 28 now.

00:04:51.560 | So my wife and I got married that summer

00:04:54.080 | with an unplanned daughter on the way.

00:04:56.200 | She had already had a two-year-old daughter

00:04:57.840 | at the time as well.

00:04:58.880 | So I kind of went from a carefree college guy

00:05:00.960 | to a father of two in about a nine-month span there.

00:05:04.760 | So that's when I started listening to you.

00:05:06.520 | I knew my finances were pretty much cooked.

00:05:09.140 | And little did I know, they were more cooked than I even

00:05:11.400 | had thought at the time.

00:05:12.400 | So I started listening to you.

00:05:15.200 | I was making $11 an hour working on a golf course doing

00:05:18.800 | the grounds maintenance, living off

00:05:20.520 | of student loans, Pell Grants, WIC, food stamps,

00:05:24.320 | all that stuff, and then eventually credit card debt.

00:05:28.040 | So graduated early, became a teacher.

00:05:31.760 | And with your encouragement, talking about increasing

00:05:33.960 | income, I ended up doing lawns on the side

00:05:38.280 | since I had learned how to take care of stuff

00:05:40.280 | like that with the golf courses.

00:05:42.220 | I just went out student teaching,

00:05:43.720 | and then I was teaching with my actual job.

00:05:45.800 | I was able to grow the lawn company large enough

00:05:48.200 | that I was able to quit teaching after my second year.

00:05:50.640 | That was the COVID year.

00:05:52.800 | So it was actually kind of nice to get out of there

00:05:55.040 | because I had a lot of teacher friends saying the year

00:05:57.840 | after that with all the masking was pretty much awful.

00:06:00.120 | So that was great.

00:06:01.680 | So the thing is, I'm making a pretty solid income right now.

00:06:06.160 | It's nothing great.

00:06:07.360 | Nebraska's cost of living is really low,

00:06:10.800 | but that helps a lot.

00:06:12.440 | So I'm making about--

00:06:13.680 | so I'm able to pay myself a net salary of about $80,000.

00:06:17.600 | The business itself, we should gross minimum $400,000

00:06:23.280 | this year, but it could be a lot larger than that.

00:06:28.040 | But I'll discuss here in a second kind of the issues.

00:06:32.080 | I'm wondering what I need to do to grow my business in a way

00:06:38.000 | that eventually I can sell it.

00:06:39.760 | I'm not really interested in selling it right now.

00:06:42.320 | There's no rush.

00:06:43.600 | I do understand that this is essentially talking

00:06:47.400 | about building a bridge to wealth.

00:06:50.000 | And I understand that this is my bridge,

00:06:52.280 | and I shouldn't tear it down or give up

00:06:54.360 | on it when I'm five feet away from the other shoreline trying

00:06:58.520 | to start a new one.

00:06:59.920 | But I'm also understanding that it

00:07:01.600 | is a narrow bridge that takes a lot of maintenance.

00:07:05.560 | I understand that--

00:07:07.640 | well, I'm realizing more and more now

00:07:09.400 | that the low barrier of entry for lawn care that

00:07:13.520 | allowed me to get into it when I was on food stamps

00:07:15.760 | and things like that at the time are also

00:07:17.840 | the reasons why it's not really terribly profitable,

00:07:21.040 | as well as the employees in this line of work

00:07:25.000 | are oftentimes not great.

00:07:28.400 | They are seasonal.

00:07:29.680 | They seem to just--

00:07:32.000 | you get a good one here and there, and then they--

00:07:37.120 | I've got a couple of good ones that I've gotten to stick

00:07:39.120 | around, but it's just really tough as far as consistency

00:07:42.480 | goes.

00:07:43.720 | And I just find myself basically working my butt off

00:07:47.760 | to keep the business going.

00:07:49.040 | And I basically just come in and save the day.

00:07:51.280 | And I realize, wow, I'm doing 20 or 30 hours a week

00:07:55.240 | of $25 manual labor when I could be using

00:07:58.240 | my time in a lot better ways.

00:08:01.080 | And so because of all that, I've been transitioning a little bit

00:08:04.520 | more into fertilization pest control

00:08:06.760 | because it does have higher profit margins.

00:08:09.480 | People are paying you because they don't

00:08:11.960 | know how to do the applications.

00:08:14.160 | They're afraid to mess up with the chemicals

00:08:16.120 | versus with lawn mowing.

00:08:17.400 | It's like, oh, I just don't want to do it,

00:08:19.160 | so I'm going to pay some guy to come out and cut the grass.

00:08:21.640 | So that is something that's positive.

00:08:23.880 | We doubled our fertilization customers this year

00:08:25.840 | while keeping our mowing customers the same.

00:08:28.040 | So as far as just right now with the business,

00:08:31.720 | I plan on continuing that fertilization route

00:08:35.400 | so that the business is just a little bit easier on me.

00:08:39.000 | It's really hard to keep a strict schedule where

00:08:41.080 | you have your Monday yards, Tuesday yards, Wednesday

00:08:43.280 | yards, and they're the same every single week when

00:08:45.480 | you have seasonal employees that are not consistent.

00:08:49.640 | Whereas fertilization, the schedule's a little bit easier.

00:08:53.280 | And again, the lower labor percent

00:09:01.360 | just makes it a lot easier to pay guys more.

00:09:06.640 | They have to do certification tests and things like that.

00:09:10.520 | So that's what I'm doing right now

00:09:11.940 | to keep the business going in a way that's making

00:09:14.480 | it a little bit easier on myself.

00:09:16.080 | But I don't see myself necessarily

00:09:18.960 | continuing with this business in 10 years.

00:09:21.680 | So I want to be building other companies,

00:09:26.400 | investing in real estate, doing things like that.

00:09:28.600 | I love inventing things.

00:09:30.880 | I want to have several sources of income

00:09:32.760 | other than just this one company.

00:09:34.680 | That basically makes it where every day I'm

00:09:39.080 | worried about the weather.

00:09:40.480 | All year long, I'm checking the weather app.

00:09:43.000 | I mean, I don't know.

00:09:43.880 | I probably have a record for how often I check the weather app.

00:09:47.560 | And then as well as, I can't plan a trip

00:09:51.520 | because the second I do, two days before the trip,

00:09:54.360 | somebody quits.

00:09:55.220 | Or during the trip, two guys don't show up,

00:09:57.760 | and I'm sitting there on this trip.

00:09:59.240 | All I just wanted to do is just take a Thursday and Friday off.

00:10:02.120 | And then now all of a sudden, it's Saturday,

00:10:03.440 | and half the Friday yards aren't even done yet.

00:10:05.160 | And I only have one guy out there working.

00:10:06.600 | And it's like I'm sitting there stressed out about it.

00:10:09.100 | So the questions I really have--

00:10:12.400 | I know it's kind of a long intro--

00:10:13.840 | but how do I structure the business from here on out

00:10:16.760 | so that when I want to sell it, I can?

00:10:19.440 | When do I know the right time to sell it in my life?

00:10:22.840 | Again, I'd like to have other businesses in play that are

00:10:28.600 | also bringing me income.

00:10:29.680 | I'm not going to just throw this away

00:10:31.560 | before I'm set up with other things.

00:10:33.600 | And then other certain milestones

00:10:35.520 | that maybe I need in the business that

00:10:38.080 | make it more desirable for people to purchase it--

00:10:40.880 | I don't know if that's the amount of income,

00:10:42.760 | the amount of time the owner, myself,

00:10:45.840 | am putting in on a weekly basis.

00:10:47.440 | Should I be keeping track of that, my hours?

00:10:50.440 | And then also a solid place of residence.

00:10:53.260 | Right now, we are working out of a rented shop.

00:10:56.040 | It's actually basically a storage facility.

00:10:57.840 | There's a couple other businesses

00:10:58.800 | that work out of there.

00:10:59.760 | But would it be better for me to purchase a place?

00:11:02.280 | Does that look better?

00:11:03.200 | Or is that even worse?

00:11:04.200 | Because when somebody buys it, are they

00:11:06.160 | going to move everything to their place anyway?

00:11:08.280 | Now they have this property that they deal with?

00:11:10.280 | Things like that.

00:11:10.920 | Got it.

00:11:11.760 | Congratulations on all your progress

00:11:13.960 | and for taking hold of your responsibility

00:11:17.000 | and making enormous progress.

00:11:18.200 | Congratulations.

00:11:19.720 | Thank you.

00:11:20.560 | I appreciate it.

00:11:22.640 | Listening to you, really, that was a game changer,

00:11:25.960 | a life changer.

00:11:26.800 | I'm so glad.

00:11:27.360 | Thank you.

00:11:28.360 | If you sold the business today, what business

00:11:31.160 | would be your next business that you would go into?

00:11:34.960 | So that's part of it.

00:11:36.760 | That's why I'm not really afraid of holding onto this.

00:11:40.560 | But it seems like this business just

00:11:42.120 | takes so much of my time and energy

00:11:44.400 | that because I have computer work

00:11:48.760 | I need to do as far as talking to customers

00:11:51.100 | and doing things like that, sending out invoices.

00:11:54.360 | But then that all gets pushed back to evenings

00:11:56.560 | after my wife and kids go to bed because I'm out

00:12:00.000 | mowing yards all day or helping out with the fertilizer

00:12:02.800 | or something like that.

00:12:05.200 | But I have a couple of different products.

00:12:07.760 | Again, I love inventing.

00:12:09.080 | So I have a couple different products,

00:12:11.040 | some that are involved in the lawn care company

00:12:14.880 | space in general that I probably like to start.

00:12:19.680 | I'm interested more in product companies or knowledge

00:12:23.800 | companies rather than, again, the service companies.

00:12:28.280 | You talked about the other--

00:12:29.920 | I haven't honestly thought about this

00:12:31.720 | until two weeks ago when you brought it up,

00:12:33.560 | I think, on your podcast or three weeks ago about--

00:12:35.760 | well, now I'm blanking.

00:12:42.360 | Searching for your next car?

00:12:44.040 | Don't settle, thrive.

00:12:46.280 | At CarMax, it's easy to shop online or in person.

00:12:50.000 | With upfront pricing and tools designed to help,

00:12:52.920 | finding a car you love has never been easier.

00:12:56.080 | Plus, you can sell or trade in your current vehicle

00:12:58.600 | with an online offer in minutes, no strings attached.

00:13:02.200 | Start shopping now to find a car you'll love at CarMax.com.

00:13:06.520 | CarMax, the way it should be.

00:13:10.640 | What do you call it when you buy a company that--

00:13:13.280 | or you purchase into a--

00:13:15.600 | franchise, franchise.

00:13:16.520 | Yeah, yeah, I don't know how I blanked on that.

00:13:17.640 | Franchise, you know, franchising maybe.

00:13:20.080 | And then again, just investing as well.

00:13:22.120 | If the company, I could get it to the point

00:13:23.800 | where I sell it for $1 or $1.5 million,

00:13:27.640 | I don't quite know the value of the business as a whole

00:13:30.800 | and where I will be in five years.

00:13:32.600 | But at that point, I'd like to be reinvesting that stuff

00:13:35.120 | into real estate, which could take up a lot of time as well.

00:13:38.760 | Right, OK.

00:13:40.200 | All right, so let me answer your questions

00:13:42.360 | and give you a framework to kind of build some things on.

00:13:48.000 | First and foremost, I don't know what specifically

00:13:52.600 | you need to do to your business in Nebraska

00:13:56.600 | in order to make it attractive to a potential buyer.

00:14:00.640 | But you can find that out by looking around in your area

00:14:04.600 | and asking yourself, who would buy my business in three years

00:14:09.080 | time?

00:14:10.240 | And try to figure out who that person would be,

00:14:13.400 | and then go and talk to that person.

00:14:15.400 | And I mean actually genuinely go talk to the person.

00:14:18.520 | I'm glad that you identified the problem being

00:14:22.160 | the barrier to entry, because that is exactly the problem.

00:14:25.840 | The great thing about a lawn care business

00:14:28.400 | is simply that anybody with a little hustle

00:14:31.200 | can take a Toyota Corolla, put a weed eater and a lawn mower

00:14:34.120 | in the trunk, and go up and down the street

00:14:35.960 | and find a way to make a living.

00:14:38.240 | And so a lawn care business is a business

00:14:40.960 | that's open to anyone with a little hustle.

00:14:43.760 | Now the problem is then that that competition is generally

00:14:48.400 | going to push down prices, because it's

00:14:50.520 | available to anyone.

00:14:52.000 | If there were some kind of trade cartel that

00:14:56.080 | could protect the business against other people coming in

00:15:00.000 | and make it hard for people to come in,

00:15:01.880 | like let's say a licensing mechanism for physicians.

00:15:09.760 | They have a licensing mechanism that

00:15:11.400 | makes it really hard to come in.

00:15:13.120 | And so they have very low competition,

00:15:14.720 | and they can command much higher wages, obviously, of course,

00:15:16.800 | the value of the services.

00:15:17.880 | But things like having a licensing--

00:15:19.920 | if you set up a licensing cartel for lawn maintenance,

00:15:22.720 | and you have to get some kind of government license

00:15:25.120 | or some other thing like cosmetology,

00:15:28.200 | then now you have fewer people coming into it,

00:15:30.800 | because there's a protectionist racket there

00:15:33.000 | that's keeping it out.

00:15:33.920 | But in lawn business, you don't have that.

00:15:36.120 | So this is your fundamental problem.

00:15:38.800 | Now the question is, who's going to buy the business?

00:15:41.440 | You build a business with, say, 500 accounts or 100 accounts.

00:15:44.280 | We'll just use 100 accounts.

00:15:45.880 | And so now you've got 100 accounts

00:15:47.760 | that you're working on.

00:15:49.640 | The guy who would put his lawnmower and weed eater

00:15:52.360 | into the trunk of his Toyota Corolla

00:15:54.120 | is not going to buy that business.

00:15:56.200 | Who is going to buy the business?

00:15:58.040 | Well, it's going to be somebody with money,

00:16:00.480 | and it's going to be somebody who wants to own it.

00:16:02.920 | So the person with money, generally speaking,

00:16:07.660 | the only people with money who are

00:16:09.240 | going to want to buy a business like the one that you've built

00:16:12.480 | is going to be somebody who already has a preexisting

00:16:15.160 | connection to the industry.

00:16:18.040 | I'm not going to come and buy your business,

00:16:20.040 | because I would just say, well, I could build my own

00:16:22.680 | if I wanted to.

00:16:23.920 | And I'm not going to spend a lot of money on buying a business

00:16:27.720 | unless I'm already in that industry,

00:16:29.220 | because there's a relatively low barrier to entry.

00:16:31.960 | Anyone can get into it.

00:16:33.440 | But there's going to be companies or other business

00:16:36.200 | owners who are in your area who are in an aggressive growth

00:16:40.000 | mode and have money and are looking to expand.

00:16:42.720 | Those are the ones who are likely to buy your business.

00:16:45.800 | So you need to think about who that person would be.

00:16:48.720 | There's probably only a couple dozen of them in your area.

00:16:52.120 | And go figure out how to make some contacts with whosoever

00:16:55.720 | is involved in those businesses.

00:16:57.760 | And make it clear that I've got this business.

00:17:00.760 | I'm looking around to see who might want to buy the business.

00:17:03.800 | And I figure you guys might be people who kind of do that.

00:17:06.440 | Have you ever bought a business before?

00:17:08.180 | There are people out there who will buy businesses.

00:17:10.640 | Now, I worked in lawn maintenance.

00:17:12.320 | And what happened is the guy that I worked for when

00:17:15.200 | I was young, he just eventually sold his business

00:17:17.840 | to one of his competitors.

00:17:19.000 | And that's probably how things work,

00:17:21.440 | because you need to find some guy who's

00:17:23.000 | kind of at the stage of a business

00:17:24.520 | where he's got enough money.

00:17:25.680 | He's got the crews.

00:17:26.480 | He's got things.

00:17:27.960 | And he wants to quickly acquire accounts so that he

00:17:30.080 | can increase his scale.

00:17:31.680 | Now, you may also look around and say, well,

00:17:34.400 | is there a corporate entity that's doing this?

00:17:36.480 | And this is where you'll start to think about differentiation.

00:17:38.980 | You mentioned things like fertilizer and pest control.

00:17:42.400 | That's a distinct-- that's a significant difference

00:17:46.200 | from the guy with his pickup truck and lawnmower

00:17:48.800 | in the back of the truck.

00:17:50.040 | That now you can appeal to a larger company.

00:17:53.120 | You may have more commercial accounts.

00:17:54.720 | You may have higher end accounts.

00:17:56.480 | And that may be the kind of thing

00:17:58.540 | that you can do with your business that

00:18:00.120 | makes it more attractive to a large company.

00:18:02.640 | If you're in that space, look around and see,

00:18:04.880 | is there a business broker that's

00:18:06.920 | doing business in this space?

00:18:08.360 | And go talk to the business broker.

00:18:10.800 | Introduce yourself.

00:18:11.680 | Tell them about your business.

00:18:12.880 | And get some advice on what you can

00:18:14.320 | be doing to make your business the most attractive to people

00:18:17.920 | in your area.

00:18:18.600 | Because a lot of this stuff is very much area-based.

00:18:21.920 | And that's your first thing, is get the real,

00:18:24.840 | on-the-ground information from those people.

00:18:27.960 | With regard to questions one and three,

00:18:32.080 | as far as the structure of the business

00:18:35.040 | and then the milestones to make it more desirable,

00:18:37.920 | I don't know without knowing the people in that space.

00:18:43.200 | So it may be that the only thing you're basically

00:18:46.240 | going to be paid for is the number of accounts.

00:18:49.320 | It may be that all that matters is size.

00:18:52.520 | And if you find that out from a business broker,

00:18:55.240 | then you now know that this differentiation

00:18:58.440 | that I'm trying to do of doing additional services

00:19:02.520 | is not serving the end goal of creating

00:19:06.120 | the business that's saleable.

00:19:08.400 | If I'm just going to be paid based upon the bare number

00:19:10.600 | of accounts, and that's going to be the key metric,

00:19:13.640 | then your goal is just to go out and get

00:19:15.360 | as many accounts as possible.

00:19:17.400 | On the other hand, if it is going

00:19:18.800 | to be based upon the specialty services and the fact

00:19:22.200 | that you have these higher-profit businesses in place,

00:19:25.760 | then now you would focus on maximizing those.

00:19:28.360 | So the long-term structure of the business

00:19:32.400 | and the question regarding the milestones

00:19:36.080 | to make it more desirable could only

00:19:38.720 | be answered when you can identify the specific company

00:19:42.200 | that is likely to purchase the company

00:19:46.440 | and then think about what would be attractive to them.

00:19:49.840 | Now, there are a number of things

00:19:51.840 | that any business can do that make it more saleable.

00:19:55.880 | So you should always do these things,

00:19:58.040 | and they are the necessary things to do along the way.

00:20:00.280 | Number one, have good, organized financial records

00:20:03.600 | that are up-to-date, that are accurate, and that are clear.

00:20:06.640 | And the earlier you can get good financial controls in place

00:20:09.920 | and keep them in place, the better,

00:20:12.600 | so that you can inspire higher levels of confidence

00:20:15.480 | in your prospective buyers.

00:20:19.000 | Having a business that's run efficiently,

00:20:21.400 | so that there's a higher profit margin,

00:20:23.760 | is likely going to inspire confidence

00:20:26.520 | in a prospective buyer.

00:20:29.000 | I don't know about things like equipment,

00:20:31.840 | how that actually works out in the long run.

00:20:34.400 | But at the very least, you should

00:20:36.120 | make certain that whatever equipment and business things

00:20:39.640 | are that you have in place are maintained

00:20:41.800 | in the best possible condition, so you

00:20:43.760 | get the highest long-term resale value

00:20:45.920 | and valuation in the sale.

00:20:48.320 | You should also think about your documentation

00:20:50.800 | and think about your staffing.

00:20:52.320 | Because if somebody comes in and buys this kind of business,

00:20:55.040 | having employees who have been with you for a long time, who

00:20:58.800 | are relatively well-run, having a good training program,

00:21:01.960 | just having a business that is properly documented

00:21:04.880 | with good employee training programs, good recruitment

00:21:07.560 | programs, things like that, is going to be a big deal.

00:21:11.240 | And then when we get to things of diversity of services,

00:21:14.240 | I don't know how that stuff shakes out in the long term.

00:21:18.480 | But think about those factors as you're talking with people.

00:21:24.240 | When is the right time to sell your business?

00:21:27.000 | I would say the right time to sell your business

00:21:29.200 | is when you have an idea of the next thing

00:21:33.000 | that you can move to.

00:21:34.920 | And you can see that you can't do both at the same time.

00:21:38.400 | So if the next thing that you want to move to

00:21:41.240 | is investing in real estate, and what that means

00:21:44.800 | is I'm going to buy a house, one house per year,

00:21:47.360 | and shop around for it, finance it, fix it up little by little,

00:21:51.320 | well, you can obviously keep this business

00:21:53.560 | and buy a house per year or a house every two years.

00:21:57.000 | And you can become a real estate investor using that pathway.

00:22:00.800 | On the other hand, if you have a clear plan for a new business

00:22:04.840 | that is markedly different, and you can't do that new business

00:22:09.000 | without capital or without time, then

00:22:13.800 | that would be a good indication that it's time to go ahead

00:22:16.280 | and sell the business.

00:22:17.320 | And what you should do is you should

00:22:18.840 | get some form of valuation for your current business,

00:22:25.120 | ideally by a real prospective customer or a real business

00:22:28.560 | broker who sold a business like yours before.

00:22:31.600 | Figure out what the multiple, if it's

00:22:33.920 | going to be a revenue or earnings multiple,

00:22:36.480 | figure out what the multiple would

00:22:38.080 | be for your kind of business, and then

00:22:40.760 | look and see what this business could

00:22:42.600 | grow to over the next three or four or five years.

00:22:45.840 | So if you find out that the multiple is very small,

00:22:48.440 | as I'm guessing it is compared to many other kinds

00:22:50.640 | of businesses, if you find out that the multiple is very

00:22:53.280 | small, and you figure I could grow this thing by 20%

00:22:57.400 | in the next three years, which would be a good growth rate,

00:23:02.400 | but it's a 20% increase on a small number,

00:23:05.400 | but you have an alternative business that

00:23:08.240 | could go to double the multiple, because it's

00:23:11.360 | a different industry, and it has potential for a 50% growth

00:23:15.120 | rate, then now you would clearly want

00:23:17.800 | to move faster away from this business,

00:23:20.080 | because you've discovered the weaknesses of this business,

00:23:23.040 | and you've discovered the strengths of another business.

00:23:25.760 | So I would say that you want to get

00:23:28.400 | an idea of what this business could be worth if you really

00:23:31.240 | poured it on five years from now,

00:23:33.880 | and what an alternative business would be.

00:23:35.960 | And when you come up with an alternative

00:23:37.680 | that you feel confident has a good chance of success,

00:23:41.040 | that you yourself can execute on,

00:23:43.360 | and that is superior to what you're doing,

00:23:45.160 | then you go ahead and start making plans

00:23:46.880 | to actually sell the business.

00:23:49.640 | Now the good news is, I think almost any asset

00:23:52.840 | and any business is always for sale.

00:23:55.560 | So you probably don't need to do much anything differently

00:24:00.520 | in terms of timing, except wait for a buyer to come along.

00:24:03.960 | If you actually were going to market this with a broker,

00:24:06.280 | sign a contract, that would be different.

00:24:08.240 | But if you were just kind of casually networking

00:24:10.680 | within your industry, and especially focusing

00:24:13.640 | on meeting the kinds of people who might like to buy

00:24:15.720 | the business, and you drop a hint here and there

00:24:17.720 | that you'd like to sell the business and move on,

00:24:20.000 | you can be operating the business effectively now,

00:24:22.600 | while also moving on to the next thing.

00:24:25.560 | What I would say is, don't neglect the lessons

00:24:28.040 | that you're learning.

00:24:28.880 | The most valuable thing about this business

00:24:31.080 | is because it's straightforward,

00:24:33.040 | you've been able to learn these lessons

00:24:35.320 | step by step along the way.

00:24:37.120 | And if you can't fix the problems of the business,

00:24:40.560 | you have to ask yourself, are the problems that I'm facing

00:24:44.560 | due to the basic inherent nature of the business itself,

00:24:48.520 | or are they due to a personal area of incompetence?

00:24:52.920 | So if I'm having trouble finding, attracting,

00:24:55.800 | and retaining good quality employees

00:24:57.800 | who are gonna come to work and show up on time,

00:25:00.160 | is that something that is fundamentally due

00:25:02.520 | to the actual business or the industry?

00:25:06.400 | Or is that due to my incompetence

00:25:08.600 | at creating an attractive job,

00:25:11.040 | recruiting high quality candidates,

00:25:13.000 | and training them so that they want to stay with me?

00:25:16.040 | I'm not saying which it is, but if it's the latter,

00:25:19.440 | then you wanna focus on saying,

00:25:20.840 | what could I do to improve this,

00:25:22.800 | and learn the lessons from it?

00:25:23.880 | 'Cause whatever the next business that you go to,

00:25:25.520 | good chance all these same problems

00:25:27.000 | that you have right now are still gonna be with you.

00:25:29.920 | Let me pause for a moment

00:25:31.440 | before I go on to your other questions.

00:25:32.880 | Does that make sense conceptually?

00:25:34.640 | - Yes, 100%.

00:25:37.360 | And I actually already have a guy,

00:25:38.760 | now that you've said all that,

00:25:40.060 | I don't know why I didn't ask him in the first place,

00:25:41.840 | I've got a guy in my church

00:25:43.120 | that has a really big landscape company,

00:25:45.520 | and he's actually purchased a fertilizer company

00:25:47.240 | in the past, so that'd be perfect to talk to him.

00:25:49.000 | - Perfect. - Yep, 100%.

00:25:50.360 | - And if you've got that guy,

00:25:52.400 | ask him for other people like him who have also done that.

00:25:56.620 | So remember that the secret to breaking into a network

00:25:59.120 | is usually just finding that initial toehold.

00:26:00.840 | You may only know one person,

00:26:02.720 | but he probably knows another person or two that does it.

00:26:05.920 | And so if you're genuinely asking for advice from him,

00:26:08.960 | it's not a difficult thing for him to say,

00:26:10.760 | oh, here, call my other friend here,

00:26:12.320 | he's done it too, and he can also help you out.

00:26:15.440 | With regard to the building of solid place to work from,

00:26:19.500 | that's gonna depend on the timeline of the business.

00:26:23.040 | Generally speaking, it's always smart to buy real estate

00:26:26.700 | that your business is in.

00:26:27.860 | That's a good thing, because you've got a good tenant,

00:26:30.620 | you can keep an eye on things,

00:26:32.100 | and if you can make the finances work,

00:26:34.700 | then you can get the best of both worlds,

00:26:36.580 | because you have the income and the growth in asset value,

00:26:41.260 | and then it's a good way that allows you

00:26:43.780 | to later just sell the business, but keep the real estate.

00:26:46.800 | The only distinction would be if you might need

00:26:48.660 | that capital for a new business.

00:26:50.540 | So what would be a mistake would be,

00:26:52.340 | I'm gonna go and buy a real estate for this business,

00:26:55.080 | but 12 months from now, I sell the business,

00:26:57.540 | but I sank my life savings into buying that building,

00:27:00.700 | and now I need those life savings

00:27:02.220 | to start the new business.

00:27:03.380 | Better to start the new business in a rented facility

00:27:06.020 | so that you can get the business going,

00:27:08.140 | rather than to make the mistake

00:27:09.560 | of purchasing real estate too soon.

00:27:11.460 | But if you've got a five-year timeline,

00:27:13.220 | or whatever the timeline is to the sale of the business,

00:27:16.300 | and you see a property that would be appropriate,

00:27:17.900 | then I would say, sure,

00:27:19.180 | move in the direction of selling the business.

00:27:21.860 | And then the other question you said,

00:27:23.020 | as far as what is the right time in my life,

00:27:25.400 | the answer goes back to what I said,

00:27:27.380 | what's the next opportunity?

00:27:29.300 | If you know that this is not the business

00:27:31.620 | that I want to have 10 years from now,

00:27:34.140 | then it's a limited time business.

00:27:37.860 | And so the right time in your life to go for it

00:27:40.740 | is as quickly as you can find the next business,

00:27:44.380 | and as quickly as you can develop the personal ability

00:27:48.820 | to deal with that next business.

00:27:50.260 | So you may need to do this one for three more years

00:27:52.580 | so you can stockpile capital,

00:27:53.980 | 'cause the next business requires more capital.

00:27:56.500 | But it'll all just be based upon,

00:27:58.540 | can you find the next thing,

00:27:59.800 | and what do you need to make the next business go?

00:28:02.500 | - Sure, yeah, that makes sense.

00:28:05.900 | So if I were to purchase, say, a shop for this business,

00:28:09.100 | is there a way that I should purchase it

00:28:10.900 | so that I can keep it in my personal possession

00:28:13.780 | and rent it out to, say, the company that buys

00:28:16.860 | the actual business itself?

00:28:19.260 | Or can I just purchase that as my business,

00:28:21.900 | and when I sell it, I say, "Hey, this is excluded,"

00:28:24.300 | or how does that work?

00:28:25.200 | - You can do any of the above.

00:28:26.420 | It really doesn't matter.

00:28:28.640 | So the name that's on the title

00:28:32.980 | doesn't matter all that much.

00:28:35.460 | It's basically the same almost any way you do it.

00:28:38.780 | Ordinarily, if you have a business that's operating,

00:28:42.620 | ordinarily you would want to separate the operating business

00:28:46.020 | from the asset ownership entity.

00:28:48.540 | So it would be ordinarily smarter

00:28:51.180 | not to put the ownership of the building

00:28:53.860 | into the same company that has liability

00:28:58.860 | because you have significant liability to your employees,

00:29:03.040 | you're operating dangerous equipment,

00:29:04.700 | you're doing things that could create

00:29:06.700 | lifelong hearing damage and lifelong injuries

00:29:09.220 | and things like that.

00:29:10.500 | So if this building is owned by the company

00:29:14.220 | and you are negligent as a company owner,

00:29:17.280 | one of your employees sues you,

00:29:19.140 | well then because the building is an asset of the company,

00:29:21.960 | all of the assets of the company

00:29:23.740 | are exposed to the claims of the creditor.

00:29:25.860 | So ordinarily you would want to separate that ownership

00:29:28.700 | and you would put it into either your personal name

00:29:31.780 | or you would put it into a separate entity.

00:29:34.420 | If we're talking about a significant purchase,

00:29:36.620 | I would always just put it into a separate entity.

00:29:39.140 | However, if it turns out that you do,

00:29:42.500 | for whatever reason for right now,

00:29:45.140 | have it in the business and you go to sell the business,

00:29:47.800 | you can cut it out at that point in time

00:29:50.960 | and just adjust and say,

00:29:52.120 | well the business is for sale but not the property

00:29:54.080 | and then move the property.

00:29:55.320 | Changing title is not that difficult to do.

00:29:58.180 | - Okay, perfect.

00:30:00.360 | Thank you so much, I appreciate it.

00:30:01.560 | - My pleasure.

00:30:02.520 | We go on to Tim in Indiana.

00:30:05.840 | Tim, welcome to the show.

00:30:06.680 | How can I serve you today?

00:30:07.880 | - Hi, this is sort of a thinking like a wealthy person

00:30:11.960 | or thinking like you plan to be wealthy question.

00:30:15.220 | Your last Q&A, you answered the question

00:30:17.420 | about affording a car.

00:30:19.060 | And the big lesson was like, don't get into the weeds

00:30:21.540 | and like not let little things take big energy.

00:30:24.180 | So like the question, what investment can I make

00:30:28.020 | to pay for a car indefinitely versus like,

00:30:30.140 | how do I save up for a car?

00:30:31.600 | I really love that question 'cause it reframed reality

00:30:34.140 | and sort of broadened the scope of what I'm focusing on

00:30:37.100 | and what I'm comparing to.

00:30:38.740 | So personally, I grew up in like a humble,

00:30:41.580 | middle class household.

00:30:43.260 | I had one pair of shoes upbringing

00:30:45.080 | and it's been hard to shake this scarcity mindset

00:30:50.120 | and I've always kind of struggled with thinking bigger

00:30:52.360 | and just been scratching and clawing my way

00:30:54.400 | out of that ingrained mindset.

00:30:56.560 | And knowing that you didn't grow up particularly wealthy

00:31:00.600 | and we have similar proclivities

00:31:02.800 | and personalities I've seen.

00:31:04.960 | Do you have any other ways to reframe your thinking

00:31:09.160 | or mind hacks that kind of get you to think about things

00:31:12.560 | in a radical way that really shift the mindset

00:31:15.580 | from like middle class mindset to wealthy mindset

00:31:18.420 | or even books that do that?

00:31:19.820 | - Great question.

00:31:22.060 | I would say a lot of it is just due to exposure

00:31:25.740 | and this is where we're so, I'm so grateful

00:31:28.180 | to be able to live in the modern world

00:31:30.580 | because we can change the kinds of people

00:31:33.260 | we're exposed to very easily.

00:31:35.500 | If you and I went back a century,

00:31:37.860 | we would be living in our local town

00:31:40.660 | and the people that we would know

00:31:42.520 | would be those who were in our area.

00:31:45.440 | We would know our neighbors,

00:31:46.800 | we would know our friends from school,

00:31:48.560 | we would know the parents of our friends from school,

00:31:50.980 | we might know some people from church,

00:31:52.720 | maybe a local community organization of some kind

00:31:55.160 | and then the people from work.

00:31:56.800 | And so at that time we had in daily life,

00:32:01.760 | we had a very closed connection

00:32:04.960 | that was usually based upon social class,

00:32:07.600 | ethnicity, neighborhood, whatever it happened to be.

00:32:10.620 | If we wanted to get out of that,

00:32:12.500 | then we would have to go to books.

00:32:14.660 | And so we would need to go to the library,

00:32:16.780 | go to a bookstore, find a book written by somebody

00:32:19.140 | with a different experience, a different perspective

00:32:21.700 | and then buy the book and gain

00:32:24.620 | from that person's knowledge and experience.

00:32:27.060 | Thankfully, that's something that's always been available

00:32:29.140 | to people to do and those who have done it

00:32:31.740 | have gained exposure to a different way of thinking,

00:32:34.100 | different ideas, different philosophies.

00:32:36.380 | Challenge back then though,

00:32:39.040 | was simply that publishing at that time was very expensive

00:32:43.880 | and there were lots and lots of gatekeepers.

00:32:46.600 | So the gatekeepers were a positive thing,

00:32:50.360 | generally speaking,

00:32:51.200 | because if you're gonna have your book published,

00:32:53.660 | then it's gotta pass through an editorial review process,

00:32:56.860 | it's probably not gonna be all lies,

00:32:59.020 | it's just some lies or mostly lies, but not all lies,

00:33:03.020 | because there's gonna be an editorial review process.

00:33:05.500 | And the publishing company is taking some responsibility

00:33:08.820 | for the book, so there's gonna be some vetting,

00:33:10.380 | some fact checking, some due diligence done on the book.

00:33:13.980 | But because writing was so time consuming,

00:33:16.180 | it was hard, it was a big undertaking

00:33:19.280 | that required somebody with significant motivation

00:33:21.680 | to follow through, write the book, get it published,

00:33:23.700 | to get it into your hands.

00:33:25.300 | Fast forward to today.

00:33:26.980 | Today, we're all publishers.

00:33:28.780 | Every person in the world can publish something

00:33:31.300 | in some format extremely easily.

00:33:33.740 | The downside of that is that

00:33:35.980 | there aren't so many qualified gatekeepers.

00:33:37.900 | And so without an editorial review process

00:33:40.620 | and without fact checkers,

00:33:42.040 | we wind up having a hard time

00:33:44.460 | discerning high quality information

00:33:46.420 | from low quality information.

00:33:48.220 | And this is why there's so many frauds and hucksters

00:33:52.340 | and just all kinds, it's very challenging to figure it out.

00:33:55.300 | So we have to develop some skills

00:33:56.740 | to be able to sift good advice from bad advice

00:33:59.540 | and honest people from dishonest people,

00:34:03.620 | all of that is important.

00:34:05.300 | On the flip side, we can gain access and insight

00:34:08.120 | into all kinds of people's stories.

00:34:10.700 | And this is to me,

00:34:12.440 | one of the most valuable things in the world,

00:34:14.680 | that you can go and you can find somebody

00:34:17.140 | who is similar to you, but slightly ahead,

00:34:20.700 | and you can hear from that person directly,

00:34:23.780 | you can learn from the lessons that person is sharing,

00:34:26.940 | and you can allow that person to shape

00:34:29.220 | and adjust your thinking.

00:34:31.940 | And that's an amazing opportunity.

00:34:34.300 | I think that it's best to look for somebody

00:34:37.060 | who is somewhat near you, but just a little bit ahead,

00:34:40.880 | or a good bit ahead, but not unreachably ahead.

00:34:44.180 | If you go, for example, and you say,

00:34:46.460 | I'm gonna go and read all of the essays

00:34:49.060 | written by the King of England, if there are any,

00:34:53.100 | that's gonna be very hard for you to relate to.

00:34:55.900 | But if you go and you find somebody

00:34:57.540 | who makes 50% more money than you do,

00:35:00.020 | or who lives in your area,

00:35:01.660 | but has a different mindset around wealth,

00:35:04.120 | then you'll find that to be more relatable.

00:35:06.220 | So that's what I would counsel,

00:35:07.580 | is look for people who are similar in experience to you,

00:35:10.820 | but ahead of where you want to be,

00:35:13.620 | and start to follow their advice.

00:35:15.520 | There's just been such a profusion,

00:35:17.380 | an absolute flourishing publishing industry,

00:35:21.140 | that all kinds of people now,

00:35:23.220 | with genuine, real, valuable advice in a niche,

00:35:26.660 | are now able to publish that easily to the internet.

00:35:29.380 | And we're surrounded by just an embarrassment of riches

00:35:32.420 | in almost any area.

00:35:33.340 | So I would just say, go look for someone who's in that.

00:35:36.260 | Now, where we could go from here,

00:35:37.380 | and I don't know that I could do this extemporaneously,

00:35:39.340 | but what we could do is start to compose a list of goals,

00:35:43.580 | of the kinds of things that we would want to look for.

00:35:46.140 | So the person who might be well-suited

00:35:48.180 | to give good career advice,

00:35:50.580 | may be someone who is very poorly suited

00:35:52.940 | to give good family advice.

00:35:54.980 | And the person who gives good religious advice,

00:35:58.120 | may be somebody who is very bad

00:36:00.020 | at giving good travel advice.

00:36:01.740 | And so we would want to think about the different areas

00:36:04.580 | that we want to make progress in,

00:36:06.180 | and then choose, in essence, a mentor or two,

00:36:09.280 | in that area that we can look up to,

00:36:11.220 | and learn from along the way.

00:36:13.220 | And then just don't be scared to swap them out.

00:36:15.300 | I think the normal pathway of progression,

00:36:17.980 | at least the way that I consume advice,

00:36:19.740 | is I find somebody who has something that I want,

00:36:23.780 | I listen to that person,

00:36:24.980 | and I work to integrate everything that I can.

00:36:27.260 | But usually after a few years,

00:36:29.500 | unless that person himself or herself

00:36:31.980 | is continuing to grow aggressively,

00:36:34.260 | usually that becomes a little stale,

00:36:38.300 | and I reach a different point in life.

00:36:40.300 | And so then I need to go out and find some new mentors

00:36:42.760 | who have some new life experience.

00:36:44.700 | And that doesn't mean that the previous mentors were wrong,

00:36:47.180 | or that there was some kind of error about them.

00:36:49.580 | They were fine for what I needed at the time.

00:36:51.260 | So it's perfectly fine to consume

00:36:53.460 | what's helpful from one person,

00:36:54.980 | and then swap that person out for someone different

00:36:57.380 | when you reach a different point in life.

00:36:59.380 | - Okay, okay, that makes sense.

00:37:05.860 | Well, I won't be swapping you out anytime soon, Joshua.

00:37:08.660 | - Well, thank you.

00:37:09.500 | I try to keep growing, and so hopefully that comes through.

00:37:13.420 | But I appreciate that.

00:37:15.360 | But I actually, I think many people will swap me out,

00:37:18.900 | and that's totally fine.

00:37:20.380 | But I do try to stay ahead of the curve,

00:37:21.980 | and that's one of the reasons I try to share

00:37:24.100 | as pointedly as possible

00:37:26.340 | when and how my experiences have changed,

00:37:30.340 | when and how my positions have changed.

00:37:32.400 | Because I think that growth is the natural course

00:37:35.940 | of a man's life.

00:37:37.620 | He should be growing.

00:37:38.580 | I should be different at 40 than I was at 20.

00:37:41.660 | And as long as we recognize that and are honest with it,

00:37:45.080 | then it will work.

00:37:46.560 | One more comment on the concept of scarcity mindset.

00:37:50.600 | I'm very uncomfortable with this term,

00:37:55.600 | though I quickly acknowledge that it is useful.

00:37:59.280 | The reason I'm comfortable with the term

00:38:02.520 | is I've very rarely done well

00:38:06.640 | with psychological commitments

00:38:08.940 | to try to screw up a belief in something

00:38:11.300 | that is not backed by reality.

00:38:13.640 | And so I can recognize and identify the fact that,

00:38:17.880 | hey, I've got a scarcity mindset.

00:38:20.560 | But I've always had a tough time

00:38:22.540 | with the way that people often apply

00:38:24.840 | the concept of the strangest secret

00:38:26.760 | or the idea of just believing in something

00:38:29.340 | that will happen in the future.

00:38:31.000 | I find that that, at least for me,

00:38:33.640 | sets a foundation of dishonesty,

00:38:37.840 | that I'm lying to myself.

00:38:39.440 | I'm lying to myself of the fundamental,

00:38:43.160 | who is the one person in the world

00:38:44.720 | that I don't want to lie to.

00:38:46.280 | So I'm not about to sit around and say,

00:38:48.440 | I'm rich, I'm rich, I'm rich, I'm rich,

00:38:50.840 | when in reality I'm poor.

00:38:52.560 | I think the way that you overcome a scarcity mindset

00:38:55.080 | is by eliminating the scarcity through good, solid actions.

00:38:59.240 | And then as time goes by, you talk with people

00:39:02.560 | and you identify one particular change in thinking

00:39:05.380 | that can be a helpful way to improve something.

00:39:08.420 | And the only way to eliminate,

00:39:11.560 | or a way to eliminate the scarcity mindset

00:39:14.800 | is to identify one or two things

00:39:17.160 | that are illogical and focus on something else

00:39:21.680 | to replace them with.

00:39:23.040 | And so I've worked with a number of private clients

00:39:25.620 | on this topic over many years,

00:39:28.040 | and I've seen it in my own space as well.

00:39:31.640 | And that's one of the reasons I try to bring out

00:39:34.400 | basically the frame of scale to all conversations.

00:39:39.200 | If you, for example, by scarcity mindset,

00:39:42.160 | you're referring to something like frugality.

00:39:45.400 | There is a truth about frugality

00:39:48.440 | that is applied at every level.

00:39:51.920 | So what I reject, for example,

00:39:55.080 | is somebody who says, you know, I grew up poor,

00:39:57.620 | I'm poor right now, I don't earn very much money,

00:39:59.640 | I don't have very much money, but I just read "The Secret",

00:40:02.640 | so I'm gonna sit here and just imagine the future.

00:40:05.960 | And by the way, I may be unfairly pillorying "The Secret",

00:40:10.760 | I haven't read it actually.

00:40:12.340 | So if I'm mischaracterizing it, please forgive me.

00:40:15.420 | I make fun of it because it's become a meme in our culture,

00:40:18.820 | and when I hear people talk about it,

00:40:20.820 | they see it as just basically

00:40:22.820 | trying to instill a belief system.

00:40:24.820 | Obviously, psychocybernetics is obviously

00:40:28.460 | an important component of life,

00:40:31.220 | and so instilling a belief system can be necessary,

00:40:33.640 | but it's not a sufficient condition for significant change.

00:40:37.660 | It may be a necessary first condition,

00:40:39.100 | but it's not a sufficient condition.

00:40:40.280 | So anyway, back to the point.

00:40:42.240 | So let's say that I'm poor, and I don't have any money,

00:40:45.620 | I don't know anybody with money,

00:40:47.420 | and I realize I have a scarcity mindset.

00:40:50.060 | Well, the first thing to do is to be honest and say,

00:40:52.140 | I'm broke, I don't have any money, I gotta change this.

00:40:54.740 | And I start having money.

00:40:56.460 | And so the first thing to do is to start saving money.

00:40:59.740 | - Searching for your next car?

00:41:01.420 | Don't settle, thrive.

00:41:03.640 | At CarMax, it's easy to shop online or in person.

00:41:07.380 | With upfront pricing and tools designed to help,

00:41:10.340 | finding a car you love has never been easier.

00:41:13.480 | Plus, you can sell or trade in your current vehicle

00:41:16.000 | with an online offer in minutes, no strings attached.

00:41:19.560 | Start shopping now to find a car you'll love at CarMax.com.

00:41:23.920 | CarMax, the way it should be.

00:41:25.960 | - In order to save money, I need to be frugal.

00:41:29.360 | So I go, and if I have a low income,

00:41:31.880 | the expression of frugality is that I'm gonna go

00:41:34.880 | get my clothes from a thrift store,

00:41:36.880 | I'm gonna shop for my food on the discount sale price,

00:41:41.420 | and I'm gonna do all of the things

00:41:43.300 | that are kind of coupon cutting

00:41:44.920 | and all of the expressions of that

00:41:46.820 | that are low-hanging fruit for frugality.

00:41:49.900 | And that's important because if I do that,

00:41:52.520 | then I can drive a wedge into my income

00:41:54.460 | and I can start saving money.

00:41:55.860 | And now as I save money,

00:41:57.300 | I'll actually have a little bit of money.

00:41:59.180 | Fast forward a few years.

00:42:00.500 | If I've been able to take that money,

00:42:01.940 | invest the money, increase my income

00:42:03.800 | by applying things I learned about increasing my income,

00:42:07.540 | I still have to be frugal.

00:42:09.700 | I just may not have to be frugal

00:42:11.420 | specifically with the area of clothes,

00:42:13.540 | whether I buy them at the thrift store or I buy them new.

00:42:16.100 | I'll still be frugal though

00:42:17.220 | with the kind of vehicle that I purchase.

00:42:19.620 | I'll still be frugal with the kind of house that I live in.

00:42:22.500 | But fast forward a decade, and all of a sudden now,

00:42:25.700 | the car, the kind of car that I drive now doesn't matter

00:42:29.140 | 'cause I can drive anything, but I still have to be frugal.

00:42:31.860 | It's just that I have to be frugal

00:42:33.080 | with other consumption items

00:42:34.600 | or other kinds of business decisions.

00:42:36.640 | So frugality is a necessary virtue at all levels of wealth.

00:42:41.400 | But what frugality means changes

00:42:43.780 | based upon the scale of where someone is.

00:42:46.360 | And this is why I say what I said

00:42:49.040 | about trying to find someone

00:42:50.200 | who is just a little bit ahead of you.

00:42:52.800 | Because what is necessary when you're very broke

00:42:56.880 | is not necessary when your income has doubled,

00:43:00.480 | but you're gonna be in a totally different place

00:43:02.200 | when the income is four times from now.

00:43:04.220 | And since you can't know what those things are,

00:43:07.500 | it's safest to consume some advice

00:43:09.380 | from someone who's a little bit ahead of you

00:43:11.340 | for say 80% of the time,

00:43:13.100 | and then make sure that you consume the advice

00:43:14.860 | of someone who's way, way ahead for the other 20%.

00:43:17.340 | Because it could be that there's some big jumps

00:43:19.540 | to be able to be made.

00:43:20.940 | And so I wanna emphasize honesty and honesty to myself

00:43:24.980 | and recognize that if I've got a scarcity mindset,

00:43:29.020 | it may be because resources are scarce.

00:43:31.520 | And that's a very different conversation

00:43:34.200 | than somebody who has abundant resources

00:43:38.160 | but still has the mindset.

00:43:39.300 | We can fix that in a few weeks or a couple months.

00:43:42.380 | But if the scarcity mindset is from genuine scarcity,

00:43:44.920 | the key is get rid of the scarcity.

00:43:46.680 | - Yeah, maybe I can narrow the scope a little bit.

00:43:50.080 | You just hit on it.

00:43:51.960 | I grew up having to fix everything

00:43:54.560 | because you certainly couldn't buy anything new.

00:43:56.400 | And like the other day, I spent four hours

00:43:58.720 | fixing our vacuum, where I look back,

00:44:00.800 | I'm like, wow, looking at my hourly rate,

00:44:03.800 | I should have just gone and bought a vacuum.

00:44:05.720 | Or like, do I mow the lawn every week

00:44:08.000 | or do I pay someone else?

00:44:09.080 | It's like that level of,

00:44:11.540 | it's almost like breaking the habit.

00:44:14.920 | - So let's explore that for just a moment.

00:44:17.360 | When, what day of the week did you fix the vacuum?

00:44:20.280 | - It was on the weekend, like a Saturday.

00:44:25.120 | - If you hadn't been fixing the vacuum,

00:44:27.000 | what would you have been doing with your time?

00:44:29.360 | - Probably thinking of ways to improve my small business

00:44:34.520 | or ways to optimize what I have already.

00:44:38.440 | - Okay, so the key for making one of these decisions

00:44:41.520 | is the opportunity cost.

00:44:43.360 | If you had instead spent four hours

00:44:46.520 | working on improving your small business,

00:44:48.760 | but instead of doing that, you went and fixed the vacuum,

00:44:53.080 | then at least financially,

00:44:55.000 | you should have not fixed the vacuum.

00:44:56.840 | You should have just gone and bought a new one.

00:44:59.160 | Now, we could talk about enjoyment

00:45:00.520 | 'cause a lot of times,

00:45:02.280 | some guy may enjoy fixing the vacuum.

00:45:04.040 | Puts on the baseball game in the background

00:45:05.800 | and sits down and works on the vacuum

00:45:07.440 | and it's something that's genuinely enjoyable.

00:45:09.320 | And so if something is enjoyable,

00:45:11.680 | then we don't just cut it out

00:45:12.800 | just because we can make more money doing something else.

00:45:15.160 | But if your business could gain

00:45:17.560 | from additional time spent on the business,

00:45:20.100 | on planning, on preparing,

00:45:21.320 | on whatever the associated business activities are,

00:45:24.280 | if it could gain from that

00:45:25.840 | and you're choosing not to do that

00:45:27.560 | by doing a low-value activity,

00:45:29.900 | then that is an error.

00:45:31.560 | And so you should engage in some methodology

00:45:34.420 | to identify where those time leaks are

00:45:37.120 | and where those low-value activities are

00:45:39.840 | because in the fullness of time,

00:45:42.140 | for you to reach your financial goals,

00:45:44.400 | you have to commit the resource you have,

00:45:48.880 | which is time, to high-value activities.

00:45:51.720 | And if you have ambitious financial goals,

00:45:54.640 | you're not going to reach those ambitious financial goals

00:45:56.800 | by doing low-value activities.

00:45:58.920 | So you have to embrace the specialization of labor

00:46:01.740 | and embrace the fact that I have the capacity now

00:46:04.700 | to do high-returning labor

00:46:06.960 | and I want to do as much of that as I can.

00:46:10.060 | So that one's a little tricky.

00:46:11.400 | It probably deserves a podcast in and of itself

00:46:13.520 | with lots of episodes,

00:46:16.120 | excuse me, with lots of expansions and examples.

00:46:18.400 | But it's not as simple as just to say,

00:46:20.400 | well, I could do more of that

00:46:22.120 | because sometimes you can't.

00:46:23.720 | Sometimes you're just worn out and you need a break,

00:46:25.800 | in which case there's no reason to spend money

00:46:27.840 | if instead you can fix it yourself.

00:46:30.160 | But if you genuinely would have gone

00:46:31.840 | and worked on your business

00:46:32.960 | and if that would have been a higher-returning investment,

00:46:36.420 | then yes, it was a mistake for you to focus

00:46:38.120 | on fixing the vacuum instead of going and doing that.

00:46:40.760 | - Okay, okay.

00:46:45.280 | - All right.

00:46:46.440 | - That makes sense.

00:46:48.120 | And it probably makes it more difficult

00:46:50.560 | to pay somebody to mow the lawn

00:46:52.120 | when all the neighbors mow their own lawns.

00:46:54.520 | So I guess it makes sense when you're like,

00:46:55.880 | find somebody who is making 50% more

00:46:58.920 | 'cause they're likely not in the same neighborhood.

00:47:00.920 | - Right, right.

00:47:01.880 | And remember, there's always a good way to do it, right?

00:47:03.920 | Find a kid who needs a summer job and pay him handsomely

00:47:06.720 | so that he can get the start on it.

00:47:09.360 | There's always a way to justify the stuff

00:47:11.640 | in a way that's gonna make it feel good for you.

00:47:13.620 | Let me just give you two quick exercises that will help.

00:47:15.800 | Number one, take your annual income goal

00:47:20.320 | and break it down to an hourly rate.

00:47:22.380 | So let's say your annual income goal is $200,000 per hour.

00:47:26.560 | Excuse me. (laughs)

00:47:28.480 | Excuse me.

00:47:29.760 | - Okay.

00:47:30.880 | - We'll take, yeah, that would be great.

00:47:32.360 | - Done.

00:47:33.200 | - So $200,000 per year, right?

00:47:36.420 | Divide that into 52 weeks and then divide that by 40.

00:47:39.740 | So $200,000 a year is an hourly rate of $96.

00:47:44.160 | Now, what we can do basically is just round this up.

00:47:46.720 | $100 an hour is $200,000 a year.

00:47:49.640 | $500 an hour is a million dollars a year.

00:47:52.600 | So I don't know how to explain that math,

00:47:54.880 | but you probably got it by now.

00:47:55.840 | You basically just double it and add some zeros

00:47:57.420 | and you're there.

00:47:58.260 | So $40 an hour work gives you 80,000 a year,

00:48:00.880 | basically speaking.

00:48:02.240 | So figure out what your annual income goal is.

00:48:04.840 | And if your annual income goal is $200,000,

00:48:08.520 | then you need to be doing $100 an hour work.

00:48:12.120 | And so every hour that you don't do $100 an hour work

00:48:15.820 | is keeping you from reaching your annual income goal.

00:48:19.440 | So if you can go and you can pay someone else $50

00:48:22.440 | to do the things that you would be doing,

00:48:25.520 | and instead you can go and do $100 an hour work,

00:48:28.240 | then you're on the right track

00:48:29.460 | because you're focusing on the high value work.

00:48:32.600 | If the opportunity cost is,

00:48:34.160 | oh, I'm gonna pay these guys $50 an hour,

00:48:36.340 | but what I'll do instead is just sit around and do nothing

00:48:39.200 | and not active rest or whatever,

00:48:42.280 | then you're better off doing the $50 an hour work

00:48:44.480 | because it's additive rather than replacing

00:48:47.640 | the other work that you would do.

00:48:49.360 | But figure out what your hourly rate needs to be

00:48:52.240 | for your own personal financial goal.

00:48:55.200 | Then come back to the actual activity and ask yourself,

00:48:59.000 | is this $100 an hour work?

00:49:00.760 | And if you discipline yourself to always be focusing on,

00:49:03.580 | I need to do $100 an hour work,

00:49:05.960 | then you'll be in a situation where systematically

00:49:08.420 | as you do more $100 an hour work,

00:49:10.480 | you will in the fullness of time reach the $200,000 goal.

00:49:14.440 | So it will work in the fullness of time.

00:49:16.660 | Hope that helps and keep in touch.

00:49:18.360 | Let's talk about it in the coming months.

00:49:20.400 | Daniel in Texas, welcome to the show.

00:49:21.640 | How can I serve you today, sir?

00:49:23.880 | - Thanks, Josh.

00:49:24.720 | How are you doing today?

00:49:25.540 | - Very well, sir.

00:49:26.380 | Thank you.

00:49:27.480 | - Good.

00:49:28.720 | So my root question is,

00:49:30.740 | what is the value of just learning a skill

00:49:34.800 | for having the skill?

00:49:36.640 | Even if you're not sure that the skill

00:49:39.000 | directly points you in the direction you want to go.

00:49:41.560 | The details with that is I was,

00:49:45.640 | for my day job, I had the chance to start doing

00:49:48.680 | some amount of sales kind of on the side.

00:49:51.440 | I'm in project management, for everyone listening,

00:49:55.080 | and I had the chance to kind of take on

00:49:57.320 | basically a little extra work on top of my job

00:50:00.560 | to do some sales, which would obviously

00:50:02.840 | make some extra money would be the plan,

00:50:05.700 | and then learn that skill to some degree.

00:50:10.080 | That worked great for me.

00:50:11.040 | I was happy with it.

00:50:11.880 | It worked for the family, everything.

00:50:13.840 | Due to, you know, there's always less money

00:50:16.240 | in the giant corporate bank account

00:50:18.920 | than they would like there to be,

00:50:20.960 | they are asking me to move full-time into sales,

00:50:24.540 | forego the old job,

00:50:27.120 | and just take that on full-time.

00:50:31.480 | So I know sales is obviously a useful skill.

00:50:35.180 | I don't look at sales other than as kind of

00:50:37.920 | a general thing as being something

00:50:39.520 | I would ever want to go into,

00:50:43.000 | or really have much to do with.

00:50:44.360 | On the other hand, you have to sell things all the time,

00:50:46.840 | so, including yourself.

00:50:48.600 | So I guess I'm trying to figure out,

00:50:49.920 | it doesn't really, it's like,

00:50:51.280 | it also, the hard thing, I've worked from home

00:50:53.720 | almost all the time now.

00:50:54.840 | I'm now going to basically be gone five days a week,

00:50:57.200 | driving all over creation, which I love that aspect.

00:51:01.400 | But, yeah.

00:51:02.920 | - Got it.

00:51:03.800 | So my first answer is that for the young,

00:51:07.240 | learning a skill that you're not necessarily going to use,

00:51:11.440 | the value of that is very high.

00:51:13.720 | For the older, the value of that is lower.

00:51:17.240 | And this has to do, basically,

00:51:19.480 | with what we have in abundance.

00:51:21.760 | Generally, learning a skill involves time.

00:51:24.640 | Now, it can involve money, but it generally involves time.

00:51:27.840 | And for the young, time is more abundant,

00:51:30.560 | and money is short.

00:51:32.920 | As you get older, time becomes shorter,

00:51:35.560 | and money usually becomes more abundant.

00:51:38.680 | And so since we can take money,

00:51:40.920 | and we can buy other people's time,

00:51:43.520 | the value of learning a particular skill

00:51:45.960 | goes down significantly.

00:51:48.200 | It also goes down because we're more focused,

00:51:50.920 | and we know ourselves a little bit more

00:51:53.060 | to be able to give better direction

00:51:54.780 | of what specifically we want to do.

00:51:57.520 | Now, I'm speaking a little bit generally,

00:51:59.560 | but this is kind of a good general outline,

00:52:02.040 | I think, to say.

00:52:03.520 | So let's say that, let's put teeth on this.

00:52:06.400 | Let's say that I'm running a business as a teenager,

00:52:09.200 | and I need to create a website.

00:52:12.520 | Well, I could go and buy a website.

00:52:15.240 | I could just go to any website providers,

00:52:17.480 | and that would be perfectly reasonable.

00:52:20.060 | But if I sit down, and I create the website myself,

00:52:24.080 | and I use it as a chance to develop a skill,

00:52:27.080 | I'll probably, I will have that skill now

00:52:29.500 | for the rest of my life.

00:52:30.540 | And since time is abundant,

00:52:32.560 | and there's probably not a lot more useful

00:52:34.880 | than doing that skill, let me go ahead and do that.

00:52:37.040 | And I may discover all kinds of things

00:52:38.920 | that I can use later in life,

00:52:40.560 | because now I understand the website at a better level.

00:52:43.560 | But now if I'm a lawyer, and I'm 45 years old,

00:52:46.460 | and I need a new website,

00:52:47.960 | it's very difficult for me to imagine

00:52:49.960 | ever advising someone like that

00:52:52.440 | to sit down and create your own website.

00:52:55.200 | It would be a very, very high cost of doing that.

00:52:57.900 | So think about time versus money.

00:53:00.080 | In addition, we have to recognize

00:53:01.860 | that not all skill acquisition

00:53:03.300 | falls into an economic framework.

00:53:05.880 | And so there are many good reasons

00:53:07.680 | to accumulate skills outside of economics,

00:53:10.000 | and we just judge those by a different metric.

00:53:11.920 | You're asking a basically economic question,

00:53:14.000 | but let's acknowledge that I may really enjoy calligraphy,

00:53:18.100 | because it's an art form, and I'll never make money on it,

00:53:20.760 | but if I like doing calligraphy,

00:53:21.940 | then sure, it's valuable to go build the skill.

00:53:24.620 | I use that example,

00:53:25.680 | because it's the famous example, though,

00:53:27.520 | to show that sometimes skills that we develop

00:53:30.080 | that are not related to our current business

00:53:34.680 | can wind up being useful down the road.

00:53:36.920 | The calligraphy example is famous,

00:53:38.640 | because Steve Jobs took a calligraphy class in college,

00:53:43.440 | and then used the idea of being keyed in

00:53:47.080 | or clued into design as something

00:53:49.600 | that ultimately impacted the whole design culture

00:53:53.520 | related to Apple computer.

00:53:55.600 | And that high design culture became a core component

00:53:59.680 | of the company's identity and the success of the products.

00:54:04.680 | Jobs never did that strategically,

00:54:08.280 | but it's a good example of the serendipitous nature of life

00:54:11.600 | that we can learn something and move on.

00:54:14.600 | Now, to scale, to sales.

00:54:16.800 | I would say sales is one of those core skills

00:54:19.680 | that everybody who has it

00:54:22.120 | has something that's enormously valuable.

00:54:24.680 | And I think it's one of those core skills

00:54:26.660 | that probably everyone should have to some degree.

00:54:30.680 | And because of the high return on investment,

00:54:33.660 | it's worth learning, even if it's not a long-term endeavor.

00:54:36.720 | When I went into the insurance business

00:54:38.860 | and started selling life insurance,

00:54:40.660 | I did it because I wanted to learn how to sell.

00:54:43.260 | And I didn't, in fact, end up sticking with that business,

00:54:47.180 | even though I'm in a related business currently.

00:54:50.020 | But I'm very grateful for the experiences

00:54:52.060 | that I gained from that business,

00:54:53.500 | because learning how to sell effectively

00:54:56.200 | is something that has given me enormous confidence in life.

00:54:59.340 | And when I talk about developing skills,

00:55:02.860 | at least when I do coaching on my career planning,

00:55:05.660 | I talk about economically valuable skills.

00:55:08.980 | And selling is one of those core things.

00:55:10.900 | I built this model years ago

00:55:12.380 | when I read Joshua Kaufman's book, "The Personal MBA."

00:55:15.820 | And in that book, he defines a business very carefully.

00:55:19.140 | He's gonna talk about business.

00:55:20.220 | He defines a business.

00:55:21.820 | And according to his definition,

00:55:23.660 | he says, "A business is a repeatable process

00:55:27.100 | "that one, creates and delivers something of value,

00:55:31.420 | "two, that other people want or need,

00:55:34.680 | "three, at a price they're willing to pay,

00:55:37.860 | "four, in a way that satisfies

00:55:39.700 | "the customer's needs and expectations,

00:55:42.020 | "and five, so that the business brings in sufficient profit

00:55:45.260 | "to make it worthwhile for the owners to continue operation."

00:55:48.520 | Let me repeat that.

00:55:49.360 | I know it's wordy, but just listen.

00:55:51.340 | "A business is a repeatable process

00:55:53.420 | "that creates and delivers something of value

00:55:56.140 | "that other people want or need,

00:55:58.160 | "at a price they're willing to pay,

00:56:00.140 | "and in a way that satisfies

00:56:01.580 | "the customer's needs and expectations,

00:56:03.840 | "so that the business brings in sufficient profit

00:56:06.360 | "to make it worthwhile for the owners to continue operation."

00:56:10.100 | It doesn't matter whether you're running a solo venture

00:56:13.060 | or a billion-dollar brand.

00:56:14.300 | If you take any of those five things away,

00:56:16.820 | you don't have a business.

00:56:17.860 | You've got something completely different.

00:56:19.700 | So a thing, a venture that doesn't create value for others

00:56:23.020 | is a hobby, which is fine.

00:56:24.500 | It's just not a business.

00:56:25.860 | A venture that doesn't attract attention is a flop.

00:56:28.740 | A venture that doesn't sell the value it creates

00:56:30.980 | is a non-profit.

00:56:32.260 | A venture that doesn't deliver what it promises is a scam.

00:56:35.180 | And a venture that doesn't bring in enough money

00:56:36.940 | to keep operating will inevitably close.

00:56:39.720 | So that's the core point.

00:56:42.180 | So since business, every business,

00:56:45.100 | is fundamentally a collection of these five processes,

00:56:48.380 | then these are the five areas to focus

00:56:51.900 | when we're thinking about building

00:56:53.060 | economically valuable skills.

00:56:54.480 | So we can put names on them.

00:56:56.060 | The first one, where a business creates

00:56:58.260 | and delivers something of value,

00:56:59.420 | we can call that value creation,

00:57:01.140 | which is discovering what people need, want,

00:57:04.380 | or could be encouraged to want, and then creating it.

00:57:08.060 | When we think about a business being a process,

00:57:10.980 | creates and delivers something of value

00:57:12.180 | that other people want or need, that's called marketing.

00:57:14.940 | Marketing is attracting attention

00:57:17.060 | and building demand for what you've created.

00:57:19.660 | At a price they're willing to pay, we can call that sales.

00:57:22.500 | Turning prospective customers into paying customers

00:57:25.140 | by actually consummating a transaction.

00:57:27.720 | In a way that satisfies the customer's needs

00:57:29.820 | and expectations, we call that value delivery.

00:57:32.580 | Giving your customers what you've promised

00:57:34.320 | and ensuring they're satisfied with the transaction

00:57:36.900 | so that the business brings in sufficient profit

00:57:38.780 | to make it worthwhile for the owners to continue operation,

00:57:41.520 | that's finance, bringing in enough money to keep going

00:57:43.860 | and make your effort worthwhile.

00:57:45.980 | So all five of those skillsets are core

00:57:50.220 | to all businesses everywhere in the world.

00:57:53.060 | And somebody who is skilled or knowledgeable

00:57:55.360 | to at least some degree in all five of them

00:57:57.580 | is very well suited to do well in business.

00:58:00.100 | So they are value creation, marketing,

00:58:02.860 | sales, value delivery, and finance.

00:58:05.780 | Now, of those, sales itself is really unique

00:58:10.320 | because sales has provable value.

00:58:13.180 | And that's what's so powerful about it.

00:58:14.940 | A good salesman can go into any market and find a job

00:58:17.860 | because a salesman by definition can prove

00:58:21.040 | that he brings in more money to the company

00:58:22.900 | than he costs the company.

00:58:24.460 | So it's a uniquely valuable skill to have,

00:58:27.580 | and it's a core skill to all business.

00:58:29.700 | And so for that reason, it should be very highly prized

00:58:32.420 | when there's opportunity to learn it,

00:58:34.400 | even though it not be something that you want to do forever.

00:58:37.400 | - Okay, that's helpful.

00:58:43.460 | That was kind of what I was thinking.

00:58:46.060 | Was it worth it for the sake of learning the thing?

00:58:51.060 | Sorry to them also, I'm still trying to figure out

00:58:55.460 | like there's parts of it where I'm looking at

00:58:59.180 | and saying I don't love being taken away from my family

00:59:02.220 | and want to figure that out long-term.

00:59:04.060 | So I have to figure that aspect out.

00:59:09.060 | - Those are all important questions and considerations

00:59:11.780 | that I couldn't comment on right now.

00:59:14.100 | Just pointing out that sales itself is uniquely valuable.

00:59:17.660 | It's a skill that's fundamental to all business.

00:59:20.260 | And it's one of those things

00:59:21.420 | that at least some experience in sales

00:59:24.540 | is something that seems like it'll pay off for a lifetime.

00:59:27.600 | How that specifically applies to you, you be the judge.

00:59:31.540 | - Yeah, what is the, I mean, I guess if you were to say,

00:59:35.900 | hey, this is a useful thing, let's assume it goes fine,

00:59:39.220 | but I don't love it, whatever.

00:59:41.820 | Where's the point at which you say,

00:59:43.780 | okay, I've learned this decently.

00:59:47.460 | I feel confident in myself, but not maybe overconfident.

00:59:51.860 | I'm going to try and now go do the other thing.

00:59:55.700 | Like I've learned it enough.

00:59:57.100 | I'm familiar with it enough.

01:00:00.420 | When do you move on to the next thing?

01:00:03.060 | - I think that one is just what I repeat so frequently

01:00:06.620 | is when you know what the better thing is.

01:00:10.140 | As a man, it's different than the advice

01:00:13.140 | that you would have to implement in your life as a man

01:00:15.900 | is different than the advice that you would implement

01:00:18.060 | in your life as a teen.

01:00:19.780 | If you're coaching a 14-year-old

01:00:21.820 | who has a chance to just go learn sales for three years

01:00:25.020 | or two years, you would say,

01:00:26.300 | yeah, go learn sales for two or three years.

01:00:27.940 | You're going to be so glad for the experience, go for it.

01:00:30.620 | And this is a great thing for teens to do.

01:00:33.180 | Most people who I've known

01:00:35.180 | who've been very successful financially,

01:00:37.340 | or at least many, let me be careful with my words,

01:00:39.760 | they have some background, right?

01:00:42.100 | They sold Cutco knives in college,

01:00:43.860 | or they did some kind of network marketing gig,

01:00:46.940 | or they did something.

01:00:48.700 | I had a list of ones that I did,

01:00:50.340 | and I'm grateful for those experiences.

01:00:52.020 | You learn something from all of those experiences.

01:00:54.940 | But for you, time is not so cheap as it is for a teen.

01:00:59.300 | So if you're going to go into sales,

01:01:01.780 | that should be because this is the best opportunity

01:01:04.740 | that I have now that moves me down the path

01:01:07.820 | towards my vision, whatever it is.

01:01:10.840 | It's perfectly fine if that vision is just,

01:01:12.840 | I can make more money,

01:01:14.120 | because I need more money at this point in time.

01:01:16.520 | But if you have a vision of something

01:01:18.240 | that you want to do on the next step from sales,

01:01:20.800 | then you move on to that as quickly as you can see it.

01:01:23.340 | So we can acknowledge broadly

01:01:26.120 | that this is a useful skill that we want to develop,

01:01:28.960 | but your time is not cheap.

01:01:31.000 | And so you should be thoughtful about it.

01:01:32.720 | It may be that you go into sales here

01:01:34.680 | at an opportunity that you have.

01:01:36.240 | It involves a little travel,

01:01:37.500 | but your family can handle it for a time.

01:01:39.920 | But a year from now,

01:01:40.920 | with a year of good sales experience under your belt,

01:01:43.260 | now there's a different sales job

01:01:44.920 | that takes away the travel

01:01:46.280 | or whatever it is that's negative about this,

01:01:48.120 | and has a much bigger and better bonus structure

01:01:50.560 | and commission structure,

01:01:51.720 | where now you can do much better.

01:01:53.280 | In that case, you would quickly jump to that,

01:01:55.320 | and you would get there because you have the opportunity.

01:01:58.040 | So only move in the direction of sales

01:02:00.680 | if it kind of obviously makes sense

01:02:03.940 | in terms of your overall career plans.

01:02:06.340 | - Okay, but, and that's, you know, like I'm,

01:02:13.160 | yeah, I'm trying not to,

01:02:17.120 | time is less than I'm trying to use that well,

01:02:19.480 | 'cause I'm also in my mid-30s

01:02:21.480 | and trying to figure out how to use that time well,

01:02:23.520 | and not lose time in the place that I'm at,

01:02:28.080 | because things have,

01:02:33.160 | I guess, trying to make sure

01:02:34.140 | that I'm moving in the right direction

01:02:35.820 | and not just learning a bunch of random things,

01:02:37.940 | and then I'm 50 and I have a bunch of different skills,

01:02:41.200 | but never enough time in any one thing

01:02:43.860 | to move forward in one industry.

01:02:45.580 | - Yeah.

01:02:46.500 | It's frustrating if you don't have a clear strategy.

01:02:49.140 | So just know that it happens to a lot of people.

01:02:52.300 | I just finished a biography this week,

01:02:54.260 | and it was a biography of this really amazing guy,

01:02:56.700 | very smart,

01:02:58.140 | but it wasn't until he was almost 50 years old

01:03:01.500 | that he had finally put together

01:03:03.300 | all of these pieces of his life

01:03:05.300 | and realized his unique calling in life.

01:03:08.980 | And his biography was outstanding,

01:03:13.260 | and his contribution to the world was enormous,

01:03:16.620 | absolutely enormous,

01:03:18.060 | and yet it was obvious from just reading his biography

01:03:21.580 | that it took him a long time to build confidence in himself

01:03:25.540 | and to have such a diversity of experience

01:03:31.380 | that it ultimately came together

01:03:32.660 | and where he really left his imprint on the world.

01:03:35.380 | So I don't know if it,

01:03:37.020 | I don't think it can be forced or hastened.

01:03:39.540 | Go as far as you see,

01:03:40.860 | and then when you get there, there'll be more light.

01:03:43.420 | If you think that sales is going to destroy your family,

01:03:46.420 | don't do it, right?

01:03:47.620 | Because that's largely irreversible.

01:03:50.020 | But if you think that your family could handle it,

01:03:52.720 | and it's strong and it's not too onerous,

01:03:55.500 | and it may move you in the direction, then pursue it.

01:03:58.300 | And it's not wrong.

01:03:59.340 | There are a couple of, I think, basic metrics

01:04:01.180 | that should be adopted.

01:04:02.500 | Number one, if you get the chance to earn more money,

01:04:05.340 | then generally speaking, you should pursue it

01:04:07.260 | unless it comes with some unacceptable cost.

01:04:09.420 | Again, unacceptable risk, loss of life, loss of marriage,

01:04:12.460 | loss of children, things like that.

01:04:14.360 | So if you get the chance to make more money, earn more money.

01:04:16.900 | If you get the chance to take on more responsibility,

01:04:20.020 | generally speaking,

01:04:20.900 | unless it comes with some unacceptable cost, don't do it.

01:04:24.460 | But every time you go up the ladder

01:04:25.820 | of money and responsibility, you gain and you grow,

01:04:28.740 | and that's what transforms you

01:04:30.340 | into a more powerful man in the fullness of time.

01:04:32.820 | And then you look back later and see.

01:04:35.200 | But if sales can be a part of your vision, go for it.

01:04:38.900 | If it's not, then don't go down that path

01:04:41.820 | if you can't see how at least some way

01:04:43.580 | it fits into your vision.

01:04:45.060 | Samuel in Colorado, welcome to the show.

01:04:46.540 | How can I serve you today, sir?

01:04:48.060 | - Hello, thank you so much.

01:04:50.740 | We've spoken recently on career and income topics.

01:04:54.100 | - I was gonna call this a regular segment, I love it.

01:04:56.880 | - Yeah, today's shifting slightly from that onto inflation.

01:05:01.000 | But before I get into that,

01:05:02.760 | I was really inspired by the conversation

01:05:04.440 | on scarcity mindset.

01:05:05.880 | And I get my idea of the scarcity mindset

01:05:09.640 | from Stephen Covey,

01:05:10.480 | Seven Habits of Highly Effective People.

01:05:12.120 | And he talks about it very briefly, just one or two pages.

01:05:15.320 | And he concludes you should not have the scarcity mindset,

01:05:19.120 | but he only seems to really address it

01:05:21.640 | in a financial context.

01:05:22.880 | And that's how I think I heard it addressed

01:05:24.560 | on the last call.

01:05:26.000 | So just really quick, I wanted to say,

01:05:27.680 | I have a very strong scarcity mindset,

01:05:30.320 | but it's mainly in terms of time.

01:05:32.520 | And you've mentioned the time is scarce as well,

01:05:34.240 | but even more so you can see in things like as a skier,

01:05:37.700 | I may only get one day and one weekend in a whole season

01:05:42.880 | where there is incredible powder in Colorado,

01:05:45.040 | like 20 inches of powder.

01:05:46.600 | You may not even get that in a season.

01:05:48.080 | So there's absolutely a scarcity mindset in my mind.

01:05:51.900 | Same thing with rock climbing.

01:05:53.840 | You know, a willing partner who's not flaky

01:05:56.040 | and doesn't bail on you,

01:05:57.480 | that aligns with the day with good weather,

01:05:59.240 | that's extremely rare.

01:06:00.920 | So just wanted to hear your thoughts on scarcity mindset

01:06:03.280 | outside of finance.

01:06:04.640 | - Fair question.

01:06:06.960 | I don't know that I have anything profound to say

01:06:13.480 | other than to affirm what you're saying.

01:06:15.440 | At the end of the day,

01:06:17.360 | time is the thing that seems to be,

01:06:21.300 | at least in our current experience of time,

01:06:23.920 | time is the thing that is profoundly limited.

01:06:27.320 | Now, I believe that someday God will end the system

01:06:29.960 | that we have of time,

01:06:31.480 | and we will then have an eternal life

01:06:33.720 | in which we'll have an entirely different model

01:06:36.160 | and a different way of making decisions,

01:06:37.680 | and I can't wait to see what those conversations

01:06:40.240 | are gonna be.

01:06:41.200 | Whenever we try to wrap our mind around time

01:06:44.240 | and even long-livedness,

01:06:46.120 | we can't really think without the concept of time.

01:06:50.240 | It's so fundamental to who we are.

01:06:52.240 | So as long as we are on this mortal coil,

01:06:55.040 | then we need to think continually about time,

01:06:57.560 | and to me, that seems to be the ultimate resource

01:07:00.360 | because it continues forward at a steady pace.

01:07:05.280 | It does not change, and there's always less of it.

01:07:09.400 | And so the actual embrace of time is core.

01:07:14.080 | It's fundamental to what it means to be a productive person.

01:07:17.160 | Virtually all of my regrets,

01:07:18.720 | and I try to avoid too much the feeling of regret,

01:07:21.160 | but I try to learn from them,

01:07:23.040 | all of my regrets relate in some way to poorly used time.

01:07:28.040 | Other than that, like money, I've wasted plenty of money.

01:07:34.240 | I don't worry about that

01:07:35.360 | because money is ultimately renewable.

01:07:37.920 | There are other things.

01:07:39.080 | I don't have many relationship regrets.

01:07:41.040 | I've generally not experienced,

01:07:43.840 | I've not done anything really terrible there.

01:07:46.640 | So there are other regrets, things that can't be changed,

01:07:48.960 | but most of my regrets relate to poorly used time.

01:07:52.840 | And the older I get, the time gets shorter,

01:07:56.120 | both actually and perceptively.

01:07:59.500 | So I feel increasingly this intense pressure

01:08:02.480 | to be useful with time.

01:08:03.600 | And then in my worldview, and I think our shared worldview,

01:08:07.360 | I know that ultimately I will be responsible to God himself

01:08:12.120 | for how I use the time that he's entrusted to me,

01:08:14.840 | and that I have a responsibility to use it

01:08:17.560 | in a productive and effective way.

01:08:21.680 | So I feel that pressure,

01:08:24.960 | that kind of consistent need to be good with time.

01:08:29.400 | Now, what I think you're relating to

01:08:31.000 | is something I talk about,

01:08:32.560 | and just in terms of things that are time-bound goals

01:08:35.380 | versus money-bound goals or something else.

01:08:38.280 | And so if there's something

01:08:39.880 | that can only be done at certain times,

01:08:43.260 | then that should be prioritized.

01:08:44.960 | And so where you put in amazing powder days

01:08:49.200 | or ideal circumstances for rock climbing,

01:08:52.240 | someone else might put in a day of great surf,

01:08:55.040 | then these are predictably unpredictable things.

01:08:58.640 | Like you can know sort of when they're gonna come,

01:09:00.400 | but when they come, you gotta drop everything and go.

01:09:02.760 | I would put that into my context

01:09:04.280 | of how I think about things like experiences

01:09:06.640 | with my children, particular events in their life,

01:09:09.840 | and those kinds of things.

01:09:11.840 | So I'm not going to let something

01:09:14.720 | that can be done at any time

01:09:16.540 | fall in the way of something

01:09:17.860 | that can only be done at certain times.

01:09:19.980 | And so it would be very important,

01:09:22.500 | it is in the same way that I structure my life

01:09:25.220 | in such a way that I am present for every single moment

01:09:28.220 | that I wish to be present for,

01:09:30.100 | you would structure your life as you're doing

01:09:32.540 | in such a way that when there is good powder, you're there.

01:09:36.260 | But it doesn't mean then

01:09:37.400 | that you can't use the other time effectively,

01:09:39.540 | you're just identifying that at this particular weekend,

01:09:42.940 | I'm not gonna do this other thing that's important,

01:09:44.820 | rather, I'm gonna be on the rock face or on the slope.

01:09:47.580 | - Yeah, thank you so much.

01:09:52.120 | So yeah, circling over to inflation,

01:09:55.960 | and I did do a quick search.

01:09:57.560 | I see you have almost 20 episodes on inflation,

01:10:00.660 | including one in 2022 on my current economic times.

01:10:04.520 | I think I've listened to it,

01:10:05.440 | but let me know if you've already covered these topics.

01:10:07.280 | But inflation in regards to a retirement plan,

01:10:11.360 | so it's vaguely related to my earlier calls,

01:10:13.400 | but I think years ago, I tried to make a retirement plan,

01:10:17.920 | but I never finished it because I cannot come up

01:10:21.360 | with a rate of return and inflation rate

01:10:25.360 | that I'm comfortable with, specifically the inflation rate,

01:10:27.800 | because I agree with a lot of what you say

01:10:30.680 | about the federal debt and our economy

01:10:35.000 | and no other country is any better.

01:10:36.840 | So I think it's realistic to expect,

01:10:41.040 | and I mean, this is just directionally,

01:10:42.880 | it's probably not even close,

01:10:44.080 | but if anything, it'd be worse,

01:10:46.340 | like 10 to 20% inflation per year,

01:10:49.600 | if not more going forward.

01:10:51.080 | We had that somewhere around that this last year,

01:10:54.720 | even though people generally don't say we're in recession,

01:10:58.080 | we're not doing that bad.

01:10:59.960 | So just imagine if we actually ever did enter

01:11:02.760 | into a recession.

01:11:04.440 | And so I think it would be irresponsible

01:11:07.440 | for me to make a retirement plan

01:11:09.680 | that had any assumption of rate of return

01:11:12.920 | beyond just breaking even,

01:11:15.480 | just keeping the purchasing power you have.

01:11:18.120 | And in fact, I think that's even too optimistic.

01:11:20.760 | I think more than likely,

01:11:22.300 | like I took a quick look at my balance sheet

01:11:25.480 | and I've been getting around eight to 10% returns per year,

01:11:30.480 | just in the stock market,

01:11:31.840 | but that doesn't account for inflation.

01:11:33.400 | So I think any returns you could get other than,

01:11:37.520 | like you say, being an entrepreneur and having a business,

01:11:40.560 | they would be more than eaten up by inflation,

01:11:43.360 | even if we don't go into survivalism times.

01:11:45.920 | So just wanted to hear how you can come up

01:11:48.080 | with a realistic rate of inflation for a retirement plan.

01:11:50.920 | - Great question, and an important one.

01:11:55.680 | First, inflation is, for most retirees,

01:12:00.080 | the single biggest risk that they face.

01:12:02.840 | Loss of purchasing power is an enormous

01:12:06.240 | and catastrophic risk to the retirement plans

01:12:09.920 | of many retirees.

01:12:11.400 | And it's one of the reasons I work very hard

01:12:14.120 | whenever I have the chance

01:12:15.320 | to try to get prospective retirees

01:12:18.320 | to orient themselves around being concerned

01:12:21.200 | more about the loss of purchasing power

01:12:23.960 | than about the loss of current value.

01:12:27.800 | Because some people are so fixated on current value

01:12:31.080 | and fluctuations of the current stock price,

01:12:33.560 | and so therefore they say,

01:12:34.760 | "I've got to go all to fixed income.

01:12:36.040 | "I've got to go to CDs," things like that.

01:12:37.720 | But over a long-term retirement, that's not the case.

01:12:42.440 | Now notice those last three words I said,

01:12:44.360 | long-term retirement.

01:12:46.280 | If I'm counseling an 89-year-old,

01:12:49.800 | I'm not spending a lot of time jumping up and down

01:12:52.960 | about loss of purchasing power.

01:12:55.240 | On the contrary, I'm willing to accept loss of principal

01:12:58.720 | is a bigger focus because the time is shortened.

01:13:02.200 | But for a 60-year-old or 65-year-old,

01:13:04.680 | I am jumping up and down about loss of purchasing power,

01:13:07.080 | and it has to do with long-time perspective.

01:13:09.600 | Now, in your situation, it's catastrophically worse

01:13:13.000 | because you're planning for a very long early retirement.

01:13:17.400 | So how on earth do we plan for inflation

01:13:20.080 | over potentially a 60- or 70-year period?

01:13:23.720 | It's just flat-out impossible to predict.

01:13:26.920 | And I think we need to acknowledge

01:13:28.600 | that it's impossible to predict and then build a model

01:13:31.720 | that doesn't necessitate us making accurate forecasts

01:13:35.520 | or predictions of the future.

01:13:37.640 | You said, "I think there may be 10% to 20% inflation

01:13:41.600 | in the future."

01:13:42.560 | I find that to be a reasonable expectation.

01:13:45.840 | In my own thing, what I've said in past shows

01:13:48.720 | is that I think that mass inflation

01:13:50.640 | is a reasonable expectation,

01:13:52.760 | mass inflation being double-digit

01:13:54.840 | but maybe less than 30%.

01:13:56.880 | So 10% to 20% of inflation rates

01:13:59.920 | I think are perfectly reasonable scenarios

01:14:03.080 | to be concerned about.

01:14:04.760 | The reason, the logical argument that makes sense for me

01:14:08.760 | is that without inflation,

01:14:12.360 | the government is basically stuck with unaffordable,

01:14:16.480 | unimpossible finances.

01:14:21.080 | But hyperinflation doesn't solve the problem,

01:14:24.320 | and no inflation doesn't solve the problem.

01:14:26.760 | So that argument has been that in the fullness of time,

01:14:29.240 | mass inflation is probably something

01:14:31.640 | that policymakers will look towards.

01:14:35.080 | Now, does the Federal Reserve Board

01:14:37.520 | have the necessary level of independence

01:14:40.920 | to keep inflation down when policymakers

01:14:44.000 | and monetary fiscal policy deciders

01:14:47.920 | are trying to get it up?

01:14:49.720 | I don't know.

01:14:50.560 | I find that whole world so opaque

01:14:52.800 | and so impossible to actually know,

01:14:54.280 | I just simply don't know.

01:14:55.960 | But I think that mass inflation

01:14:57.800 | is a reasonable thing to be concerned about.

01:15:01.560 | It's not a reasonable thing

01:15:02.600 | to be concerned about for 60 years.

01:15:04.880 | It's also not a reasonable thing

01:15:06.560 | to be concerned about for 30 years.

01:15:08.560 | It's more of the reasonable thing

01:15:09.600 | to be concerned about for some years, five to 10 maybe.

01:15:12.480 | I don't have any idea.

01:15:13.360 | I'm just making this up on terms of number.

01:15:15.400 | Trying to point out though

01:15:16.400 | that it's not conceivable for the long-term,

01:15:20.200 | for the very long-term.

01:15:21.200 | Something catastrophic would happen.

01:15:23.400 | There would be a reset of the financial system,

01:15:25.680 | a new system started,

01:15:27.040 | and we would move on to whatever that happened to be.

01:15:30.440 | When it comes to planning though,

01:15:32.160 | the problem is if you're forecasting 15% inflation,

01:15:35.920 | which is not unreasonable,

01:15:37.720 | but you're experiencing 8% asset growth,

01:15:41.240 | which is also not unreasonable,

01:15:43.880 | there is no possible scenario

01:15:45.440 | in which your financial forecasts work.

01:15:47.440 | The entire premise of financial independence

01:15:49.720 | is based upon investments performing

01:15:52.520 | and relatively normal financial markets.

01:15:55.320 | So I don't even try to forecast mass inflation

01:15:58.520 | when it comes to a conversation like yours.

01:16:00.320 | So if we're gonna talk about your personal finances,

01:16:02.720 | I'm gonna say, hey, listen,

01:16:04.000 | why don't you plan on eight to 10% investment returns?

01:16:07.120 | That's fine.

01:16:08.000 | Let's go with 8%, right?

01:16:09.240 | 'Cause there are good reasons to believe

01:16:10.440 | that the future may be a little bit more difficult.

01:16:12.760 | So let's go with 8% instead of 10%.

01:16:15.080 | And then with regard to inflation,

01:16:16.480 | let's shoot for three or four, right?

01:16:17.800 | Let's go for three and then see what happens.

01:16:20.280 | But then what I want you to do is build a plan

01:16:23.120 | that allows you to adjust and adapt for a changing

01:16:28.120 | market condition.

01:16:30.680 | And for early retirees, this to me is the core thing

01:16:34.360 | is to have multiple plans.

01:16:36.220 | So if we did get to mass inflation, what would you do?

01:16:39.340 | And here we need either significant flexibility

01:16:42.040 | in expenses or flexibility in income,

01:16:44.680 | the ability to increase your income when you need to.

01:16:47.400 | And I won't go too deep into it,

01:16:48.960 | but when I teach in my retirement course,

01:16:50.520 | I go over this in detail and show how

01:16:52.640 | the way that you plan for retirement

01:16:57.360 | is by building in flexibility and insurance.

01:17:00.700 | And so let me just use an analogy

01:17:02.680 | of going across the country.

01:17:04.040 | Do you remember MapQuest?

01:17:05.160 | You're old enough to remember MapQuest, right?

01:17:07.400 | - Yes. - Right.

01:17:08.560 | I was thinking about this yesterday.

01:17:09.640 | I was driving around and I was wondering

01:17:11.320 | what happened to them.

01:17:12.140 | I haven't gone and pulled up their website,

01:17:13.080 | but MapQuest was revolutionary when I was in high school

01:17:17.640 | because for the first time in life,

01:17:19.920 | we didn't have to just look at a map

01:17:21.340 | or get directions from someone.

01:17:22.600 | We could make our own directions.

01:17:24.560 | And so I could go to MapQuest.com,

01:17:27.160 | I could put in my home address,

01:17:28.640 | I could put in the address of my friend's birthday party,

01:17:31.360 | and I could get these turn-by-turn directions across town.

01:17:34.680 | But I had to print them out and carry them with me.

01:17:37.360 | And if I made a mistake on the way, I had to go back,

01:17:41.020 | I had to retrace my steps and find myself

01:17:43.080 | until I could follow step-by-step

01:17:44.560 | the turn-by-turn directions.

01:17:46.320 | So imagine that you're trying to go from Miami to Seattle.

01:17:51.680 | So you have this enormous trip.

01:17:53.640 | Well, when you're working,

01:17:55.200 | basically you know that Seattle is northwest of me.

01:17:58.520 | And so I need to continually be going a little bit north,

01:18:00.720 | a little bit west.

01:18:01.560 | And so you just start driving and you go north,

01:18:03.240 | and then you go west, and you go north and you go west,

01:18:05.040 | and you go northwest, and you look at the map.

01:18:07.280 | The map is your annual financial plan,

01:18:09.200 | and you sit down and you know I'm heading for Seattle.

01:18:11.440 | And that's what it's like when you're working.

01:18:13.000 | And if you go a few miles outside of your way,

01:18:15.080 | meaning overspend a little bit,

01:18:16.420 | or projections aren't quite right, no big deal,

01:18:18.280 | you're still just going northwest.

01:18:21.460 | Now, when you get to retirement planning

01:18:24.880 | and you start to plan for a life of not working,

01:18:27.300 | you're basically doing MapQuest directions.

01:18:29.480 | And you're sitting down and you're saying,

01:18:31.240 | how do I navigate from Miami to Seattle?

01:18:33.640 | And you're imagining with early retirement,

01:18:35.720 | you've got this huge idea, 60 years to deal with,

01:18:39.920 | where I've gotta figure out a 60-year plan,

01:18:42.540 | and I've gotta print it out today and have it perfect.

01:18:45.640 | So in the same way that it's, not inconceivable,

01:18:48.960 | it's highly unlikely that you could print out

01:18:52.040 | the old-fashioned MapQuest turn-by-turn directions

01:18:54.560 | in Miami and follow that route perfectly

01:18:58.000 | until you wind up in Seattle.

01:19:00.160 | That's just not really likely.

01:19:01.720 | There's gonna be all kinds of changes.

01:19:03.000 | There's gonna be a raccoon in the road.

01:19:04.720 | Something's gonna happen that's gonna cause you

01:19:07.480 | to go off track.

01:19:08.760 | So your planning needs to be more flexible.

01:19:10.660 | So what do you do?

01:19:11.500 | Well, you go to MapQuest,

01:19:13.960 | or today we would go to, of course, Google Maps,

01:19:16.480 | and we would say, all right, here's an estimate

01:19:18.960 | of how long it'll go if I drive,

01:19:21.160 | and you would maybe plot out some stops,

01:19:23.520 | and you would get a good idea of your plan.

01:19:25.740 | But then you go with the GPS,

01:19:27.400 | and the GPS is that live feedback,

01:19:29.560 | that live turn-by-turn feedback.

01:19:31.500 | So if you make a different turn,

01:19:32.880 | or there's an obstacle in the road,

01:19:34.340 | you navigate your way around it.

01:19:35.920 | So a good retirement plan needs to have

01:19:39.600 | the MapQuest maps printed out so that you say,

01:19:42.920 | this is reasonable, I'm okay with this,

01:19:45.480 | but it also needs to have that live, real-time GPS.

01:19:48.240 | And so you put in place a set of triggers for yourself,

01:19:51.020 | knowing that if I reach this roadblock of 15% inflation,

01:19:55.880 | and stock market has gone down by 30%,

01:19:58.520 | then instantly I'm going back to work.

01:20:00.720 | And by the way, that's why I kept my CPA license current,

01:20:03.720 | and that's why I kept some industry connections.

01:20:05.680 | So instantly I'm going back to work,

01:20:07.300 | and I'm going back to work for five years,

01:20:09.120 | and then after five years, I'll reassess,

01:20:11.100 | and we'll get back on track.

01:20:12.480 | So you can't do planning for a mass inflation scenario

01:20:16.720 | that's predictable, it's inconceivable that it's possible.

01:20:19.720 | But what you can do is you can imagine

01:20:21.780 | how you would respond to different market conditions,

01:20:24.920 | and then put that in place.

01:20:26.080 | And then finally, insurance.

01:20:27.620 | Then you look at your overall situation,

01:20:29.840 | and you say, do I have some assets

01:20:32.080 | that would be protected from inflation?

01:20:34.200 | So this is where the value of owning a home,

01:20:36.280 | and having a little cabin that you live in

01:20:39.300 | that has solar panels on the roof,

01:20:41.160 | and is own debt free, and has very low property taxes,

01:20:43.920 | and having a garden in the back,

01:20:45.200 | well, this makes you largely less subject

01:20:47.880 | to the vagaries of inflation.

01:20:50.240 | And then looking at your assets and making sure,

01:20:52.680 | okay, I've got some assets

01:20:54.080 | that I can adjust with inflation, things like that.

01:20:56.440 | So that's my metaphor, and that's how I approach it.

01:20:59.600 | - Thanks so much.

01:21:02.900 | I guess my main struggle with that is,

01:21:05.640 | I was describing 10 to 20% more as not something

01:21:09.280 | that might happen five to 10 years in a 60-year period,

01:21:12.640 | but that maybe it'll get better, it'll get worse,

01:21:15.740 | but on average, it would be at least that bad.

01:21:18.080 | So even to make it easier for the example,

01:21:20.760 | can you see a scenario where,

01:21:23.160 | on average, over the next 60 years,

01:21:25.220 | you would have inflation that's better than,

01:21:27.680 | or even significantly better than 8%?

01:21:30.160 | Like, I know we've had that historically,

01:21:32.080 | but just seeing all the trends you're pointing out,

01:21:34.280 | I don't see any reasonable way to think

01:21:36.440 | that in the future that's gonna be the case.

01:21:39.360 | - I can't myself see that, but I can't argue against it.

01:21:44.360 | Meaning, can I see that happening?

01:21:50.480 | No, I think that the impact of experiencing mass inflation

01:21:55.480 | for a very long period of time would be so significant

01:22:02.040 | that we would basically have to reinvent

01:22:04.360 | our entire financial system,

01:22:05.800 | and I don't have any idea what that would look like.

01:22:08.960 | But I also can't argue against it and tell you,

01:22:11.560 | here's how I think we get out of this thing.

01:22:13.720 | So I'm not an economist, that's a good question

01:22:15.880 | to go and ask some brilliant economist,

01:22:17.640 | but I don't know how we get out of this thing.

01:22:20.680 | Now, I don't know how we get out of the current thing.

01:22:23.280 | We're just along for the ride,

01:22:24.720 | kind of waiting to see what happens.

01:22:26.540 | So I try to see what are those principles

01:22:28.400 | that will work out in most scenarios,

01:22:31.040 | but the answer is no, I can't see how we could have

01:22:35.160 | those high levels of inflation for that long period of time.

01:22:38.560 | Now, a couple of quick things to point out.

01:22:40.720 | Our modern economic system has been reset

01:22:42.960 | three or four times in the last century.

01:22:45.120 | Most of our data from something resembling

01:22:48.440 | our current economic system really only goes back

01:22:52.460 | a little more than a hundred years,

01:22:53.960 | a little over a century now.

01:22:57.280 | And even that, the economy back then

01:22:59.560 | is so wildly different than it is today,

01:23:01.320 | it's hard to even know.

01:23:03.060 | The latest big reset was, of course,

01:23:05.000 | the going off the gold standard under Nixon.

01:23:07.340 | That was an enormous reset of monetary policy.

01:23:10.200 | So we're very new into this current scenario.

01:23:13.160 | And the U.S. dollar has experienced huge hyperinflation,

01:23:17.720 | but the U.S. dollar has been reset, revalued,

01:23:20.120 | is it three times or four times,

01:23:21.560 | going back all the way to right after the Revolutionary War.

01:23:24.600 | So it's perfectly reasonable to say,

01:23:27.600 | hey, this can't continue and there's gonna be

01:23:29.220 | some kind of enormous reset.

01:23:30.640 | That's perfectly reasonable to me.

01:23:33.120 | I just don't know what that would be

01:23:34.440 | or what it would look like.

01:23:35.760 | So we're just along for the ride.

01:23:40.020 | And so I try to focus on those things

01:23:41.680 | that would have to not, that can't change.

01:23:44.140 | So assets that are good assets

01:23:46.680 | are always gonna have some kind of value.

01:23:48.360 | Could their value be destroyed and diminished?

01:23:50.960 | Yes, but if you've got a house

01:23:52.920 | and you can live in that house

01:23:54.280 | and someone else can live in the house,

01:23:55.440 | the house has some value in any economy,

01:23:57.880 | whether you're paid in U.S. dollars

01:23:59.240 | or whether you're paid in green bucks or whatever,

01:24:01.080 | Bitcoin or whatever it happens to be,

01:24:02.940 | that house has a basic utility.

01:24:04.600 | It's an encapsulation of labor and material

01:24:07.840 | and it provides a utility.

01:24:09.840 | A business, if you own a business

01:24:11.200 | and the business is making money,

01:24:12.300 | that's gonna have value.

01:24:13.320 | So regardless of the currency it's set in,

01:24:15.660 | regardless of that stuff, it's gonna have value.

01:24:18.040 | So all that say is that no, I can't predict,

01:24:21.160 | I don't see how we could have 60 years of 15% inflation

01:24:25.480 | in any of our current paradigms,

01:24:27.680 | but I can't argue against it.

01:24:29.180 | So I wanna focus on those principles

01:24:30.880 | that probably are gonna work no matter what it looks like

01:24:33.600 | and then just wait and see what happens.

01:24:35.600 | - Thanks, I'll merge it on to related topics

01:24:39.720 | in future weeks.

01:24:40.560 | Thanks for your help.

01:24:41.380 | - Thank you, Samuel.

01:24:42.220 | I'm enjoying our serial conversation.

01:24:45.440 | Nathan in Texas, welcome to the show.

01:24:47.200 | How can I serve you today?

01:24:48.500 | - Hey, thanks Joshua.

01:24:51.880 | Calling today, one of my summer goals

01:24:53.640 | has been to help my elementary age kids

01:24:59.080 | just kind of progress on their financial literacy,

01:25:03.260 | just general level.

01:25:06.280 | And I have a very kind of like some loose ideas,

01:25:08.840 | but just calling to compare notes

01:25:11.360 | and be kind of refined by your thoughts

01:25:13.360 | and then also use it as a good jumpstart

01:25:16.120 | to get me going on that goal

01:25:17.360 | 'cause the summer is ticking away.

01:25:19.720 | So yeah, I'd just love to hear my oldest is 12,

01:25:22.640 | my youngest is five, I've got four.

01:25:24.720 | So yeah, I can tell you more

01:25:28.680 | or you can take it from there.

01:25:29.600 | - Yeah, so you said 12 to five, right?

01:25:31.720 | So those are gonna be wildly different experiences

01:25:34.640 | for all of them.

01:25:36.080 | Do you, what are some of the influences

01:25:39.560 | other than my podcast or whatever,

01:25:42.360 | like what are some of the influences

01:25:43.840 | that have been the most formative for you yourself

01:25:47.820 | with regard to how you think about money?

01:25:49.880 | - I would say probably first and foremost,

01:25:54.320 | my family of origin, what I observed there

01:25:57.920 | and probably just worldview

01:26:02.760 | and kind of the Christian teaching on stewardship

01:26:05.920 | and things like that.

01:26:07.240 | Yeah, I would say probably it's like,

01:26:10.720 | you double clicked on my family of origin.

01:26:13.840 | Certainly, if I look at my maternal grandfather,

01:26:18.840 | he lived through the depression.

01:26:22.520 | So my folks always really appreciated frugality.

01:26:27.560 | So going back to somebody that was talking about scarcity,

01:26:31.440 | I think that frugality can lean towards scarcity sometimes.

01:26:36.440 | But definitely kind of like the Dave Ramsey principles

01:26:41.080 | of earning more than you spend

01:26:46.080 | and being prepared for emergencies, those sorts of things.

01:26:50.220 | Yeah, but then definitely I'm animated personally

01:26:54.440 | by the idea of stewardship

01:26:56.560 | and that we really need to give a good account

01:27:01.560 | for how we use our time, talent and treasure.

01:27:03.520 | So I wanna get the kids used to,

01:27:05.700 | I think you've talked about this,

01:27:07.040 | money flowing through their hands.

01:27:09.000 | And so while I never grew up with an allowance,

01:27:12.360 | that's one thing that I have considered

01:27:14.200 | just to kind of get them used to more coming in

01:27:19.160 | and going out and then build on that.

01:27:21.360 | - Right, I've given some thought to this

01:27:23.640 | and probably many of my thoughts are encapsulated

01:27:26.880 | in the series that I'm currently doing

01:27:28.400 | on financial goals everyone should set.

01:27:30.320 | I've wanted to build a high school finance curriculum

01:27:36.280 | and I may do it in the fullness of time, we'll see.

01:27:39.080 | But that would ultimately be the answer

01:27:41.560 | because there are some really foundational lessons

01:27:44.480 | that all teenagers should be taught.

01:27:47.500 | Those lessons are usually things that are mentioned

01:27:50.080 | and then skipped past in most books

01:27:52.800 | because most books are written for adults.

01:27:56.080 | So for example, cornerstone foundational lesson

01:27:58.560 | is understanding the time value of money.

01:28:01.360 | And so students should be made to memorize charts

01:28:05.240 | showing if I earn money and invest it at a young age,

01:28:08.320 | what the difference is if I do that at a young age

01:28:10.840 | versus in the long run.

01:28:13.440 | That's something that you'll see

01:28:14.820 | in a lot of introductory finance discussions,

01:28:17.380 | but it's just kind of skipped past.

01:28:18.760 | But really them getting their heads around that

01:28:21.200 | is something that is, I think, really important.

01:28:23.960 | I think what's even more motivational than that

01:28:25.880 | would be the charts related to the math of early retirement,

01:28:29.440 | understanding how savings rates

01:28:31.560 | compared to spending rates.

01:28:32.760 | For me, that was enormously transformative

01:28:34.600 | and I wish I'd understood that when I was 14

01:28:37.600 | or 12 or whatever.

01:28:38.800 | Beyond that, a lot of the knowledge has to do more

01:28:43.960 | with things that are best learned in doing

01:28:46.240 | rather than in learning about.

01:28:49.100 | So there are some books that I would recommend.

01:28:52.400 | My favorite book on the subject is "Richest Man in Babylon."

01:28:56.040 | That, I think, is the core fundamental text

01:28:59.680 | that needs to be done.

01:29:00.840 | "Richest Man in Babylon" is one of the very few

01:29:03.280 | living books on money that I know of.

01:29:06.160 | And I've recorded the entire thing,

01:29:08.140 | so you can just have them listen to the audio recordings

01:29:10.280 | that I've released here in the podcast feed

01:29:12.240 | or have them read it and talk about it.

01:29:13.980 | But "Richest Man in Babylon" is, I think, the starting point.

01:29:18.600 | A lot of the other books that I recommend to adults

01:29:21.320 | aren't necessarily applicable to children.

01:29:23.480 | So I have, of course, Radical Booklist.

01:29:25.660 | Radicalbooklist.com if you wanna get

01:29:27.280 | Joshua's "Financial Freedom" book list,

01:29:29.520 | and I send you the list of recommended books to work on.

01:29:34.320 | But I would say probably two or three of those

01:29:36.920 | are appropriate for children

01:29:38.240 | and the others are not so appropriate.

01:29:40.440 | So I don't know of a lot of books.

01:29:42.560 | I think there are many books that could be offered,

01:29:47.200 | and I would see it as, with many things,

01:29:48.920 | more important to focus on making a habit

01:29:52.240 | of choosing books and reading books

01:29:54.640 | rather than any one particular text.

01:29:57.080 | After "Richest Man in Babylon,"

01:29:58.600 | because the ideas are so sticky

01:30:00.620 | based upon the way that it's presented,

01:30:03.000 | then I would say basically choosing books

01:30:05.980 | that stimulate the thinker.

01:30:07.800 | So if you're gonna focus on this from a book perspective,

01:30:10.480 | I would be more inclined to say,

01:30:13.120 | I would assign "The Richest Man in Babylon,"

01:30:15.520 | and then I would say, when we go to the library,

01:30:19.640 | I want you to pick out at least two or three books on money

01:30:23.000 | and look through them or read them

01:30:24.680 | and make that the ongoing practice.

01:30:26.820 | Because a book on money can be adapted enormously,

01:30:30.040 | and you suggest titles that you have found useful

01:30:33.520 | or that you think would be useful to a particular child,

01:30:36.780 | but they're often pretty customized.

01:30:41.080 | So I don't have this list right off the bat,

01:30:43.880 | but anything that is story-based and principle-based

01:30:46.880 | rather than technical-based,

01:30:48.320 | I think is what you're looking for.

01:30:49.400 | So "Richest Man in Babylon," "Wealthy Barber."

01:30:52.260 | Is there a Morgan House book, I think,

01:30:55.920 | that was like a narrative-based?

01:30:57.920 | I don't have a list of titles current,

01:30:59.860 | but anything that's narrative-based

01:31:01.360 | and that's story-based would be good.

01:31:03.280 | Anything that provides discussion of goals

01:31:05.540 | that is appropriate.

01:31:07.240 | So Steve Maxwell's book

01:31:09.160 | "On Teaching Your Sons to Buy Debt-Free Houses,"

01:31:11.560 | I think is such a powerful book

01:31:13.080 | because it relates and he shares and shows,

01:31:15.720 | look, here's how all of my sons

01:31:17.120 | bought houses debt-free before they were married

01:31:21.120 | in their earlier mid-20s,

01:31:23.680 | which is just powerful to give children a goal.

01:31:25.640 | So that's kind of the book discussion.

01:31:28.560 | More than the book discussion,

01:31:29.920 | I think what you're looking for

01:31:31.640 | is to focus on the principles

01:31:33.720 | that will get money passing through their hands.

01:31:36.320 | So what I would love for you to,

01:31:38.000 | what I would say is take the series

01:31:39.480 | that I'm doing right now,

01:31:40.880 | listen to it with your children,

01:31:42.440 | or just listen to it yourself

01:31:43.880 | and then talk about the concepts with children.

01:31:46.400 | And I'm trying to break that series

01:31:48.920 | into discrete concepts

01:31:53.920 | that are just enough to say,

01:31:55.680 | here's what it is and then here's why it's important.

01:31:58.320 | And then just start walking your children down that list.

01:32:01.760 | So you're a 12-year-old,

01:32:02.760 | you can start the task of getting a job,

01:32:05.360 | getting a summer job or getting a Christmas break job.

01:32:07.480 | Doesn't need to be a lot,

01:32:08.680 | but a couple of weeks of him working with something,

01:32:12.320 | that puts a little money in his pocket

01:32:14.480 | will dramatically transform his questions.

01:32:17.280 | And then when he gets the job,

01:32:18.600 | then the first thing you're gonna talk about

01:32:19.880 | is how much does he save?

01:32:20.960 | How much does he spend?

01:32:21.880 | How much does he give?

01:32:23.080 | That's a good platform for your stewardship discussion.

01:32:26.280 | Once that happens, you can talk about what to invest in.

01:32:28.960 | And we'll talk about that or talk about who to give it to.

01:32:31.400 | So I think it's more important that these ages,

01:32:33.280 | that there's just money flowing through their hands,

01:32:35.040 | either in the form of an allowance or in terms of a job,

01:32:38.120 | and then that you're giving the instruction.

01:32:39.840 | As they go into teenage years,

01:32:41.240 | then to go through the Crown course.

01:32:43.240 | If stewardship is a big thing,

01:32:44.960 | the Crown financial course is fantastic.

01:32:46.760 | So go ahead and take your children through it

01:32:48.280 | as a family exercise

01:32:49.960 | and use some of those structured courses.

01:32:52.040 | But there's not just any one thing.

01:32:53.560 | It's more a matter of cultivating the belief

01:32:56.960 | that it's possible, it's doable, it's expected,

01:33:00.220 | and then cultivating the specific habit of,

01:33:02.920 | if I say that I care about money

01:33:04.840 | and I actually care about money,

01:33:06.300 | then I ought to be reading at least two or three books

01:33:08.520 | a year on money and processing the ideas.

01:33:11.160 | So that I'm continually being taught and educated

01:33:13.560 | and getting better and better at managing my money.

01:33:15.960 | - Okay, yeah, I think all that makes sense.

01:33:19.560 | Certainly some of those ideas,

01:33:21.480 | like I don't know if it's just thinking too low

01:33:24.160 | of like what my kids are ready to work on.

01:33:30.760 | Certainly I can see all of that with my oldest,

01:33:34.600 | the 12-year-old.

01:33:36.480 | The others that are like nine, six, and five,

01:33:38.440 | I'm trying to like imagine these conversations

01:33:42.200 | in a good way.

01:33:43.040 | Like I can kind of tell from the way you're sharing about it

01:33:45.200 | you guys just have regular family conversation

01:33:48.680 | or conversation with your kids

01:33:50.440 | about all of these ideas and principles.

01:33:54.120 | So I certainly try to share as much openly

01:33:57.800 | as I can with my kids.

01:33:59.800 | But it's also like if I pull up the spreadsheet

01:34:02.520 | with the budget or show them a time value

01:34:06.800 | of money investment chart,

01:34:08.040 | like my six-year-old's gonna wanna play soccer,

01:34:12.480 | which is great.

01:34:13.320 | So yeah, go ahead.

01:34:14.160 | - Let me interrupt you to disagree with you,

01:34:15.640 | is that no, I don't have constant conversations

01:34:18.120 | about this with my children.

01:34:19.720 | I don't see how this is developmentally appropriate

01:34:22.160 | for an eight-year-old to talk about.

01:34:24.920 | I answer the questions, like it's not a secret,

01:34:27.640 | but I don't think that this is a core component

01:34:30.000 | of what eight-year-olds should be focused on.

01:34:31.840 | I think eight-year-olds should be focused on stories

01:34:33.760 | and they should be slaying dragons

01:34:35.560 | and they should be building tree forts

01:34:37.120 | and they should be winning princesses' hearts

01:34:39.360 | and thinking about,

01:34:40.200 | and there's no, I reject the hustle culture idea

01:34:45.200 | that our eight-year-old should have a cell phone

01:34:48.000 | to their ears, focusing on doing the next deal

01:34:51.200 | so that they can make more money

01:34:52.360 | and yelling at all their friends

01:34:53.440 | about why are you guys wasting time?

01:34:55.560 | We do want to instill character,

01:34:57.440 | but I don't think that this is appropriate

01:34:59.080 | for younger people.

01:34:59.920 | And I was answering basically with your 12-year-old.

01:35:02.360 | So with the 12-year-old,

01:35:03.640 | that's where most of this comes in.

01:35:05.080 | With the other ones,

01:35:06.440 | I think it's more important things that are caught

01:35:09.240 | and just discussed in the natural context of your life.

01:35:12.480 | So with regard to stewardship,

01:35:14.640 | if you're gonna put money in the box at church,

01:35:18.120 | let's say that you have an option,

01:35:19.200 | okay, I could give online

01:35:20.920 | or I could put money in the box at church,

01:35:23.380 | then put money in the box at church

01:35:25.040 | and have one of your children take it

01:35:26.480 | and put the money in every week,

01:35:28.280 | put in, drop the envelope in the box every week

01:35:30.600 | so that they know that this is something

01:35:32.080 | that we do every week.

01:35:33.360 | If you're gonna go out to eat,

01:35:35.680 | hand whatever it is,

01:35:37.720 | put money in your children's hands

01:35:39.280 | and let them make the decisions.

01:35:41.000 | That's where, as you've heard me talk about previously,

01:35:43.440 | the concept of an allowance, I think it's important

01:35:45.160 | 'cause it allows them to spend things,

01:35:46.800 | save for things, look for jobs, look for all that stuff.

01:35:49.840 | But in terms of technical education,

01:35:51.480 | I don't think that any of this

01:35:52.600 | is particularly relevant at a young age.

01:35:54.840 | I think that it's most important to cultivate imagination

01:35:58.480 | and ideas and academic ability

01:36:00.760 | and unique skills and strong things at that basis.

01:36:04.720 | 'Cause money is not that hard to master.

01:36:07.040 | Like, it's really not.

01:36:08.480 | It's a basic set of steps

01:36:10.360 | and it can be learned perfectly well in the teenage years.

01:36:13.240 | Now, I do have more to say on it,

01:36:14.840 | which I'm not gonna do in this context,

01:36:16.160 | but I think your goal is, hey, by 15, 16,

01:36:20.080 | you're bringing your child into the family finances,

01:36:23.820 | discussing things.

01:36:24.840 | I think your ambition should be that your children,

01:36:27.560 | basically, by the time they're, I don't know, 14, 15, 16,

01:36:30.560 | something like that,

01:36:31.640 | is that you're treating them as adults.

01:36:33.040 | And one of the things of treating them as adults

01:36:35.240 | will just be just bringing them

01:36:36.320 | into the family finances in some way.

01:36:38.320 | So I don't think having opacity

01:36:40.640 | with regard to finances is appropriate.

01:36:42.820 | Sharing is important,

01:36:44.240 | and especially as they start to head towards college,

01:36:46.200 | opening up about here's what we have, here's what I earn,

01:36:48.680 | here's what our budget looks like.

01:36:50.280 | Having them take responsibility for things.

01:36:52.600 | So putting and saying,

01:36:54.360 | okay, I want you to do the grocery shopping,

01:36:56.080 | and I'm gonna take you three times

01:36:57.600 | to do the grocery shopping and show you,

01:36:59.280 | but now, this summer, your responsibility

01:37:01.160 | is to buy the groceries.

01:37:02.040 | Here's the list, here's the money.

01:37:03.800 | Anything you can do that's doing

01:37:05.920 | and related to money is really valuable.

01:37:08.200 | But in terms of education or reading,

01:37:11.200 | it's not that relevant

01:37:12.960 | until there's significant money flowing through.

01:37:15.680 | So it's gonna be much more impactful

01:37:17.960 | if you read "Richest Man in Babylon"

01:37:20.800 | and then focus on getting a job, doing well in school,

01:37:23.360 | getting scholarships, getting to college,

01:37:25.680 | and then providing appropriate training with summer jobs

01:37:28.520 | and then, and here's how you handle it

01:37:30.320 | versus giving a student a giant stack of books.

01:37:32.920 | - Yeah, okay, that's perfect.

01:37:34.960 | And I think that aligns with my expectations.

01:37:38.840 | Give me a brief thought on what you would think

01:37:43.320 | some good allowance uses.

01:37:44.880 | I'm looking to spark a little creativity

01:37:47.000 | in my own mind here.

01:37:48.240 | Beyond just like, you know, the younger elementary kids,

01:37:51.600 | like, of course, you're like,

01:37:53.320 | maybe you just do the simple, like, give, save, spend,

01:37:56.040 | you know, like, just three.

01:37:58.120 | And so, of course, you're like, you know,

01:38:00.360 | you're saving for the Lego set or whatever, you know,

01:38:03.800 | whatever they come up with.

01:38:05.120 | I had not thought of the idea of like,

01:38:08.560 | okay, like, when they got to eat as a family,

01:38:10.840 | you know, like, your kid's meal is gonna be nine bucks.

01:38:13.760 | Here you go, here's nine bucks for everybody.

01:38:15.600 | Pick what you want.

01:38:17.160 | What are some other ways that you have thought

01:38:18.640 | about encouraging kids to use allowance

01:38:21.440 | and then kind of deciding how much money

01:38:23.000 | to funnel through there?

01:38:24.000 | - Sure, the key, I think, is just to be verbal with children

01:38:29.000 | and train every time you can.

01:38:31.320 | So, when you go out to eat, talk about the cost

01:38:35.560 | and explain how it works, that here's what you see,

01:38:39.560 | then it's gonna be increased by taxes,

01:38:41.680 | then we have to leave a tip, here's what the cost is,

01:38:44.360 | here's what the budget is, just discussing things.

01:38:46.400 | When you go to the grocery store with your children,

01:38:48.360 | talk about unit pricing, here's what we need to buy,

01:38:50.640 | value per calorie, dollar per calorie,

01:38:52.520 | whatever it is that you are focused on,

01:38:55.040 | just talking about those things and recognizing

01:38:57.760 | that every time I make a decision,

01:38:59.240 | it's my job to instruct my children in what I'm thinking

01:39:02.880 | so that they will reflect my values and attitudes

01:39:06.160 | and that my instruction will form a background,

01:39:08.560 | knowledge base for them in the fullness of time.

01:39:12.240 | To your question, as far as allowances, I have a system.

01:39:17.240 | I have implemented it imperfectly.

01:39:19.180 | I'm not satisfied with how I'm actually implementing it,

01:39:21.800 | but I still think it makes a lot of sense

01:39:23.840 | and it's what I'm seeking to implement.

01:39:25.440 | The lack of implementation is primarily due to,

01:39:27.920 | I don't even know what currency

01:39:29.060 | to give my children an allowance in

01:39:30.400 | because we travel so much.

01:39:32.560 | So that's been, I don't expect most people

01:39:34.520 | to share that frustration, but it is a real frustration.

01:39:38.720 | So put simply, I don't call it good,

01:39:41.640 | so here's my names for it,

01:39:43.800 | is I teach my children to have three bags.

01:39:47.560 | I give them literally bags of money

01:39:49.360 | and bag number one is a giving bag,

01:39:51.480 | bag number two is an investing bag

01:39:53.240 | and bag number three is a spending bag.

01:39:55.600 | I give them a certain amount of money

01:39:57.320 | and then I encourage, I tell them to divide it into three.

01:40:01.240 | And so you should choose an amount of money

01:40:03.280 | that will make a lot of sense to divide it into three.

01:40:05.520 | So it might be $6 a week so that it can be two in each bag

01:40:10.520 | or it may be $60, whatever it is.

01:40:13.040 | But what you're looking for

01:40:13.960 | is to have a relevant amount of money

01:40:16.180 | that they can accumulate enough to buy the kinds of things

01:40:19.280 | that you think they should be doing.

01:40:22.040 | So I just split it into thirds

01:40:24.120 | because I think it makes for simpler math

01:40:26.000 | versus some other random percentage.

01:40:28.640 | So the giving bag is money to give away to other people.

01:40:32.320 | So if I'm gonna give you $12 a week,

01:40:34.580 | then we're gonna put $4 in the giving bag

01:40:36.700 | and then the giving bag is going to accumulate.

01:40:39.280 | So who and what do you want to give it to?

01:40:41.640 | And so you have a family conversation.

01:40:44.200 | Are you gonna give it to the plate at church?

01:40:46.440 | Are you gonna give it to the missionary offering?

01:40:48.840 | Are you gonna give it to your friend's birthday present?

01:40:51.400 | Are you gonna give it

01:40:52.240 | to your brother's birthday party outing?

01:40:54.160 | Are you gonna give it to the person in need

01:40:55.880 | on the side of the street?

01:40:56.800 | Doesn't matter, just encourage them

01:40:58.240 | to be looking for opportunities to give it.

01:41:00.360 | The investing bag, I don't call it saving

01:41:02.840 | 'cause this is not a savings bag.

01:41:04.440 | The investing bag is the wealth fund.

01:41:07.520 | So money only goes into the investing bag

01:41:10.560 | and it only comes out to invest and then it goes back in.

01:41:13.500 | The idea is I think that children especially

01:41:16.440 | should be taught that we only get richer.

01:41:19.320 | So the way you do that is by making sure

01:41:21.240 | you don't ever consume all your money.

01:41:22.920 | And so you always have a financial freedom fund.

01:41:25.720 | You always have an amount that goes in

01:41:27.880 | and this is what it's gonna be used for.

01:41:29.360 | So you put $4 into the investing bag

01:41:31.400 | and then it accumulates and then you say,

01:41:32.800 | okay, well, dad, what can I invest in?

01:41:34.880 | And you look around and say,

01:41:35.840 | well, maybe you can sell candy at school.

01:41:38.160 | If we go to Costco and you buy a bunch of bags of M&Ms,

01:41:40.600 | you can take those to school and you can sell them at school

01:41:44.480 | or any other version of kind of buying and selling.

01:41:47.040 | In general, buying and selling is gonna be the key thing.

01:41:49.860 | You may modernize that, right?

01:41:51.240 | You really love to go on eBay and look for Legos.

01:41:54.360 | So go and buy the Legos and then flip them

01:41:56.520 | or let's go to Walmart.

01:41:57.640 | Let's see what we can buy there

01:41:58.640 | and what we can flip to eBay.

01:42:00.460 | Let's go and see if you can buy a bicycle

01:42:03.200 | and fix it up and sell it.

01:42:04.400 | Can you go and buy, maybe with a 14 year old,

01:42:06.920 | can we go and buy broken washing machines

01:42:09.000 | and flip them and fix them and sell them on Craigslist?

01:42:13.380 | Always looking for things that you can buy or sell

01:42:15.800 | as a way of investing.

01:42:17.380 | And then as you grow there, then building little businesses.

01:42:21.120 | So let's get bread materials

01:42:23.280 | and let's bake bread and sell it.

01:42:24.760 | Let's go and buy something wholesale and sell it for retail.

01:42:27.240 | There's so many things that can be done

01:42:29.560 | and all of those kinds of things

01:42:31.240 | need to be done from the investing bag.

01:42:33.000 | And then the third one is spending.

01:42:34.560 | And so spending just means you're gonna spend it

01:42:36.880 | on whatever you want.

01:42:38.040 | Now, here is where saving comes in.

01:42:40.680 | So here's where I'm happy to say,

01:42:41.760 | yeah, just accumulate money in your spending bag

01:42:43.440 | until you have a lot of money.

01:42:44.640 | And then when you have a lot of money,

01:42:45.960 | you can buy something bigger.

01:42:47.280 | But if you wanna go out and buy something

01:42:48.720 | for $2 every time, then of course that's your prerogative.

01:42:52.240 | So that's what I'm doing.

01:42:53.640 | And I think it's the right thing to do

01:42:55.520 | because it covers all of the important components of it

01:42:59.960 | and yet does it in a good and straightforward way

01:43:02.720 | that needs to be continued.

01:43:04.060 | So start there and then go continue on.

01:43:07.240 | - Save on Cox Internet when you add Cox Mobile

01:43:09.880 | and get fiber-powered internet at home

01:43:12.200 | and unbeatable 5G reliability on the go.

01:43:15.560 | So whether you're playing a game at home.

01:43:17.480 | - Yes, go.

01:43:18.600 | - Or attending one live.

01:43:19.880 | - Go.

01:43:20.800 | - You can do more without spending more.

01:43:23.080 | Learn how to save at cox.com/internet.

01:43:25.620 | Cox Internet is connected to the premises

01:43:27.320 | via coaxial cable.

01:43:28.360 | Cox Mobile runs on the network

01:43:29.560 | with unbeatable 5G reliability

01:43:31.200 | as measured by Ookla LLC in the US 2H 2023.

01:43:34.280 | Results may vary, not an endorsement.

01:43:35.680 | Other restrictions apply.

01:43:37.000 | - We stay in Houston, Texas.

01:43:38.440 | Welcome to the show, how can I serve you today?

01:43:40.400 | - Yes, Josh, thanks.

01:43:42.800 | I've enjoyed your recent series on financial goals.

01:43:45.780 | My kids are a little bit older than yours

01:43:47.800 | and every summer I require them to do a report

01:43:51.360 | on work or a job field

01:43:52.840 | that they could possibly go into after school

01:43:55.360 | with the potential for them to convince our family

01:43:58.680 | that we're gonna fund that education.

01:44:00.700 | I want them to live a rich life.

01:44:03.880 | Of course, that doesn't require a huge income

01:44:05.960 | but it's easy to be restrained at the medium income

01:44:09.800 | and things you'd like to do

01:44:11.040 | and ways you'd like to invest in your children

01:44:13.320 | or your family.

01:44:14.720 | I see being an entrepreneur is very fashionable.

01:44:18.520 | It's very fashionable to advise young people to do that

01:44:21.040 | but I read a lot and personally see a lot of people

01:44:23.800 | who have their own paycheck

01:44:26.040 | and they invest enormous blood, sweat and tears into it

01:44:28.760 | and then they have maybe just a paycheck

01:44:32.480 | but not anything really substantial

01:44:35.280 | with regards to income.

01:44:37.160 | So my question to you is,

01:44:38.640 | with your experience working maybe

01:44:40.400 | with lower net worth individuals

01:44:42.200 | at the beginning of your career

01:44:43.680 | and then moving on to,

01:44:45.160 | I know you've said many times,

01:44:46.400 | you've learned that your job is to help people with money,

01:44:50.200 | that's what gets a lot of income coming in.

01:44:53.240 | If you were to advise a young person on broad paths to take

01:44:58.700 | going into the future,

01:45:00.480 | looking at trying to earn in the 80 to 90th percentile,

01:45:04.240 | could you categorize into somewhere between,

01:45:07.560 | let's say two and seven buckets,

01:45:09.720 | people who are making more than $150,000 a year?

01:45:15.000 | I think there's obviously a large number of people

01:45:17.520 | who are doing that

01:45:18.640 | but if you were to go look online,

01:45:20.600 | it'd be difficult to find jobs

01:45:23.320 | that are listed at $150,000 a year or more.

01:45:27.540 | Are all these people doctors and lawyers

01:45:30.160 | or what are some broad categories

01:45:32.960 | that these people tend to be in?

01:45:34.640 | - Good question, interesting.

01:45:37.380 | We could answer that by just pulling up the BLS,

01:45:42.320 | the Bureau of Labor Statistics data

01:45:45.240 | and look at what they have to do

01:45:48.060 | or you could answer it by going and finding your Asian

01:45:51.340 | or your Asian friends

01:45:52.600 | and seeing what they encourage their children to do.

01:45:55.200 | There's a joke that if your parents are Indian,

01:45:57.160 | you've got a lawyer in the house,

01:45:58.440 | you've got a doctor in the house

01:45:59.400 | and if you've got a third child, you've got an engineer.

01:46:02.240 | It's not too far wrong in terms of that approach.

01:46:05.820 | First, I think the way to do that

01:46:08.860 | is really to hammer, hammer, hammer on education.

01:46:12.940 | So the next series in,

01:46:15.080 | the next podcast in the series that I'm gonna talk about

01:46:18.520 | is going to be getting all of the education

01:46:20.640 | that you can get.

01:46:21.780 | And if you look at the kinds of people

01:46:24.840 | who have high needs for education,

01:46:28.880 | that's your most correlated feature

01:46:33.880 | to what you're saying,

01:46:38.440 | to a top 20% income

01:46:40.560 | is gonna be significant amounts of education.

01:46:42.960 | Any kind of advanced degree or qualification

01:46:46.120 | is going to be the pathway to that.

01:46:48.440 | And the big ones that you mentioned are,

01:46:51.360 | number one, medicine.

01:46:53.520 | Medicine pays very well in the United States.

01:46:55.780 | Medicine pays well for doctors,

01:46:57.920 | but it also pays well for nurses.

01:47:00.120 | It pays well for all of the specializations

01:47:02.860 | within nursing or within medicine.

01:47:05.280 | And that's a very reliable way working in healthcare

01:47:09.200 | for high levels of income.

01:47:11.960 | The second one relates to law.

01:47:14.240 | Law is a relatively high paying career

01:47:17.780 | and it's reliably associated with good incomes

01:47:21.060 | and a lot of work and advanced education.

01:47:24.760 | Engineering is also consistent, is a consistent category.

01:47:29.760 | Engineering has the problem of being more limited

01:47:34.280 | than the other ones.

01:47:35.640 | One of the frustrations,

01:47:36.800 | I've consulted with a number of engineers

01:47:38.340 | who are kind of at the top of their field,

01:47:40.120 | and one of the consistent frustrations for engineers

01:47:42.800 | is they kind of max out much sooner

01:47:45.040 | than some other careers do.

01:47:48.440 | So a lawyer can become more specialized

01:47:51.360 | or go into a certain area

01:47:52.520 | and have a much higher ceiling than an engineer can.

01:47:55.360 | And so an engineer who's working for other people,

01:47:57.440 | for whatever reason,

01:47:58.720 | they just often aren't paid huge amounts of money,

01:48:01.080 | but they are certainly paid top 20% income

01:48:03.720 | when they're at the top of their career.

01:48:06.240 | The biggest category that doesn't fit necessarily

01:48:09.160 | that pathway of formalized schooling

01:48:13.880 | is information technology.

01:48:16.240 | So anyone related to information technology

01:48:19.280 | because of the newness of that industry,

01:48:21.600 | while certainly getting a degree in computer science

01:48:23.760 | can be an important asset,

01:48:25.300 | it's not the automatic pathway.

01:48:27.400 | And so there's a lot more people

01:48:28.520 | who are making quite a lot of money in the tech industry

01:48:32.520 | who didn't get there with the formalized schooling process.

01:48:36.080 | I wonder if that will change in the future,

01:48:38.240 | but so far, since that industry is still so relatively new,

01:48:42.040 | it hasn't happened.

01:48:43.720 | Finance is a huge category

01:48:46.520 | that would have to be represented in what you're saying.

01:48:50.440 | Finance is kind of a hodgepodge of different things.

01:48:54.000 | There's some aspects of corporate finance

01:48:56.400 | that certainly will pay well.

01:48:58.360 | Then there's banking and Wall Street stuff,

01:49:02.520 | but if you're in your local town,

01:49:06.020 | financial jobs of a guy who sells insurance,

01:49:09.440 | the guy, property and casualty or life insurance,

01:49:12.220 | local financial advisors,

01:49:14.040 | generally speaking,

01:49:15.080 | if somebody has been in that business

01:49:16.320 | for at least five years,

01:49:17.480 | it's hard to believe that they're not in the top 20%.

01:49:20.320 | So that's certainly gonna be a component of it.

01:49:24.080 | We talked about,

01:49:25.400 | I guess I didn't mention pharmacy

01:49:27.000 | when I was talking to healthcare.

01:49:28.020 | Pharmacy would be another category.

01:49:30.200 | High-skilled technical jobs like aviation could certainly fit.

01:49:35.200 | Aviation definitely can pay top 20%.

01:49:38.080 | And by the way, there's a huge shortage of pilots right now.

01:49:41.080 | So that's a very promising one.

01:49:43.480 | Then you get to the less predictable,

01:49:45.640 | but certainly impactful one.

01:49:47.320 | You get the whole world of business

01:49:48.960 | or just corporate work.

01:49:50.720 | So corporate executives

01:49:52.080 | and middle and upper-level managers

01:49:54.080 | certainly generally all fall into that category.

01:49:57.080 | And so there's a huge number of those

01:49:59.720 | and there are always education requirements,

01:50:02.120 | but it's not as specialized with regard to education

01:50:05.280 | as other things.

01:50:08.160 | And then certainly we would have a category on there

01:50:10.920 | for structured entrepreneurship.

01:50:13.320 | Here I think of real estate brokers

01:50:14.920 | or mortgage offices,

01:50:18.000 | things like that where it's entrepreneurship,

01:50:19.800 | but it's entrepreneurship

01:50:20.720 | within a kind of a structured industry,

01:50:23.760 | not just from the skies.

01:50:27.960 | So it is entrepreneurship,

01:50:29.680 | but it's a different style.

01:50:31.360 | You don't have to come up with a unique business.

01:50:33.540 | Those would be some that occur to me

01:50:34.820 | and all of them are fruitful in high-income wages.

01:50:38.300 | - All right, thank you very much.

01:50:42.240 | - My pleasure.

01:50:43.360 | We go on to Lucas in New Jersey.

01:50:46.000 | Welcome to the show.

01:50:46.840 | How are you doing today, Lucas?

01:50:48.840 | - Hey, Joshua.

01:50:50.240 | One comment to your last caller.

01:50:51.600 | As an engineer who is making his way up the career ladder,

01:50:55.200 | if you wanna be technical and make money in engineering,

01:50:57.360 | you gotta go the management track.

01:50:59.800 | That's been my observation.

01:51:01.480 | And to this scarcity mindset

01:51:04.480 | that seems to be the focal point of today's show,

01:51:07.120 | I would highly recommend,

01:51:08.280 | I know it's hard for men, it was hard for me,

01:51:10.800 | find a good therapist.

01:51:12.120 | It's the best way to address some of these things

01:51:14.800 | and you just can't quite get past.

01:51:17.080 | - Here's where I would put in, what is it?

01:51:18.960 | Better health is advertising everywhere these days.

01:51:21.120 | So find your podcaster that has a better health referral link

01:51:24.920 | and try with something like that.

01:51:27.440 | - Yeah, yeah, definitely.

01:51:28.720 | Well, onto my question.

01:51:29.800 | So my wife and I are operating a small business

01:51:32.640 | and we're getting ready to hire an accountant

01:51:34.920 | for our business.

01:51:36.280 | We use QuickBooks and we wanna create an accountant profile,

01:51:39.400 | but we haven't signed anything with this accountant

01:51:42.160 | and wanna make sure that we're not putting ourselves

01:51:44.360 | at any risk.

01:51:45.200 | Now, I've vetted them, I've spoken to them,

01:51:47.280 | they have great reviews.

01:51:48.520 | I've done that, but I wanna get your input

01:51:51.560 | on what we should look for as we hire this person

01:51:54.000 | to make sure that we're getting the real deal,

01:51:56.240 | we're protecting ourselves,

01:51:57.480 | and just kind of what is standard

01:51:59.440 | when you're hiring an accountant?

01:52:00.520 | What should we be looking for?

01:52:01.400 | What should we be signing?

01:52:02.640 | - By any risk, are you mainly thinking about data

01:52:05.000 | or just the whole thing in general?

01:52:06.760 | - Mostly data.

01:52:09.600 | Anytime we're letting someone open their eyes to our books,

01:52:13.400 | I think this'll probably come up

01:52:15.840 | and this is just the first time that it's happened.

01:52:18.000 | And my wife and I are both sitting here like,

01:52:19.640 | oh, we haven't officially hired them,

01:52:22.520 | but we want to know that they are competent,

01:52:26.640 | so we want them to kind of see what we're doing.

01:52:28.920 | And I wanna make sure I'm thinking about this right

01:52:31.000 | and what should we be putting in place

01:52:33.800 | so that we can hire them and feel good about that process?

01:52:38.800 | - Yeah, there's a technical answer

01:52:42.880 | and then there's a realistic answer

01:52:44.840 | and they're pretty much opposite one another.

01:52:48.360 | So let me give both of them.

01:52:50.800 | So the technical answer that I have warned in the past

01:52:54.080 | is basically something akin to,

01:52:56.760 | you should really never give anyone access

01:52:59.200 | to your private financial information.

01:53:01.920 | Anytime you give someone access

01:53:03.560 | to your private financial information,

01:53:05.520 | you're creating risk for yourself.

01:53:09.040 | And so if you go to your accountant

01:53:11.080 | and you take your accountant to your books,

01:53:12.880 | you're creating risk.

01:53:14.320 | An element of that risk is always going to be data leakage

01:53:18.160 | from just simply a cybersecurity component,

01:53:20.520 | but you have that now, right?

01:53:23.440 | If you're using QuickBooks Online

01:53:24.840 | and your data is being stored in the cloud,

01:53:27.400 | you have a risk that your personal data can be targeted,

01:53:30.960 | you can be hacked and it can be stolen,

01:53:33.080 | even though it is encrypted,

01:53:34.160 | even though QuickBooks is a big company,

01:53:35.760 | blah, blah, blah, blah, blah.

01:53:37.240 | Any data that's stored in the cloud is always prone to attack.

01:53:41.200 | You should assume at all times

01:53:43.200 | that all data that you store in the cloud,

01:53:45.080 | including your most important financial data,

01:53:46.800 | is going to be hacked

01:53:47.720 | and is going to be sold on the internet.

01:53:49.120 | That's a standard assumption

01:53:50.640 | with anything related to the internet.

01:53:52.680 | When you're talking about interacting

01:53:54.040 | with another individual, you have more risks.

01:53:57.240 | So you have risks of people in that individual's office

01:54:00.920 | being able to see the data.

01:54:02.600 | So when I was a financial advisor, I had data,

01:54:05.080 | all kinds of financial data of all of my clients.

01:54:07.680 | I had an assistant who had access to my files.

01:54:12.040 | And if my assistant had wanted to review client data,

01:54:14.920 | the assistant could.

01:54:16.160 | And then there's a whole management structure

01:54:18.680 | in the financial industry of all kinds of people

01:54:20.480 | who have access to the files.

01:54:21.480 | My managing director, of course, had access to all my files.

01:54:23.960 | My compliance officer obviously did.

01:54:25.840 | Managing partners, all up and down.

01:54:27.560 | And the accountant is the same basic way.

01:54:29.520 | You usually have a smaller office

01:54:30.840 | if you have an independent accountant,

01:54:32.480 | but the accountant has access to your files.

01:54:34.560 | Anybody working for the accountant

01:54:35.880 | is probably gonna have access to the files.

01:54:37.640 | If you're in a small office

01:54:39.040 | that isn't gonna have multiple layers of management,

01:54:41.760 | then usually there's gonna be

01:54:43.200 | less sophisticated data management systems.

01:54:46.920 | So probably everyone in the office

01:54:48.720 | has access to all the client files,

01:54:50.360 | unless they're a more sophisticated, larger firm

01:54:53.320 | with better security protocols.

01:54:56.160 | So what that means is that anybody in the office

01:54:58.280 | can see your accounts because that's what happens.

01:55:01.760 | That's just how it works.

01:55:04.080 | In addition to that, you create legal risk for yourself.

01:55:07.440 | So let's say that you and your wife are in business today,

01:55:10.760 | but then, you know, three months from now

01:55:13.760 | or six months from now, you hire this accountant.

01:55:15.520 | Six months from now, you turn over your records.

01:55:17.440 | Six months from now, she divorces you,

01:55:20.000 | and you're trying to defend yourself against her.

01:55:22.600 | And so you try to delete all your data for your business,

01:55:25.200 | and you're trying to get rid of all those records.

01:55:27.080 | Well, now, because you've given that data to someone else,

01:55:32.280 | then that someone else can be subpoenaed,

01:55:35.360 | and the data can be gotten from that someone else.

01:55:38.160 | And so if you were working with me as a financial advisor,

01:55:42.800 | and if I had client files on you,

01:55:45.040 | and you went and were declaring bankruptcy,

01:55:47.280 | and you told me about the million dollars

01:55:49.120 | of gold in your backyard, and I had that written down,

01:55:51.960 | million dollars of gold in the backyard

01:55:53.480 | underneath the oak tree,

01:55:54.760 | then all my client notes can be subpoenaed

01:55:57.200 | by the judge, by the lawyer,

01:55:58.640 | and all of that is public record to the court.

01:56:01.720 | So anytime you're dealing with data, there's always risks,

01:56:05.080 | both practical risks for stealing data,

01:56:08.000 | as well as genuine legal risks.

01:56:11.000 | And there's, you know, can you protect yourself?

01:56:14.400 | Yes.

01:56:15.240 | So the legal risks, the advice there,

01:56:17.960 | is that if you want maximum legal protection

01:56:21.360 | with regard to an accountant,

01:56:23.680 | you need to hire an accountant who is both an accountant,

01:56:27.800 | i.e. CPA, and a lawyer.

01:56:31.000 | There is an association,

01:56:32.280 | I can't state it off the top of my head,

01:56:34.320 | but there is an association of practitioners

01:56:37.800 | who are lawyer accountants.

01:56:39.360 | That's what they are.

01:56:40.560 | You will spend more money to work with one of them,

01:56:43.320 | but the big benefit that you get

01:56:46.040 | is that now your personal, confidential,

01:56:48.720 | financial information can be part of your client files.

01:56:53.600 | So as long as you specifically follow

01:56:56.080 | all of the best practices to initiate a relationship

01:56:59.840 | where you're requesting legal advice,

01:57:03.360 | then now your files with your lawyer

01:57:06.800 | can now be privileged information,

01:57:08.600 | privileged for attorney-client communication.

01:57:11.720 | And that is a good step that protects you from legal risk,

01:57:14.320 | and that is wise.

01:57:15.160 | So if you have a reason to believe that that's necessary

01:57:17.400 | or a good idea for you, that would be the case.

01:57:20.200 | Now, from a practical perspective also then,

01:57:23.200 | what you should do is quiz your lawyer accountant

01:57:28.320 | on what his or her standards are for information security.

01:57:33.320 | And so there are increasingly superior protocols here

01:57:38.600 | for security.

01:57:41.280 | And so you should quiz your lawyer accountant

01:57:46.280 | and find out, what do you do for data security?

01:57:49.120 | How do you protect your systems?

01:57:50.480 | How do you protect your computers?

01:57:52.200 | How do you protect your client's valuable information?

01:57:55.240 | And there should be something in place,

01:57:57.920 | what you're looking for is at least something.

01:57:59.800 | I don't think that in general,

01:58:01.280 | it's gonna ever be bulletproof or like airtight.

01:58:04.160 | No, there's always significant risks.

01:58:06.160 | All of us have big cybersecurity risks

01:58:08.080 | that are undealt with,

01:58:10.040 | even though we should and could deal with them.

01:58:11.960 | There are solutions out there, but we don't do them.

01:58:14.080 | But what you're looking for

01:58:14.920 | is at least somebody who's given some thought to it,

01:58:17.160 | at least somebody who has full disk encryption on a device.

01:58:20.360 | So if the device is stolen from his office,

01:58:22.520 | it doesn't immediately do that.

01:58:24.080 | Someone who's using good protocols

01:58:25.720 | and good secure storage mechanisms

01:58:27.840 | and has some way of holding keys and passphrases.

01:58:32.000 | And then you can also engage in good data hygiene yourself,

01:58:35.920 | and that would be important.

01:58:37.000 | So using the proper QuickBooks Online login

01:58:39.680 | rather than emailing stuff back and forth

01:58:42.120 | would be important.

01:58:44.280 | And so you're looking, I think, not for perfection,

01:58:47.040 | but you're looking for somebody

01:58:48.160 | who basically makes you feel good

01:58:50.040 | by the fact that he's thought about it,

01:58:52.440 | that he's got a plan in place, at least some kind.

01:58:55.920 | In reality, though, that was all the technical answer.

01:58:59.280 | The practical answer is it probably

01:59:02.600 | just doesn't matter that much,

01:59:03.920 | especially with what I think you were hinting at.

01:59:06.120 | If you print out a profit and loss statement

01:59:08.080 | of your business and a balance sheet,

01:59:10.480 | and you go trotting around accountant's offices

01:59:12.600 | and you start plunking that down,

01:59:15.040 | an hour after you leave,

01:59:16.560 | the accountant is not gonna remember any of the data

01:59:19.040 | just because it doesn't matter.

01:59:20.520 | And so I would say it's kind of like seeing people naked.

01:59:24.480 | If you walked into the office next door to you

01:59:26.480 | and there's a woman standing there naked,

01:59:27.800 | you're probably gonna remember that.

01:59:29.720 | But if you're a doctor and you see naked people

01:59:31.640 | standing in front of you all day long,

01:59:33.160 | it's just kind of, it's all the same.

01:59:35.440 | It's another naked person.

01:59:36.800 | And so having been a financial advisor,

01:59:38.640 | the same thing basically happens with money,

01:59:40.800 | is that when I first started and like,

01:59:42.360 | oh, wow, now I know how much money someone earns.

01:59:45.080 | After a time, you just entirely stop caring.

01:59:47.320 | You're completely immune to it.

01:59:48.880 | And unless there's something that's radically different,

01:59:51.640 | you just, it's just another person.

01:59:53.320 | And it's not like it's impressive or memorable.

01:59:56.040 | So I don't think there's much risk of you walking around town

01:59:58.680 | and taking out your balance sheet

02:00:01.440 | and your profit and loss statement and talking about it

02:00:03.560 | and sharing what you're looking for.

02:00:05.600 | But if you want the protection,

02:00:07.760 | the technical answer is lawyer accountant.

02:00:10.080 | - Okay, yeah, I think the,

02:00:14.880 | I appreciate both of the technical and the real answer.

02:00:17.640 | I think the concern is we haven't entered

02:00:21.160 | into a formal business relationship with this person.

02:00:24.280 | And I was wondering if, in your opinion,

02:00:25.960 | that is necessary before we share anything.

02:00:28.200 | - No, I don't even know what that would mean.

02:00:30.520 | - Yeah, I'm not sure either.

02:00:35.720 | I guess that's where the question's coming from,

02:00:37.440 | is what is normal here since it's my first bet,

02:00:40.080 | first go around with this as an entrepreneur.

02:00:43.200 | - I would say what you should try to do

02:00:44.480 | is to get as clear as possible on what you're looking for.

02:00:47.400 | So are you looking for tax preparation?

02:00:49.440 | That's very different than I'm looking

02:00:51.000 | for proactive business advice or proactive tax advice.

02:00:54.480 | So get an idea of what you're looking for

02:00:56.400 | and then go and start interviewing people.

02:00:58.080 | And then I would just share kind of big picture numbers.

02:01:02.000 | We have a business that does X amount of dollars in revenue.

02:01:04.520 | We have profit margins of about this much.

02:01:06.800 | We have this number of employees.

02:01:08.280 | Here's what we're trying to accomplish.

02:01:09.640 | We're trying to get this, this, this.

02:01:11.440 | What could you offer?

02:01:12.440 | How could we work together?

02:01:13.760 | And I don't see why there would be

02:01:15.000 | any kind of formal agreement

02:01:17.240 | before you would have those conversations.

02:01:19.400 | - We've had some of that conversation already.

02:01:24.120 | It is gonna be a lot of tax related stuff

02:01:27.480 | since this is still a sole proprietorship.

02:01:29.640 | So that's definitely the starting point.

02:01:34.280 | - Good, so I don't think you're disclosing

02:01:39.400 | huge amounts of information there.

02:01:41.240 | And I don't think there's a big risk.

02:01:43.280 | If you want to have it iron tight,

02:01:46.240 | then do all of this consultation with a lawyer.

02:01:49.000 | So for example, if you're a sole proprietor

02:01:51.480 | and you're thinking about,

02:01:52.520 | should I establish a corporation?

02:01:54.200 | That's a legal question.

02:01:55.640 | Now, obviously your accountant will comment on it,

02:01:57.720 | just like I used to comment on it,

02:01:59.240 | just like I comment on it when people call me and ask me.

02:02:02.120 | But technically speaking, that's a legal question.

02:02:04.520 | You should have an understanding of the tax considerations,

02:02:06.960 | but that's a legal question.

02:02:08.680 | And so you would engage the services of a business lawyer

02:02:11.520 | to give you specific advice.

02:02:13.000 | And then in that context, when you engage the lawyer,

02:02:18.000 | then you will have attorney client privilege

02:02:21.120 | for your privileged business information.

02:02:23.240 | - Okay, got time for one more?

02:02:27.040 | - Sure, go ahead real quick.

02:02:29.160 | - So we are eligible for a grant for our business.

02:02:32.640 | And the terms of that grant allow us to pay ourselves back

02:02:36.080 | for costs that we've incurred in the past for the business.

02:02:41.760 | Would it make sense to keep the funding from the grant

02:02:46.560 | for future business expenses,

02:02:47.960 | or to pay ourselves back for things

02:02:49.560 | that we've paid out of pocket?

02:02:51.120 | - Do you see a reason to pursue one path or another?

02:02:56.480 | - Refilling our coffers a little bit,

02:03:01.800 | since we've paid it, everything personally so far,

02:03:04.160 | due to the nature of the business,

02:03:05.200 | which operates out of our house.

02:03:08.000 | But I could see value in just kind of holding that

02:03:12.520 | for improvements to the business,

02:03:15.800 | growing the business in the future,

02:03:17.760 | and we don't have an immediate need for the money

02:03:19.520 | if we were to reimburse ourselves.

02:03:21.760 | Maybe that's my answer.

02:03:23.160 | - Yeah, I think if you don't see a way

02:03:26.800 | to actively use it in the immediate future,

02:03:29.160 | then filling the personal coffers,

02:03:31.680 | including things like making sure

02:03:33.280 | that you're making retirement account contributions,

02:03:35.760 | things like that, I think are important.

02:03:38.240 | Every calendar year that passes,

02:03:40.200 | you lose the ability to make

02:03:41.440 | a retirement account contribution.

02:03:43.360 | And as a business owner,

02:03:44.520 | you really don't wanna miss those, if at all possible,

02:03:47.520 | because that's what keeps you going

02:03:49.840 | if your business goes into bankruptcy.

02:03:52.000 | That's what allows you to start again,

02:03:53.680 | is having money in your retirement accounts.

02:03:55.840 | So even if the terms of the grant

02:03:59.120 | didn't allow you to actually make

02:04:01.160 | a retirement account contribution,

02:04:02.920 | but if it does allow you to pay yourself back,

02:04:04.640 | then pay yourself back, lower your current income

02:04:07.120 | so that you can defer into retirement accounts,

02:04:08.800 | things like that.

02:04:09.960 | Now, if we're talking about

02:04:10.880 | significantly more money beyond that,

02:04:12.680 | I would again go back to, I think,

02:04:14.160 | the good framework here is to think about bankruptcy planning.

02:04:17.440 | If I went through bankruptcy, what would be available?

02:04:19.680 | So if you live in a state that allows you

02:04:22.720 | to have a high homestead exemption

02:04:24.720 | on your personal residence, well, pay down your mortgage.

02:04:27.520 | And then if you need the money to expand the business,

02:04:29.760 | you could always choose to go out

02:04:30.920 | and refinance the mortgage in the future.

02:04:33.400 | And again, speaking conceptually here

02:04:35.160 | about the value of bankruptcy-proof assets

02:04:39.040 | for a business owner as being a really valuable thing

02:04:41.920 | to think about, not giving specific advice

02:04:44.720 | about you paying down your 2.7% mortgage

02:04:46.840 | to refinance it at 9% in the future

02:04:48.400 | when you need the money out.

02:04:49.760 | But beyond that, I mean, taking profits

02:04:53.000 | and actually having made money

02:04:54.640 | if it's in the terms of the grant is always a good idea,

02:04:57.800 | but you're gonna wanna expand.

02:05:00.880 | And so having the money available to you

02:05:02.680 | for expansion is good.

02:05:04.720 | So I could argue both ways.

02:05:06.200 | I would focus on what I said of retirement accounts

02:05:08.760 | or other exempt assets as a way

02:05:10.600 | of just kind of leveraging yourself up a little bit

02:05:13.520 | and making sure you're building on a solid foundation

02:05:16.400 | and then look for ways to invest it to grow the business.

02:05:19.600 | - Okay, perfect, I appreciate it.

02:05:23.320 | - My pleasure.

02:05:24.400 | Fun questions.

02:05:25.240 | That concludes our Friday Q&A show for today.

02:05:27.640 | Really interesting set of questions.

02:05:29.240 | I thank you for the interesting discussion.

02:05:32.080 | As always, I had two or three other callers that came on,

02:05:34.640 | but I guess I didn't get to them.

02:05:35.720 | So just know that generally I get to you.

02:05:37.920 | I work through everyone who's on the line,

02:05:39.200 | even if it takes a while.

02:05:40.360 | And remember, if you'd like to join me on next week's show,

02:05:42.000 | go to patreon.com/radicalpersonalfinance,

02:05:44.080 | patreon.com/radicalpersonalfinance.

02:05:46.200 | That will gain access for you to next week's Q&A show.

02:05:49.000 | Have a great weekend.

02:05:50.560 | - Boldly searching for your next used vehicle?

02:05:53.280 | With CarMax, you don't have to settle on anything

02:05:55.680 | when it comes to your ride.

02:05:57.240 | Instead, steer clear of the ordinary

02:05:59.840 | and buy the car that's right for you.

02:06:02.160 | Because CarMax makes it easy to stop settling

02:06:05.040 | and find a car you'll love today.

02:06:07.640 | Start shopping now at carmax.com.

02:06:10.600 | CarMax, the way car buying should be.

02:06:13.280 | you

2024-07-19_Friday_QA