2024-09-09_Save_to_Pay_Cash_For_Your_First_House
00:00:00.500 | When you're in winter's favorite town,
00:00:05.160 | the snow-covered mountains surround you,
00:00:09.800 | a historic Main Street charms you,
00:00:14.520 | and every day brings a new adventure.
00:00:17.120 | Welcome to Park City, Utah, naturally winter's
00:00:23.800 | favorite town.
00:00:26.680 | Join the experience at visitparkcity.com.
00:00:30.320 | Welcome to Radical Personal Finance,
00:00:31.440 | a show dedicated to providing you with the knowledge,
00:00:33.000 | skills, insights, and encouragement you need
00:00:34.960 | to live a rich and meaningful life now,
00:00:37.040 | while building a plan for financial freedom
00:00:38.520 | in 10 years or less.
00:00:39.820 | My name is Joshua Sheets, I'm your host,
00:00:41.360 | and today we're gonna deal with one of those topics
00:00:43.440 | that is absolutely a core component of financial freedom,
00:00:47.100 | as we continue our podcast series called
00:00:49.080 | Financial Goals That Everybody Should Set.
00:00:51.600 | And today I wanna try to persuade you to set a goal
00:00:54.720 | to buy a debt-free house.
00:00:58.600 | And ideally, to buy your first house debt-free,
00:01:02.740 | meaning with cash.
00:01:04.560 | Now, for many of my listeners, it'll be too late for that,
00:01:07.880 | because you've already bought a house,
00:01:09.200 | and you bought a house with a mortgage, and that's fine.
00:01:11.880 | We can talk at another time about the value
00:01:14.120 | of paying off a mortgage.
00:01:15.920 | But if you have children, or if you have grandchildren,
00:01:18.960 | or you have nieces and nephews,
00:01:20.000 | or if you have young people that you like,
00:01:21.800 | I wanna persuade you to try to talk to them
00:01:24.220 | to set a goal of paying cash for their first house.
00:01:29.220 | In the previous podcast episode in this series,
00:01:31.380 | we talked about the value of buying a house,
00:01:33.940 | and how buying a house can so many times
00:01:37.100 | form a foundation to your financial life
00:01:39.380 | that is enormously powerful,
00:01:40.900 | and it can be an incredibly valuable financial asset
00:01:43.580 | for you to own.
00:01:44.620 | And I'm not saying that nobody
00:01:46.580 | should ever take out a mortgage.
00:01:47.820 | I think that buying a house with a mortgage
00:01:49.900 | is better than not buying a house at all.
00:01:52.180 | But the spirit of this podcast series is to say
00:01:55.040 | that a lot of times we can achieve the goals
00:01:58.200 | that we set for ourselves.
00:01:59.860 | But one of the reasons we don't achieve more goals
00:02:02.540 | is because we don't have the creativity
00:02:04.980 | or the vision to set goals that we believe in,
00:02:08.820 | yet goals that are ambitious and take us to a higher level.
00:02:11.860 | And I believe this is one of those goals.
00:02:13.620 | And so I wanna persuade you, especially if you are young,
00:02:16.380 | I wanna persuade you to set this goal.
00:02:19.500 | Now, this is not a goal that I had when I was younger,
00:02:21.820 | but I wish I had.
00:02:23.180 | And this is a goal that I wish to impart to my children
00:02:26.460 | because I believe it can provide a powerful foundation
00:02:31.460 | for a phenomenal life that really balances
00:02:36.060 | the needs of life, the experience of life,
00:02:40.380 | and building a positive lifestyle for yourself
00:02:43.700 | and for your family with long-term financial accumulation.
00:02:48.260 | Years ago, I read a book by an author named Steve Maxwell,
00:02:53.260 | and the book was called "Buying a House Debt-Free."
00:02:56.460 | I interviewed Steven Maxwell on the podcast.
00:02:58.980 | So I will look up that podcast episode
00:03:01.960 | and link you back to the previous episode
00:03:03.660 | if you'd like to listen to the interview with him.
00:03:05.900 | It was an okay interview.
00:03:07.580 | If my memory serves, it wound up being more personal
00:03:09.960 | rather than action-oriented,
00:03:11.260 | which is what I wanted to cover
00:03:12.740 | and what I still wanna cover.
00:03:14.180 | But in the book, "Buying a House Debt-Free,"
00:03:16.380 | Maxwell describes the story from his family
00:03:19.900 | of how he inspired and taught his children
00:03:24.640 | to save money towards the purchase of a house.
00:03:28.220 | And in fact, all of his sons, I think he has four sons,
00:03:31.540 | all of his sons during their 20s, before they were married,
00:03:36.380 | were able to pay cash for their first house.
00:03:41.020 | Some of them bought a house very early,
00:03:44.340 | some as young as 19 or 21.
00:03:47.300 | I think the latest of them bought a house at about age 29,
00:03:51.000 | and the price range of the houses
00:03:53.060 | varied from a little under $100,000
00:03:55.900 | to one being somewhere between $200,000 and $300,000
00:03:58.940 | if my memory serves correctly.
00:04:01.020 | And when I read that book, I realized that, wait a second,
00:04:04.860 | this is actually not that difficult of a formula,
00:04:08.260 | that many young people, if they were inspired and motivated
00:04:12.300 | and had a guide and a mentor to show them how,
00:04:14.900 | absolutely could save money and pay cash
00:04:19.120 | for their first house.
00:04:21.060 | Let's go through a little bit of math so you understand it.
00:04:24.020 | Maxwell's basic formula that he taught his children
00:04:27.580 | was, number one, to work during school.
00:04:32.380 | They were a homeschooling family,
00:04:33.580 | they homeschooled all their children
00:04:34.840 | all the way through high school.
00:04:36.380 | And as part of their homeschooling,
00:04:38.280 | they would do their coursework probably in the morning,
00:04:41.780 | and then they encouraged all of their children to get jobs
00:04:45.540 | or to build businesses in the afternoon.
00:04:48.660 | And by the way, as a homeschooling advocate,
00:04:51.700 | this has been one of my favorite reasons to homeschool.
00:04:55.260 | I think that the use of the extended school day
00:04:57.660 | is often enormously inefficient for young people,
00:05:00.300 | and we want to get some of that time back.
00:05:03.300 | And it's not hard at all to finish
00:05:06.820 | a standard school curriculum for a normal student
00:05:10.980 | in about three to four hours a day of actual work.
00:05:14.660 | What happens is that most students
00:05:16.660 | spend eight hours of their day,
00:05:18.700 | and only three or four hours is actually,
00:05:21.060 | excuse me, most students who are going to school
00:05:22.660 | have eight hours of their day
00:05:24.100 | sucked up by their school obligations,
00:05:25.860 | but only about, say, three or four hours of it
00:05:28.200 | is actually productive.
00:05:29.860 | When you're homeschooling,
00:05:30.820 | you can just do the productive three or four hours,
00:05:33.100 | and you can be done by noon.
00:05:34.640 | When I was younger, in my own family,
00:05:37.220 | we were homeschooled from 8 a.m. till noon,
00:05:39.140 | had some homework in the afternoon on occasion,
00:05:41.760 | but four hours a day of a focused student
00:05:44.020 | is pretty doable.
00:05:45.420 | Now, if you're finished with school every day by noon,
00:05:48.060 | and you're an active young teenager,
00:05:51.020 | especially one who's able and willing to go
00:05:53.620 | and get a job or start a business,
00:05:55.940 | all of a sudden now you have
00:05:57.140 | a dramatically higher earning potential
00:05:59.780 | than many other students who have their entire day
00:06:03.440 | taken over by school obligations.
00:06:05.820 | So let's figure out what the earning potential
00:06:08.140 | of a teenager might be,
00:06:09.540 | even if a teenager is earning a relatively basic wage.
00:06:14.140 | Now, I don't know exactly what number
00:06:15.940 | you want to choose for this,
00:06:18.260 | but I'm gonna use an average hourly earnings
00:06:21.780 | of about $15 an hour.
00:06:23.900 | I think that if you think of many "teenager jobs,"
00:06:28.100 | someone manning an ice cream shop
00:06:30.540 | or working at a fast food restaurant,
00:06:33.100 | perhaps the starting wage might be $12 or $13 an hour
00:06:36.860 | in some areas.
00:06:38.300 | Perhaps in some areas it may be $10 an hour.
00:06:42.140 | I doubt that in your area it's that.
00:06:44.820 | I would guess that in most cases,
00:06:47.180 | $15 an hour would be a fairly reasonable number to use.
00:06:51.240 | At any rate, I'm not going to increase
00:06:54.860 | to account for cost of living increases and inflation
00:06:59.100 | or skill advancement or promotions.
00:07:00.980 | I'm just gonna use a flat earnings figure of $15 an hour.
00:07:05.220 | Let's assume that a student is able to work during school.
00:07:09.940 | Let's pretend that you homeschooled
00:07:11.820 | and your student was done by 12 or one o'clock.
00:07:14.380 | And let's assume that your student could do
00:07:16.220 | four hours a day of work every afternoon
00:07:18.700 | from say one o'clock p.m. to five o'clock p.m.
00:07:21.680 | Well, four hours a day, five days a week,
00:07:24.260 | that's 20 hours per week.
00:07:30.780 | If someone is earning $15 an hour at 20 hours per week,
00:07:35.780 | that's a gross income of $300 per week.
00:07:39.740 | If that continues 52 weeks per year with no vacations,
00:07:43.460 | that would be $15,600 per year.
00:07:47.780 | So at four hours a day, five days a week,
00:07:50.580 | weekends totally free, we're at $15,600 per year.
00:07:55.140 | Take off a week or two of vacation,
00:07:56.620 | assume that there's no paid vacation.
00:07:58.580 | Let's just round that to $15,000 per year.
00:08:01.620 | Now, what if you did that all during high school?
00:08:06.300 | Well, assuming again, no increases, $15,000 per year,
00:08:10.300 | over the course of four years would be a total earnings
00:08:12.780 | of $60,000 during high school.
00:08:15.740 | Let's assume we continue that during high school years
00:08:18.600 | and the first four years after high school, college years.
00:08:22.240 | Well, now we're at about $120,000 of income earned
00:08:27.020 | from work, that is quite a lot of money.
00:08:31.140 | Now, what are the necessary expenses of this person?
00:08:34.120 | Well, here's where things can go very differently
00:08:37.540 | depending on the vision of the young person.
00:08:40.900 | If the young person has a vision for staying at home,
00:08:45.220 | living rent-free with mom and dad,
00:08:47.240 | keeping expenses very modest,
00:08:50.660 | spending only the necessary amount of money
00:08:53.700 | to live a reasonable lifestyle,
00:08:56.340 | then it's not unreasonable for a student
00:08:58.700 | who may be 20, 22 years old
00:09:01.160 | to have a hundred and something thousand dollars saved,
00:09:04.460 | even with just basic earnings.
00:09:07.540 | What does a teenager need to spend money on?
00:09:10.700 | He might need to purchase a little bit of clothing
00:09:13.360 | for himself, assuming that his parents
00:09:15.060 | aren't giving him the money for that.
00:09:17.020 | Obviously, different people have different clothing budgets.
00:09:19.480 | I would think that somewhere between 500 and $1,000 a year
00:09:22.980 | would be a very reasonable budget
00:09:25.220 | for a young person to be spending on clothing.
00:09:27.860 | The teen is undoubtedly gonna have some expenses
00:09:30.060 | for social activities.
00:09:31.100 | When I was in college, my budget was about $200 a month
00:09:34.140 | for social activities.
00:09:35.620 | So let's call it two to $3,000 a year
00:09:37.860 | for social activities for a frugal teen.
00:09:40.460 | Let's assume that the teen needs some transportation.
00:09:43.060 | Ideally, he or she should wait and not buy a car
00:09:46.880 | if it can be avoided, if he can arrange his lifestyle
00:09:49.820 | so that he doesn't need a car, that would be ideal.
00:09:52.400 | But if you need some wheels, four or $5,000
00:09:55.700 | for a reasonable vehicle, I think would be fine.
00:09:58.120 | There's gonna be some driving expenses,
00:10:00.140 | the insurance expenses, and then we move to things
00:10:03.420 | like educational expenses,
00:10:04.900 | which I'm gonna deal with separately.
00:10:06.780 | The point is that even a student
00:10:08.800 | who's working a modest amount,
00:10:10.900 | if he has a vision to save money towards a specific goal,
00:10:15.820 | a big goal that will motivate him to accumulate money
00:10:20.700 | and continue to express frugality,
00:10:23.400 | then accumulating $100,000 is not that difficult,
00:10:27.840 | even just on 20 hours per week.
00:10:30.440 | Now, let's assume that we wanted to increase it a little bit
00:10:33.160 | or adjust the numbers a little bit.
00:10:35.840 | Let's assume that this teen were willing to work more
00:10:38.840 | than what I've described.
00:10:40.540 | Let's keep four hours a day during the school year
00:10:43.260 | and a full 10-hour day on Saturday as our work schedule.
00:10:49.040 | I don't think this is unreasonable, by the way.
00:10:51.680 | At one point, when I was in college
00:10:53.760 | for a year and a half, about a year,
00:10:57.440 | during the school year, I had three different jobs
00:11:01.520 | and I did a schedule something like this.
00:11:03.160 | My first job was an on-campus work-study job
00:11:06.160 | where I just had some random bird brain job on campus
00:11:10.160 | where I worked for a few hours a day
00:11:12.520 | and did that about four days a week.
00:11:15.920 | Then on Thursday nights, Friday nights, and Saturday nights,
00:11:19.840 | I had a job running a bicycle rickshaw
00:11:22.480 | where I was pedaling a bicycle taxi
00:11:25.540 | in the downtown area where I went to school.
00:11:28.200 | Thursday nights, I would go out from about six o'clock
00:11:30.080 | till 10 or 11 o'clock.
00:11:31.800 | Friday nights, I would work from about five or 6 p.m.
00:11:34.920 | till about 2 a.m., and then Saturday night, same thing,
00:11:37.420 | about five or 6 a.m. till about 2 a.m.
00:11:39.800 | And then on Saturdays during the day at that season of life,
00:11:42.920 | I had a construction job where I would work
00:11:45.400 | from about 8 a.m. till about 4 p.m.
00:11:48.320 | Then I would take a shower, change,
00:11:50.320 | and go to my next job on Saturday night.
00:11:52.720 | And I did that during the school year
00:11:53.920 | for pretty much an entire school year.
00:11:56.200 | So I've done it.
00:11:57.480 | I had Sundays off.
00:11:58.840 | That was when I did homework on Sunday afternoons,
00:12:00.840 | went to church on Sunday mornings, had plenty of time,
00:12:03.280 | other time during the week to do some homework
00:12:05.360 | on Mondays through Wednesdays, and it worked.
00:12:08.440 | It was okay, it was fine.
00:12:10.160 | So my point is I don't think that working 30 hours a week
00:12:14.560 | is an unreasonable number to use.
00:12:17.320 | So let's assume that our young student
00:12:19.080 | works 30 hours a week during the school year.
00:12:21.660 | School year is normally about 40 weeks per year,
00:12:24.640 | earning $15 an hour.
00:12:26.480 | During the summer, let's assume that he kicks it up
00:12:28.360 | and works 45 hours a week, either five nine-hour days
00:12:31.800 | or some eight-hour days during the weekend
00:12:33.720 | and some Saturday work, and again, earning $15 an hour.
00:12:38.120 | So his total annual earnings in that scenario
00:12:40.680 | would be $26,100.
00:12:43.380 | Do that over four years, you're at about $104,400.
00:12:47.880 | Do it over eight years, you're at $208,800.
00:12:51.460 | So I think it's perfectly reasonable
00:12:54.320 | that over the course of about eight years,
00:12:57.040 | a motivated, focused young man or woman
00:13:00.160 | could attend to his or her studies, could work,
00:13:03.560 | and still accumulate $100,000 or $200,000
00:13:06.520 | to purchase some form of a starter house.
00:13:09.720 | It's a totally doable thing.
00:13:11.840 | I haven't in any way made an unreasonable calculation.
00:13:16.340 | I think that this is the most basic reasonable thing
00:13:20.200 | that I could do.
00:13:21.240 | For example, I didn't take any creative license
00:13:24.880 | or teach any courses on how to get paid
00:13:27.160 | a lot more than $15 an hour.
00:13:29.180 | But I think that many, if not most, motivated young people
00:13:32.520 | with a little bit of coaching
00:13:33.880 | could certainly earn more than $15 an hour.
00:13:37.520 | If you develop some academic skill in an area
00:13:40.320 | and you start tutoring,
00:13:41.560 | I think easily you could earn double $15 an hour
00:13:44.200 | even as a high school student or a college student
00:13:46.360 | doing tutoring.
00:13:47.520 | I haven't focused on any skill acquisition
00:13:50.000 | to where you actually develop and build skills.
00:13:52.360 | And over the course of an eight-year calculation,
00:13:54.560 | I think that's a little ridiculous.
00:13:56.240 | I haven't shown you earning any kinds of certifications.
00:13:59.380 | One thing that Maxwell's children did really well
00:14:02.200 | was they focused a lot on computer certifications,
00:14:05.560 | IT certifications.
00:14:07.120 | And so his children developed skills
00:14:10.020 | taking IT certifications.
00:14:11.440 | And then they actually turned around
00:14:12.840 | and the young people themselves developed their own academy,
00:14:17.600 | teaching the necessary knowledge
00:14:19.120 | so that their students
00:14:20.400 | could earn their own IT certifications.
00:14:23.200 | One of Maxwell's daughters became an accomplished author
00:14:25.640 | and wrote quite a number of children's books
00:14:27.960 | that were marketed through their family's overall plan,
00:14:32.960 | their overall business and their brand.
00:14:36.000 | So there are quite a lot of things that young people can do
00:14:38.440 | that I haven't taken into account.
00:14:39.760 | And by the way, I didn't take into account
00:14:41.120 | even starting earlier.
00:14:42.480 | I assume that we're dealing here with a ninth grader,
00:14:45.040 | but I don't see any reason why seventh and eighth graders
00:14:48.300 | shouldn't have age appropriate jobs,
00:14:51.040 | especially that can lead towards them
00:14:53.120 | developing advanced skills.
00:14:55.160 | So if a teenager has a goal
00:14:58.040 | of accumulating a significant amount of money,
00:15:00.480 | a hundred or $200,000 to buy a house,
00:15:02.880 | it's very reasonable that that goal could be accomplished
00:15:06.680 | within six, eight, 10 years,
00:15:10.160 | even if he's not earning an extravagant amount of money.
00:15:15.160 | So why don't most teens accomplish this?
00:15:17.780 | Quite simply, in my experience, they don't have the goal.
00:15:23.200 | Instead, they look around and they see cool things to buy
00:15:26.680 | and they start spending money on cool things.
00:15:29.400 | They see fancy sneakers
00:15:31.420 | that are gonna give them social status and they buy them.
00:15:34.520 | They see cool hobbies that often wind up
00:15:37.560 | sucking significant amounts of money out of their budget.
00:15:40.640 | They buy fancy stuff that's not necessary,
00:15:43.520 | fancy cars, fancy gear,
00:15:45.560 | engage in all kinds of things
00:15:47.340 | that suck money out of the bank account.
00:15:49.760 | And then often, because teenagers don't have a big goal,
00:15:54.560 | if they have a choice between working
00:15:56.920 | for money they don't need
00:15:58.640 | and hanging out, doing something fun and interesting,
00:16:02.500 | then it's easy to choose the thing that is fun
00:16:05.300 | and interesting rather than the thing that is hard,
00:16:07.620 | namely work.
00:16:09.180 | So understand this clearly.
00:16:11.800 | If a teenager has a clear and compelling goal
00:16:14.620 | that has a big price tag,
00:16:16.540 | a price tag such as paying cash for a house,
00:16:20.340 | then he has a reason now to earn more money
00:16:24.100 | and to spend less money.
00:16:26.080 | And as a parent, you can support him in that process
00:16:30.140 | by helping him to develop his income,
00:16:32.660 | helping him to live very low cost
00:16:34.700 | by providing food and shelter for him.
00:16:37.260 | And you can be the catalyst
00:16:40.500 | for his establishing himself
00:16:43.380 | in a strong position as a young man
00:16:46.620 | or for your daughters as young women.
00:16:49.100 | Now, why might somebody want to actually achieve
00:16:52.140 | and accomplish this goal?
00:16:54.380 | Well, first and foremost,
00:16:56.060 | I think that it's transformative
00:16:59.500 | in terms of changing how somebody views
00:17:03.480 | his or her capacities in life.
00:17:06.420 | When you set a big goal and you achieve it,
00:17:09.180 | it transforms fundamentally who you are.
00:17:12.900 | Longtime listeners of "Radical Personal Finance"
00:17:14.780 | have heard me many times tell the story
00:17:17.300 | of how I paid off my student loans
00:17:19.140 | before I graduated from college.
00:17:21.020 | I feel a little ashamed to keep telling the story,
00:17:23.100 | but you can tell that it was a transformative experience
00:17:26.380 | in my life.
00:17:27.460 | I read Dave Ramsey's book.
00:17:28.860 | After a few readings, I said, you know what?
00:17:30.620 | Dave's right, I'm gonna pay off my debt.
00:17:32.540 | And so I set a goal.
00:17:33.900 | I had no clue how I would accomplish it,
00:17:35.540 | but I said, I wanna see if I can pay off my student loans
00:17:37.740 | before I graduate.
00:17:38.980 | I still had a year and a half of college to pay for,
00:17:41.100 | so I needed to prioritize finishing
00:17:43.180 | my expensive tuition payments,
00:17:45.340 | but I wanted to save money and pay off my school loans.
00:17:48.620 | So I set a goal and I did it.
00:17:50.460 | Two weeks before I graduated,
00:17:51.660 | I paid off my student loans.
00:17:53.580 | That experience transformed my life.
00:17:55.820 | It taught me so much about my capacity,
00:17:58.700 | lessons that to this day I still hearken back to
00:18:02.780 | in my own thinking and in my own planning.
00:18:05.580 | Having the big goal gave me the reasons
00:18:08.860 | to organize my schedule, organize my time,
00:18:12.260 | and it started to cause things to happen for me.
00:18:15.220 | For example, I switched from a low paying job
00:18:18.420 | that consumed a lot of hours to a higher paying job
00:18:21.260 | that consumed fewer hours of my time and paid me more money.
00:18:25.200 | That put me on the pathway towards achieving that goal.
00:18:28.620 | When I set the goal,
00:18:30.540 | then I had to figure out how to go to class and keep my job.
00:18:33.220 | I had a 40 hour a week job.
00:18:34.740 | And so I went to my boss and I said,
00:18:36.700 | would you be willing to allow me to work flexible hours?
00:18:39.060 | And he said, well, show me how you can do that.
00:18:42.240 | Show me how you could go to school,
00:18:44.440 | take your classes and accomplish your work
00:18:47.980 | that I'm paying you for.
00:18:49.380 | So I had to sit down and create a time budget
00:18:51.420 | and I made a spreadsheet and I accounted
00:18:52.800 | for every hour of my weekly schedule.
00:18:55.100 | And what I found out was when I made a weekly schedule
00:18:57.740 | that included my classes, homework time for each class,
00:19:01.740 | driving back and forth, time for social activities,
00:19:06.000 | time for work, all of the stuff that I needed to do,
00:19:08.860 | there was plenty of time for me to do all of those things
00:19:11.820 | without any problems.
00:19:13.380 | So I worked 40 hours a week.
00:19:14.820 | I took 19 hours of class.
00:19:16.180 | I got straight A's.
00:19:17.340 | I saw my family.
00:19:18.220 | I went to church.
00:19:19.060 | I had socializing time built in
00:19:20.980 | on Friday night and Saturday night.
00:19:22.780 | And I studied on Sunday afternoons
00:19:25.060 | and it all was fine.
00:19:26.860 | And to this day, that is a lesson
00:19:28.660 | that I cannot get away from.
00:19:30.460 | In addition, things started to happen
00:19:32.100 | because I had a clear goal that really helped.
00:19:35.180 | My boss gave me just free money,
00:19:37.140 | wrote me a scholarship and said,
00:19:38.500 | "Hey, here's extra,"
00:19:39.740 | I can't remember if it was three or $4,000,
00:19:41.660 | "and here's some extra money to help you
00:19:43.420 | in your pursuit of your goals."
00:19:46.980 | And so things started to happen.
00:19:48.900 | It was a transformative experience
00:19:50.580 | because it was the first time I set a big goal
00:19:53.220 | and accomplished it.
00:19:54.140 | Now imagine you going through that.
00:19:57.540 | Imagine your son, your daughter going through that
00:20:00.100 | at a young age.
00:20:01.540 | And imagine now the confidence that comes
00:20:04.660 | from knowing, yeah, I got this.
00:20:07.260 | I got this, even at a young age.
00:20:10.260 | See, young people, we spend all of our time
00:20:12.940 | focused on academics, which I'm hugely in favor of,
00:20:16.460 | but not to the exclusion of finances.
00:20:19.100 | I think the finances can be really transformative.
00:20:22.620 | Now, in addition, imagine the security and the options
00:20:25.780 | that having this money opens up for your child
00:20:29.180 | while he or she is saving the money
00:20:31.700 | on the pathway to buying a house.
00:20:34.500 | Instead of being flat broke in high school,
00:20:37.300 | your child or you or whomever you're engaged with
00:20:40.500 | is accustomed to having thousands
00:20:42.260 | or tens of thousands of dollars accumulated.
00:20:44.700 | That completely transforms the psychology of a teenager
00:20:48.340 | to know that I did this.
00:20:50.460 | I earned and saved these tens of thousands of dollars.
00:20:54.660 | Imagine, as a young man or a young woman,
00:20:57.540 | you got $100,000 in your bank account.
00:20:59.900 | You're 21 years old, 23 years old, 25 years old.
00:21:03.700 | You're now in the top quartile, top 40% or 30,
00:21:08.700 | I don't know the number off the top of my head.
00:21:10.540 | You're in the top part of society.
00:21:12.540 | Imagine the other things that are available to you
00:21:15.140 | that weren't before.
00:21:16.780 | Now, if you want to move to take a better job,
00:21:19.620 | you don't have to go and borrow money from dad to move.
00:21:22.580 | Now, if there's a really great school
00:21:24.620 | that you want to go to,
00:21:26.100 | but you don't quite have all the money,
00:21:27.660 | you've saved the money.
00:21:29.060 | Now, if there's an experience that you think is worth it
00:21:31.780 | and it requires you to buy some plane tickets
00:21:33.940 | or whatever it is, you've got it.
00:21:35.420 | Now, if you wanna start a business, you've got the money.
00:21:38.300 | Saving for a house doesn't mean
00:21:41.100 | that you actually have to be the one
00:21:43.460 | to buy the house in the year planned.
00:21:45.300 | The pathway towards the accomplishment of financial goals
00:21:49.420 | often has a lot of twists and turns.
00:21:51.540 | So maybe your 19-year-old is earning $15 an hour,
00:21:55.900 | but he realizes, you know what?
00:21:57.460 | If I bought my own truck and my own equipment,
00:22:00.860 | I could start this little part-time business here.
00:22:03.140 | And my hourly wage doing that would be 30 bucks.
00:22:06.740 | And I could double my income by just spending $7,000
00:22:10.980 | on gear and equipment.
00:22:12.380 | There's a great investment.
00:22:13.860 | Or imagine that your teen comes across
00:22:16.860 | something really cheap.
00:22:18.980 | Maybe it's an antique that she finds at a local store.
00:22:23.100 | Maybe it's vintage clothing that she rustles up
00:22:25.620 | in a local shop or finds at yard sales.
00:22:28.500 | Maybe he's flipping cars and gets a car dealer license
00:22:31.820 | and buys cheap cars and starts flipping them.
00:22:34.100 | Now we can start to grow the money through investment
00:22:36.140 | because he has investment capital saved.
00:22:38.660 | And he's not just now entirely dependent
00:22:40.700 | on a job to accomplish it.
00:22:43.220 | What I'm trying to demonstrate
00:22:44.340 | with the income earning numbers
00:22:47.020 | is that it's a reasonable to set a goal
00:22:49.860 | to save 100 or $200,000 for a house.
00:22:54.420 | That's a reasonable goal to set, even for a teenager.
00:22:59.060 | It's a big goal, but it's a reasonable goal
00:23:01.260 | because it can be done on earnings.
00:23:03.060 | But ideally, as your teen accumulates that capital,
00:23:06.860 | now he has a reason to learn about the management of capital,
00:23:10.940 | how to make it grow, how to invest it.
00:23:13.420 | Now let's move now to the actual accomplishment
00:23:15.860 | of the house, purchasing the house.
00:23:18.140 | One of the things that I, is my favorite thing
00:23:20.860 | about Steve Maxwell's book, "Buying a House Debt-Free"
00:23:24.640 | is that his sons were able to buy a house
00:23:27.460 | before getting married.
00:23:30.120 | Now imagine how joy-filled you would be as a parent
00:23:35.120 | to know that your son has purchased a home
00:23:39.320 | that he can bring his bride into
00:23:41.660 | and that their marriage starts
00:23:43.580 | on a financially stable foundation.
00:23:47.300 | When you're old and rich, having a mortgage on the house
00:23:50.160 | doesn't matter all that much.
00:23:52.660 | You've got the money, you can pay for it,
00:23:54.460 | you have other assets.
00:23:55.940 | But when you're young and just getting started
00:23:57.980 | and you're building a family,
00:23:58.980 | there's so much uncertainty in that time.
00:24:00.780 | And there's often so much stress that is incurred
00:24:03.380 | by having a lot of bills.
00:24:04.820 | But I can't imagine a young person or a young couple
00:24:11.020 | who, if they didn't have rent
00:24:14.500 | and they didn't have a mortgage payment,
00:24:16.740 | I can't imagine anyone who can't make it
00:24:20.040 | in that circumstance because paying for housing
00:24:22.100 | is usually our biggest budget category.
00:24:24.860 | So now you have opportunity,
00:24:27.300 | you can do things you otherwise wouldn't do,
00:24:30.860 | and you have stability.
00:24:32.860 | And that's what we want.
00:24:34.620 | I personally think that young people should have a goal
00:24:37.100 | to get married young.
00:24:38.160 | I think early 20s is ideal.
00:24:40.900 | Somewhere between 20, 22, 23, hopefully before 25.
00:24:45.380 | I think early 20s is the ideal time to get married.
00:24:48.460 | And so, and also I think that's a great time
00:24:51.180 | to start having children.
00:24:52.900 | The current plan we're on of waiting until 33 to marry
00:24:56.380 | and then planning to have a baby at 37
00:24:58.920 | just ain't working for most people.
00:25:00.860 | And that's a very painful reality.
00:25:03.060 | So when you listen to young people and you say,
00:25:05.380 | why aren't you having children?
00:25:06.980 | Why aren't you married?
00:25:07.980 | Again and again and again, they say money.
00:25:10.500 | Now, as you've heard from past podcast episodes,
00:25:12.900 | I don't believe that money is a legitimate objection
00:25:16.020 | to getting married or having children.
00:25:18.740 | I think that, but I understand that people say that it is.
00:25:22.060 | So let's get rid of that problem and let's buy a house.
00:25:25.420 | Let's make sure that a young man is able to have
00:25:28.820 | a paid off house that he can bring his bride home to.
00:25:31.940 | And he can do it at 19 or he can do it at 21
00:25:34.140 | or he can do it at 24.
00:25:35.300 | It's a doable goal.
00:25:37.060 | And that's something that will build
00:25:39.580 | the non-financial side of life in a really powerful way,
00:25:42.940 | much more so than just the financial side of life.
00:25:46.380 | I want to pivot now to a couple of additional points
00:25:48.940 | and provisos that I think need to be heard.
00:25:52.460 | Don't get too bogged down
00:25:54.260 | in the actual dollars and cents calculations.
00:25:57.700 | I'm giving you a simple example
00:25:59.100 | to try to demonstrate to a teenager
00:26:01.160 | in a way that I will with my own children,
00:26:04.060 | say you can make this happen.
00:26:07.460 | Now in your area,
00:26:08.900 | there may not be any $100,000 houses available.
00:26:12.380 | Your child may wind up going and living in San Francisco
00:26:16.900 | and that's fine.
00:26:18.660 | One of the reasons you start working towards a goal
00:26:20.580 | is because the clarity that comes with it
00:26:22.820 | can often make things happen serendipitously.
00:26:25.420 | I can well imagine a young man who saved $130,000,
00:26:30.300 | but who needs $250,000 to buy a reasonable house,
00:26:34.140 | being given a gift straight up of cash by his grandfather
00:26:38.660 | who says, "John, I've been watching you work
00:26:41.500 | and work towards this goal for eight years.
00:26:43.700 | Here's 70,000, here's $100,000
00:26:47.260 | to get you moved into that house."
00:26:49.020 | That's fantastic.
00:26:50.700 | I can also well imagine a young couple saying,
00:26:53.720 | "You know what, we've saved $150,000
00:26:56.820 | and it just doesn't seem like we should be living
00:26:59.260 | in a $150,000 house,
00:27:01.260 | but there's this nice 250 or $300,000 house over here.
00:27:05.260 | Let's go ahead and make a big giant down payment
00:27:07.340 | and get that thing
00:27:08.580 | and then pay it off really aggressively."
00:27:11.340 | That would be fine.
00:27:12.820 | In addition, I think it's also reasonable
00:27:15.280 | that this money could be used for other purposes,
00:27:17.940 | but having a goal, a goal that is clear and simple,
00:27:22.060 | not something fuzzy like,
00:27:23.980 | "Hey, someday you'll be 22 years old
00:27:25.860 | and you'll want to start a business."
00:27:26.880 | No, for young people especially,
00:27:29.940 | the goal is buy a house.
00:27:31.660 | It's simple, clear.
00:27:33.380 | And when you get to buy a house debt-free, excuse me,
00:27:35.940 | buy a house debt-free, it's simple and clear.
00:27:38.140 | That means that it's probably gonna be able
00:27:40.320 | to be executed on.
00:27:41.820 | And then when you get to 24 years old or 27 years old
00:27:46.100 | and you're trying to make those decisions,
00:27:47.700 | you can enter into a fresh counseling process
00:27:51.600 | to decide what should we actually do at this point in time.
00:27:55.500 | Having a big goal allows you to save the money
00:27:58.860 | that opens up other things in your life.
00:28:01.700 | Now, as I wrap up this show,
00:28:03.300 | I want to give one more caution or warning.
00:28:07.780 | I have a concern that the clarity and power
00:28:10.740 | of this particular goal may be so compelling
00:28:14.760 | that it may keep some students
00:28:17.300 | from pursuing things that have a longer term,
00:28:23.780 | higher payoff.
00:28:25.740 | I can well imagine one of my children latching on
00:28:29.100 | to the power and the beauty of this particular goal
00:28:32.300 | and saying, "I'm gonna do it.
00:28:33.980 | After all, no one does it, I'm gonna do it."
00:28:36.220 | And I can well imagine one of my children becoming obsessed
00:28:40.300 | with earning as much money now
00:28:42.140 | at the age of 15 as possible.
00:28:44.940 | That happens frequently.
00:28:46.540 | The problem is that things that a 15-year-old
00:28:48.860 | often does to earn money may keep the 15-year-old
00:28:53.420 | from doing the things that could result
00:28:55.380 | in earning a lot of money down the road.
00:28:58.620 | I pay a lot of attention to the teenagers in my life,
00:29:01.300 | and I like to see a teenager working a job.
00:29:05.540 | I think that's great.
00:29:06.900 | I think there are things that you learn about life
00:29:09.260 | and about yourself,
00:29:11.020 | working a job that you don't learn in other ways.
00:29:15.180 | And I think it's especially important
00:29:17.340 | that teenagers go out and get their own jobs
00:29:20.100 | and that they're the ones who choose the jobs
00:29:22.660 | that they're doing with parental permission
00:29:25.300 | and that they earn their own money.
00:29:26.740 | That's a really transformative experience
00:29:28.980 | in a young man or woman's life.
00:29:30.980 | However, I get really concerned
00:29:33.980 | if a teenager is working a low-level dead-end job
00:29:38.180 | for a long time.
00:29:39.900 | Now, I don't mean to be insulting.
00:29:41.740 | I mean to be practical and honest with what I'm saying.
00:29:44.340 | Recently, I was talking to a 17-year-old,
00:29:47.220 | and for almost a year,
00:29:48.100 | she had been working at a Chick-fil-A
00:29:49.900 | just as a front-counter service order-taker,
00:29:53.500 | and she was really enjoying her work.
00:29:55.460 | It was a great social outlet for her.
00:29:57.060 | She was making some money.
00:29:58.660 | Great.
00:29:59.580 | Then the Chick-fil-A closed for renovations,
00:30:01.740 | and she went and got a job at Dunkin' Donuts.
00:30:04.180 | And I opened my mouth and said,
00:30:05.420 | "Listen, I'm glad you've been working
00:30:07.220 | "at this job for a year.
00:30:08.580 | "I think that's wonderful.
00:30:10.060 | "I'm gonna be really sad if, for the next year,
00:30:13.120 | "you're still working in fast food."
00:30:15.500 | Why?
00:30:16.340 | Because she has enormous potential in academics
00:30:21.300 | and in the development of a career and high-value skills
00:30:26.300 | that would be totally wasted if she works
00:30:29.900 | in a fast food restaurant for the coming years.
00:30:34.680 | Now, the good thing is, I think, I hope,
00:30:36.900 | that she has learned that,
00:30:38.740 | that by interacting with some of her coworkers
00:30:41.980 | who are in a different social circle
00:30:43.900 | and a different social class than her,
00:30:45.940 | she's realizing that this might not be
00:30:48.420 | where I wanna be for 10 years,
00:30:49.900 | even though I can make 13.25 an hour,
00:30:53.060 | that, really, I wanna be somewhere different.
00:30:56.220 | And, by the way, also wonderfully,
00:30:58.700 | she got the job, made thousands of dollars,
00:31:01.480 | lost it all through frivolous living,
00:31:03.820 | and now has the pain of being broke.
00:31:05.860 | So that's a really good lesson for a teenager to learn.
00:31:09.420 | All of that is good.
00:31:10.920 | So I don't wanna say don't work a fast food restaurant job,
00:31:14.580 | but I wanna always caution against an excessive focus
00:31:17.640 | on making money now as compared to seeing the long-term,
00:31:21.780 | seeing the big picture.
00:31:23.540 | I believe that a motivated teenager with academic ability
00:31:28.540 | who focuses on his or her academics
00:31:32.020 | will go much, much farther, much, much faster
00:31:36.000 | than someone who goes out and gets a job
00:31:38.480 | to start making some basic wage.
00:31:42.100 | And this would be where I significantly disagree
00:31:45.380 | with Steve Maxwell and his book.
00:31:48.260 | Maxwell focuses a lot on homeschooling,
00:31:50.820 | on helping your children to be self-employed,
00:31:52.700 | and actively discourages his children, in the book,
00:31:55.940 | from attending college.
00:31:58.140 | I respect that position,
00:31:59.400 | but I think it's probably not the right one for most people.
00:32:03.260 | It worked out well for his sons.
00:32:04.820 | They all developed independent businesses,
00:32:06.500 | they became self-employed, they all met wonderful women,
00:32:09.080 | they all married and had children,
00:32:10.660 | but it didn't work out exactly the same for his daughters.
00:32:13.680 | They're all very accomplished.
00:32:15.100 | One is an author, others are in business.
00:32:17.420 | At least one has bought her own house.
00:32:19.600 | But two of his daughters, a few years ago,
00:32:23.380 | went ahead and went to college later in their 20s.
00:32:27.440 | And as far as I can tell from their public family blog,
00:32:29.940 | his three daughters, though they have money,
00:32:32.540 | remain unmarried.
00:32:33.980 | And I would guess that they would probably all desire
00:32:37.580 | to be married.
00:32:38.660 | And so we just need to be thoughtful
00:32:40.300 | and we need to make certain that we don't stay doggedly
00:32:44.140 | on one course just for this one goal.
00:32:47.960 | I can envision a super motivated teenager,
00:32:50.380 | working, working, working, working, 23 years old,
00:32:53.340 | buys a house, working, working, working,
00:32:55.880 | but now all of a sudden didn't get the academic credentials
00:32:59.940 | that really would have really been helpful.
00:33:03.220 | Or I can see the same young man or woman
00:33:05.820 | may have been so focused on saving money for a house
00:33:10.240 | that he or she didn't wanna spend money on college
00:33:12.500 | and now missed out on some of the social connections
00:33:14.900 | or other life experiences
00:33:16.540 | that would have been really useful.
00:33:18.240 | So set the goal, but be open to counsel
00:33:21.940 | and be open to insight.
00:33:23.540 | As for me, with my children, I want them to set the goal,
00:33:27.420 | but I want them to never turn away
00:33:29.300 | from academic accomplishment
00:33:31.260 | if they're academically oriented.
00:33:32.920 | Not all people are academically oriented.
00:33:35.260 | And so that doesn't need to be universal.
00:33:37.100 | But if a young man or woman is academically oriented,
00:33:40.400 | then I think that should be a primary focus,
00:33:43.840 | even if it means a slower path
00:33:46.240 | towards accumulating money for a house.
00:33:48.800 | So I hope this gentle caution
00:33:50.960 | comes through in an appropriate way.
00:33:53.000 | Set a goal of saving money for a house,
00:33:56.480 | but don't work, work, work at a fast food job
00:34:00.140 | and not study for a math test,
00:34:02.720 | when in reality you could be a world-class mathematician.
00:34:06.080 | And by the way, there's math competitions out there
00:34:08.600 | where literally they'll pay you $100,000 for winning them.
00:34:11.920 | At least in many, some of them are tens of thousands,
00:34:14.280 | but they're out there.
00:34:15.720 | So you can earn money on academics.
00:34:18.320 | There's competitions for every science, for every skill.
00:34:21.600 | If you're a great writer, submit your work to essay contests.
00:34:24.280 | You can make money on your academics.
00:34:26.120 | And that's to say nothing of the hundreds of thousands
00:34:28.480 | of dollars you can gain in college scholarships
00:34:30.720 | by being highly qualified with your academics
00:34:33.760 | or with your athletics or with some other area of talent.
00:34:37.520 | And don't be the guy who,
00:34:38.760 | and if you go through many years of school
00:34:42.460 | and you emerge in your mid or late 20s
00:34:45.400 | and you've got a medical degree or you've got a law degree
00:34:48.160 | and you only have $43,000 saved in your bank account,
00:34:52.040 | because, and you never had the money
00:34:53.340 | to pay cash for the house, guess what?
00:34:55.680 | It's gonna be fine.
00:34:57.000 | You're going to be able to quickly buy your house
00:35:02.080 | when you are working as a doctor, as a lawyer,
00:35:05.320 | as an engineer, as a highly qualified high income earner.
00:35:09.680 | So be thoughtful about it in the fullness of time.
00:35:12.680 | Set the goal, inspire young people to do it,
00:35:15.460 | do the math with them, help them do it
00:35:17.360 | because that big goal will have a transformative effect
00:35:19.840 | on their life.
00:35:20.780 | But recognize that some of these kinds of goals
00:35:23.960 | really need a little bit of thoughtfulness with it.
00:35:26.800 | I guess I'll give one more analogy here
00:35:28.520 | to try to emphasize this point.
00:35:30.800 | I would say that you should hold this goal
00:35:32.640 | similar to how you might hold a goal of getting married.
00:35:36.000 | If a son or daughter of mine comes and says,
00:35:39.080 | "Dad, I wanna get married by 23 years old."
00:35:42.360 | I'm gonna say, "Absolutely, that's fantastic."
00:35:46.200 | But I don't want a 22 year old coming and saying,
00:35:50.240 | "Hey dad, I didn't find anyone who was really great,
00:35:54.400 | so here's just some random person that I'm gonna marry
00:35:57.540 | because the most important thing
00:35:59.180 | is me being married by 23."
00:36:01.060 | I would say, "Whoa, whoa, whoa, whoa, whoa.
00:36:02.900 | It's fine to have a goal
00:36:04.580 | because if you have a goal of being married by 23,
00:36:07.900 | wonderful, that can be a transformative thing in your life.
00:36:10.780 | It causes you to say,
00:36:11.600 | "Well, how can I develop the qualities needed
00:36:13.820 | to attract a really high quality spouse?
00:36:16.580 | What characteristics do I need?
00:36:18.700 | How do I need to present myself?
00:36:20.260 | Where am I gonna find said prospective spouse?
00:36:22.940 | I'm gonna do the work to meet that person.
00:36:24.940 | I'm gonna do the work to be prepared for marriage,
00:36:27.200 | to be mature, to be strong, to be attractive."
00:36:29.980 | All that stuff.
00:36:31.060 | The goal is fundamentally helpful and a good thing to set,
00:36:36.060 | but you don't get to 22 years and six months
00:36:38.660 | and just randomly go out
00:36:40.720 | and pick the first one that'll have you
00:36:42.820 | because that'll have a long-term negative impact
00:36:45.740 | on your life.
00:36:46.760 | It's fine to sacrifice the goal of getting married at 23
00:36:50.420 | if you're 22 and there's no good quality candidate.
00:36:54.980 | Much better to wait until you're 39 or 72 to marry
00:36:59.040 | and marry a really great spouse
00:37:01.600 | than to marry poorly at 22.
00:37:04.320 | So I would say by analogy, kind of a similar thing here.
00:37:07.880 | Teach a young person to set the goal
00:37:10.100 | of paying cash for a house
00:37:12.520 | because it's a doable goal
00:37:14.440 | and it's a goal that will require a focus
00:37:17.240 | for a sustained focus and sustained effort
00:37:20.240 | for a long period of time,
00:37:21.520 | for five, 10, 15 years of work.
00:37:24.640 | But don't hold so doggedly to the goal
00:37:27.460 | that you just say,
00:37:29.140 | "I'm not gonna take this $100,000 out of my bank account
00:37:32.260 | and pay for law school
00:37:34.340 | when I really know that going to law school
00:37:36.060 | is a good idea for me because I have to buy the house."
00:37:38.380 | No, go to law school, get your legal certifications,
00:37:42.620 | then buy a house a few years later and take out a mortgage.
00:37:46.500 | Hope that little caution there
00:37:49.280 | doesn't unravel everything that I said
00:37:51.260 | in the first part of the show,
00:37:52.700 | but I believe it is important
00:37:54.260 | that especially with something that is so significant
00:37:56.260 | as what I've described,
00:37:57.380 | that we just have a little carefulness in our application.
00:38:00.860 | Thank you for listening to today's podcast.
00:38:02.420 | I'll be back with you soon.
00:38:03.820 | Hi, Derek Van Noolen from Freeway Honda.
00:38:05.820 | With over 200 Hondas available, we're dealing
00:38:08.100 | and get 2.9% APR limited term financing
00:38:11.100 | on select new 24 models.
00:38:12.900 | Had past credit problems?
00:38:14.100 | No problem.
00:38:14.940 | Come to Freeway Honda in the Santa Ana Auto Mall.
00:38:17.060 | ♪ Freeway Honda ♪