593-Lifestyles_of_the_Frugal_and_Obscure
00:00:00.000 | Don't just dream about paradise, live it with Fiji Airways.
00:00:05.000 | Escape the ordinary with Fiji Airways Global Beat the Rush Sale.
00:00:09.120 | Immerse yourself in white sandy beaches or dive deep into coral reefs.
00:00:14.040 | Fiji Airways has flights to Nadi starting at just $748 for light and just $798 for value.
00:00:21.160 | Discover your tropical dreams at FijiAirways.com.
00:00:24.920 | That's FijiAirways.com.
00:00:26.640 | From here to happy.
00:00:28.160 | Flying direct with Fiji Airways.
00:00:29.960 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:36.120 | skills, insight, and encouragement you need to live a rich and meaningful life now, while
00:00:40.800 | building a plan for financial freedom in 10 years or less.
00:00:44.560 | Today I'm going to talk to you about the lifestyles of the frugal and obscure.
00:00:50.680 | It sounds exciting, doesn't it?
00:00:53.760 | Lifestyles of the frugal and obscure.
00:00:55.160 | You know, they could make a TV show out of such a concept.
00:00:58.920 | In fact, I have seen some various videos of people who do enjoy showing off their frugality.
00:01:05.000 | Unfortunately, if one were to make a TV show about the lifestyles of the frugal and obscure,
00:01:09.680 | it would violate the second point of obscurity.
00:01:12.840 | You could make a TV show on the lifestyles of the frugal, but you couldn't really make
00:01:17.060 | a TV show on the lifestyles of the obscure.
00:01:20.800 | And yet I want you to consider this concept as a valuable outline for you to implement
00:01:26.580 | in your own life to help you become wealthy and stay wealthy.
00:01:31.040 | Let me give you the two-sentence summary of my thesis in today's show.
00:01:36.200 | Frugality is a pathway for you to become wealthy, and obscurity is a pathway for you to remain
00:01:43.640 | wealthy.
00:01:45.120 | These two concepts are important.
00:01:46.120 | There are different phases of wealth accumulation.
00:01:49.520 | You have to figure out how to create an income stream, and then you have to figure out how
00:01:53.680 | to turn that income stream into valuable investments.
00:01:56.480 | That's wealth accumulation, the wealth accumulation phase.
00:01:59.680 | And then after you've accumulated substantial or sufficient wealth, then you have to figure
00:02:03.480 | out how to preserve that wealth.
00:02:04.960 | That's the wealth preservation phase.
00:02:06.600 | This is where we talk about good investment planning, good asset protection planning,
00:02:10.360 | everything associated with wealth preservation.
00:02:12.680 | And then we move on to the wealth distribution phase, and that wealth distribution phase
00:02:16.920 | might include things like retirement distribution strategies.
00:02:20.920 | It might include things like estate planning.
00:02:22.720 | How do we avoid excessive taxation or excessive cost in distributing our estate to our heirs
00:02:27.320 | and descendants or other causes that we wish to support?
00:02:32.640 | And so wealth goes through these different phases.
00:02:35.080 | But in the early phases especially, frugality forms the cornerstone of your wealth building.
00:02:42.240 | Frugality is not optional.
00:02:44.840 | You must be frugal in order to become wealthy.
00:02:47.680 | Let me explain why.
00:02:49.400 | No matter how much you earn, if you are not frugal, you won't have any money available
00:02:57.160 | for you to invest.
00:02:59.000 | Thus, frugality is not optional.
00:03:02.640 | Now notice that frugality is a subjective word rather than an objective word.
00:03:08.040 | When I use the term frugality, you should immediately think about frugality in terms
00:03:12.960 | of scale.
00:03:14.360 | What is frugal for one person may not be frugal for another person.
00:03:19.000 | To give you an example, purchasing for somebody who is an aspirational spender, they want
00:03:26.000 | to spend at a high lifestyle.
00:03:27.560 | For that person, purchasing a $5 million home may not be a frugal expense.
00:03:33.320 | If that person doesn't have significant wealth, if they don't have large amounts
00:03:37.600 | of assets that are throwing off investment income for them, if they don't have a very
00:03:40.880 | high income, that $5 million home may be one of the most expensive and costly things they
00:03:46.440 | do.
00:03:47.440 | That is not at all frugal.
00:03:49.600 | But if you look at another person, for another person, owning a $5 million home may be an
00:03:55.280 | extremely frugal purchase, even though it doesn't look objectively like an inexpensive
00:04:01.300 | frugal home.
00:04:03.240 | In my experience, it's not uncommon to find young working couples that have a household
00:04:08.660 | income of perhaps $75, $80, $100,000.
00:04:13.240 | It's not uncommon to find young couples like this spending $200, $250,000 to $300,000 purchasing
00:04:19.560 | a home, at least where I'm from here in South Florida.
00:04:22.440 | That's just not unusual.
00:04:24.120 | This is not uncommon.
00:04:26.200 | But if you think about what that means in terms of wealth, then for that person, let's
00:04:30.120 | say that they're earning $80,000 per year and they are spending $300,000 on a home,
00:04:37.800 | they are spending what is equivalent to almost four years of income purchasing a house.
00:04:44.080 | And it's also not uncommon when people are purchasing this kind of house for them not
00:04:48.200 | to have any real significant savings.
00:04:50.360 | They may be enrolled in a 401k plan at work and have $10,000 or $15,000.
00:04:54.680 | They may have saved up a small down payment, but perhaps this is an FHA loan where they
00:04:58.960 | only had to come up with a 3% down payment.
00:05:01.320 | So maybe they're putting down $10,000, something along that range.
00:05:05.460 | So for this person, purchasing this $300,000 home is a fairly expensive thing when compared
00:05:13.960 | to their income and to their assets.
00:05:16.680 | Now let's turn it around.
00:05:18.520 | Let's say that somebody has a net worth of $20 million and they've accumulated this net
00:05:23.320 | worth over a course of years through business or through their own personal investments.
00:05:28.040 | And with this net worth of $20 million, let's just use a very simple, very conservative
00:05:32.280 | idea of the 4% rule.
00:05:34.280 | The 4% rule, meaning that this is producing $800,000, their $20 million portfolio is producing
00:05:40.760 | $800,000 of income.
00:05:42.920 | That would be extraordinarily conservative for such a significant portfolio.
00:05:47.640 | But this person has an $800,000 income.
00:05:50.560 | Now for them to go and to spend four years of their earnings, of their income on a house,
00:05:58.240 | that would put them in a price range of $3,200,000 of buying a house.
00:06:03.800 | So let me adjust it to, so we've got $20 million.
00:06:09.080 | Let's take 4% of that, $800,000, and let's make it the same 3.75 years of income.
00:06:14.760 | 3.75 years of income puts them at a $3 million house.
00:06:20.120 | So this person could take and go and spend, buy a $3 million house.
00:06:23.920 | But if you think about their net worth calculation, they still have $20 million set aside in investments.
00:06:31.680 | And so even though they might buy a $3 million house, which is equivalent in income to the
00:06:37.700 | working couple, it's actually an extremely frugal decision for them.
00:06:42.400 | This is why it's so important to be frugal, but to apply frugality, apply the lens of
00:06:46.800 | scale to all of your frugal decisions.
00:06:49.780 | But no matter your current income, no matter your current wealth, you must be frugal.
00:06:56.120 | If you are not frugal, you will lose your wealth.
00:06:58.840 | I repeat, if you are not frugal, you will lose your wealth.
00:07:04.640 | We can point to example after example after example, most prominently from the world of
00:07:10.960 | entertainment, from the world of large professional sports, from these types of people who come
00:07:16.480 | into huge amounts of money, but then they quickly inflate their lifestyle.
00:07:20.160 | And it's not uncommon to find these people who are quickly bankrupt.
00:07:24.240 | Now thankfully, usually if they've built up some kind of name recognition, they can
00:07:27.880 | amend their ways and earn huge amounts of money again to rebuild their wealth.
00:07:32.360 | But the lack of frugality will destroy their wealth.
00:07:35.160 | So you must be frugal to become wealthy.
00:07:38.320 | If you will practice frugality in your expenses, then over time you can become very wealthy.
00:07:46.000 | If you will practice frugality, over time you can become very wealthy.
00:07:51.040 | And the reason is the frugality, because it is subjective to your income and to your position
00:07:56.180 | in life and to your current lifestyle.
00:07:59.100 | As long as you are practicing frugality that is truly appropriate for your situation, that
00:08:04.040 | will free up investment income, that will free up savings, surplus cash that you can
00:08:09.640 | then invest and those investments can make you wealthy.
00:08:12.800 | And if you'll practice that throughout your entire lifetime, you can always be wealthy.
00:08:17.480 | Now the question is, why would you practice frugality?
00:08:21.440 | See, many people have this misunderstanding about those others who are frugal.
00:08:28.300 | Many people who are profligate spenders have a misunderstanding about people who are dedicated
00:08:33.400 | and diligent savers.
00:08:35.480 | The profligate spender very likely looks at the person who is a dedicated saver and believes
00:08:40.320 | that the dedicated saver is missing out on the great things of life.
00:08:44.800 | They believe that the dedicated saver is missing out on the joy of life.
00:08:50.240 | The raison d'être, the substance, the meaning that the spender gets from spending their
00:08:56.880 | money.
00:08:58.440 | What they don't understand is the saver looks at the world in an entirely different way.
00:09:04.320 | The saver doesn't look at the world and believe that they're giving up anything.
00:09:07.960 | Rather, the saver looks at the world and believes that they have a superior path to the person
00:09:13.440 | who is the spender.
00:09:16.240 | Now there can be a conversion of sorts.
00:09:19.560 | You can convert a spender into a saver.
00:09:21.640 | You can convert a saver into a spender if you can show them the value of a different
00:09:26.000 | path.
00:09:28.160 | But based upon what you value, you will probably make different decisions.
00:09:33.840 | Back to my theme for the show, lifestyles of the frugal and obscure.
00:09:39.900 | The desire to be rich and famous, the desire to have a high social standing, will often
00:09:48.720 | lead to extravagant spending.
00:09:53.320 | And unfortunately, the idea of being rich is often against the idea of being famous.
00:10:01.560 | I'm not saying this is an absolute ironclad rule.
00:10:03.840 | Of course there are people who are both rich and famous.
00:10:07.160 | But there are a lot of people who are very interested in being famous who don't wind
00:10:11.500 | up being rich.
00:10:14.140 | Now if you value status, your social standing, your social status, or how you are perceived
00:10:21.280 | by others, if those are high personal priorities for you, it'll be very difficult for you
00:10:27.340 | to become wealthy.
00:10:30.140 | So you should think carefully about committing yourself to that high social status.
00:10:34.880 | Usually, achieving high social status involves some significant spending, especially in consumer-oriented
00:10:43.120 | cultures.
00:10:44.120 | In value-oriented cultures, where your value is based upon the good work that you do or
00:10:49.840 | the good character you have, then you can achieve high social status based upon those
00:10:56.080 | character qualities.
00:10:57.880 | Unfortunately, the United States of America is a very consumer-oriented culture, and we
00:11:03.200 | minimize the value of character, ethics, and we maximize the value of beauty and flash
00:11:11.920 | and appearances.
00:11:15.520 | Now my hope is that this will change in time, but if it's changing, it certainly seems
00:11:19.880 | very slow at the moment.
00:11:23.200 | One of the biggest challenges, especially in US American culture, is the prioritization
00:11:28.080 | of youth.
00:11:29.200 | There are some cultures where people look forward to aging because of the increased
00:11:33.600 | respect that they receive in the community.
00:11:36.420 | They look forward to being an honored and respected person.
00:11:39.560 | The United States is almost the exact opposite, where we look down on people as they age,
00:11:44.880 | and we prioritize youth and beauty.
00:11:48.120 | So if you're going to practice frugality, you will have to consciously choose a different
00:11:53.800 | value system.
00:11:56.080 | For example, you might be very motivated to practice frugality if you value being wealthy.
00:12:01.560 | Not looking wealthy, not looking rich, but being rich, being wealthy.
00:12:09.020 | You might practice frugality much more easily if you value freedom of choice, the ability
00:12:15.520 | to do whatever you want to do when you want to do it, the ability to look your boss in
00:12:20.560 | the face when they give you an unethical assignment and say, "That's it.
00:12:23.840 | I'm done.
00:12:24.840 | I don't need you.
00:12:25.840 | I don't need this work."
00:12:27.280 | If you value personal freedom, financial freedom, then these values might lead you to practice
00:12:34.280 | frugality.
00:12:38.080 | So lifestyles of the frugal and obscure, well, frugality can lead you to becoming wealthy.
00:12:45.440 | Ironic, isn't it?
00:12:47.380 | The more you practice frugality, the richer you can become.
00:12:54.180 | Lifestyles of the rich and famous often results in people being famous and losing their wealth.
00:13:01.220 | Lifestyles of the frugal, on the other hand, often lead to people being rich, being wealthy.
00:13:09.620 | Now what about obscurity?
00:13:12.060 | Obscurity is a slightly more difficult topic, but this does go back to values.
00:13:18.280 | The ironic truth is that obscurity leads more easily to the accumulation of greater wealth
00:13:26.460 | and it leads to the maintaining or preservation of great wealth.
00:13:31.780 | Now, let me give you an example, and perhaps this will show you the importance of this
00:13:40.020 | practice.
00:13:41.020 | And I'm going to start with a kind of a silly example and try to use it as an object lesson
00:13:45.540 | to come to some more practical discussions.
00:13:49.560 | Most of my listeners are US Americans.
00:13:51.740 | I'm very fortunate to have a good number of international listeners, and most of those
00:13:54.980 | international listeners come from wealthy Western nations.
00:13:58.560 | So this is applicable in those nations as well.
00:14:00.660 | But in the United States of America, we're very fortunate, most of us, to live in a very
00:14:04.660 | safe society.
00:14:06.700 | And thus we don't really worry too much about ostentatious displays of wealth.
00:14:10.100 | At least we don't worry in terms of physical danger.
00:14:14.820 | But that's not always true.
00:14:16.340 | Consider this.
00:14:17.580 | Think about the bad part of town where you live, the part of town where you live where
00:14:22.080 | the most crime occurs.
00:14:25.260 | Would you really want to dress up in fancy-looking clothes, adorn your wrist and your neck with
00:14:31.900 | flashy jewelry, put your date on your arm, drive a fancy-looking convertible down to
00:14:39.860 | the dive restaurant or the dive bar, the seedy establishment, just for a casual dinner out
00:14:46.060 | with dancing afterward?
00:14:48.000 | Would that really be a good idea for you?
00:14:51.780 | No matter how much you might want to do that, you would really recognize that's not wise.
00:14:57.820 | Now, how could you be able to eat at that restaurant or drink at that bar and dance
00:15:05.660 | at that club and be able to protect yourself from being attacked, from being robbed?
00:15:14.420 | I think there are two obvious strategies.
00:15:16.780 | The first strategy is obscurity, blending in.
00:15:22.020 | If you didn't look like an outsider, but rather if you look like the kind of person
00:15:26.380 | that is appropriate and a normal patron in that establishment, then you probably wouldn't
00:15:32.500 | have a high enough profile for anybody to worry about.
00:15:36.140 | Now if that seedy bar or seedy restaurant is on the water and you drove a beat-up pickup
00:15:40.740 | truck and wore a pair of khaki shorts and flip-flops and an old beat-up t-shirt, you
00:15:45.940 | would fit right in.
00:15:46.940 | Nobody would think you're wealthy.
00:15:48.820 | They can't look at you and see how much wealth you have.
00:15:51.180 | They can just simply look and see how much wealth you're trying to display.
00:15:57.940 | Or whatever clothing or vehicle choice would be appropriate for that bar.
00:16:02.100 | You could blend in by choosing a strategy of obscurity.
00:16:07.460 | The second strategy is a strategy of obvious strength.
00:16:12.560 | You could visit that establishment in the company of a cohort of bodyguards and obvious
00:16:17.820 | defenses.
00:16:19.860 | You could cruise down to that restaurant and yes, you're in your shiny, you know, convertible,
00:16:26.620 | fancy-looking convertible, but if there's an armored suburban in front of you with a
00:16:30.540 | crew of tough-looking guys and an armored suburban in back, there's a good chance you're
00:16:34.860 | going to be left alone.
00:16:36.860 | So you can display that obvious strength.
00:16:40.420 | Either one of these strategies is appropriate.
00:16:42.660 | And some people are simply not able to choose a strategy of obscurity.
00:16:48.020 | If you are a rich and famous person, if your face is well-known, you're a movie star, you're
00:16:53.100 | a popular entertainer, you can try to conceal yourself and disguise yourself.
00:17:00.380 | But if you always travel with a retinue of paparazzi, you're pretty much always going
00:17:05.380 | to stand out.
00:17:07.140 | And so your solution at that point is to choose obvious strength, to choose to travel in the
00:17:11.300 | company of bodyguards, to put up giant walls around your estate.
00:17:15.140 | And that's what people who achieve notoriety and fame often have to do.
00:17:19.280 | If you look at people, no matter, my favorite is the hypocrisy of people like Mark Zuckerberg
00:17:25.700 | and other very popular social leaders who advocate for certain political ideas and ideologies
00:17:35.140 | that don't involve people's ability to protect themselves.
00:17:39.340 | And yet they construct massive estates, build giant walls around their estates and spend
00:17:43.420 | lavishly on bodyguards and armed security.
00:17:47.060 | Now I think that's an appropriate decision.
00:17:48.940 | I just think that we should all be humble enough to recommend to others that they're
00:17:54.020 | able to take exactly the same choice and make the same actions as we take.
00:17:58.980 | So that obvious strength comes with the place.
00:18:01.100 | Sometimes you can't blend in.
00:18:02.300 | Sometimes you have to buy eight lots, bulldoze seven of the houses and build giant walls
00:18:07.580 | in order to keep the riffraff out.
00:18:11.540 | But if you can blend in, if you can practice obscurity, you can achieve that safety at
00:18:20.140 | a lower cost.
00:18:23.140 | It's much cheaper for you to perhaps keep around a beat up old car or a beat up old
00:18:29.580 | pickup truck, a pair of worn out shorts and a beat up t-shirt and a pair of flip flops.
00:18:34.180 | Much easier to keep that outfit around than to pay for 24/7 armed protection for yourself.
00:18:44.820 | Now here's the reality.
00:18:47.020 | Let's talk about asset protection.
00:18:50.580 | In asset protection, it's not what you do necessarily that determines your vulnerability.
00:18:58.860 | Your vulnerability to a financial attacker.
00:19:01.660 | It's not necessarily what you do.
00:19:04.260 | It's what you own.
00:19:07.300 | I repeat, with asset protection, it's not what you do, but what you own that determines
00:19:12.860 | your vulnerability.
00:19:17.200 | It is certainly true that some people have lifestyles and activities that raise their
00:19:23.180 | profile.
00:19:24.180 | Let me use an example from an asset protection book I read one time.
00:19:28.660 | They were referring to a physician.
00:19:30.380 | Now, of course, a physician, a doctor, is known to have a high profile and most physicians
00:19:36.020 | are concerned about asset protection.
00:19:38.320 | And so the standard line of thinking that doctors engage in is they think, well, if
00:19:42.940 | I'm going to be sued, it's going to be based upon medical malpractice.
00:19:46.140 | That's the most likely avenue of attack.
00:19:48.700 | And perhaps that's true.
00:19:51.900 | But if you're a physician, and again, I read this in a book, they're referring to a client
00:19:57.100 | who believed that that was the only avenue of attack.
00:20:00.940 | And so that physician had a very nice, handsome, very expensive $5 million medical malpractice
00:20:06.680 | liability insurance policy, which did nothing for them when they were targeted with a $2
00:20:13.500 | million sexual harassment lawsuit.
00:20:16.580 | Now, why would somebody face a lawsuit?
00:20:19.300 | Well, of course, they may have done something wrong and the person may have a legitimate
00:20:22.860 | claim.
00:20:24.420 | That's obvious.
00:20:26.460 | But even if you've done nothing wrong, you will still be the target of an opportunistic
00:20:32.740 | attacker who knows that you have wealth.
00:20:38.140 | And if you look and act like someone who is wealthy, if you portray yourself as somebody
00:20:42.880 | who is rich and famous, you can easily be targeted because you raise your attack profile
00:20:49.100 | very high.
00:20:53.420 | Obscurity is one of the best, most practical forms of defense.
00:21:00.580 | When advisors perform asset protection planning, most of their focus is not on privacy or secrecy
00:21:07.980 | or obscurity.
00:21:10.060 | Most is on putting in place the significant legal impediments to somebody being able to
00:21:16.060 | make a claim against them in the first place and to be able to collect on a claim if successful.
00:21:20.820 | And those strategies are super important.
00:21:25.060 | I love the topic of asset protection planning.
00:21:27.060 | I really want to figure out, you know, I've tried to figure out how to create a course
00:21:31.640 | on this subject.
00:21:33.520 | It's very challenging because so much of it is scale dependent.
00:21:37.860 | Asset protection planning for somebody with $1,000 or $10,000 is very different than somebody
00:21:41.760 | with a couple hundred thousand, and that's very different from a mere millionaire to
00:21:46.060 | a multimillionaire.
00:21:47.620 | And because there's cost and complexity involved, you have to think very flexibly along the
00:21:55.100 | line.
00:21:56.100 | And I really want to bring you and do it, and I'm working on it.
00:21:59.820 | I don't know if I can do it effectively.
00:22:00.820 | I'm going to try.
00:22:01.820 | I want to do it really well, but I'm working on it.
00:22:04.940 | But today, we're talking about the stuff that keeps you off people's radar.
00:22:09.380 | And that's where privacy comes in.
00:22:13.660 | Obscurity comes in.
00:22:16.260 | If you will dedicate yourself to practicing obscurity with your wealth, you will minimize
00:22:22.900 | the number of financial attacks you face.
00:22:27.820 | Because let's be frank about the way the legal world works.
00:22:34.860 | The legal world runs on money.
00:22:37.020 | Now there is a segment of the legal industry that is devoted to criminality, and this is
00:22:43.260 | important.
00:22:44.260 | It's important for you to protect yourself from charges of criminal conduct.
00:22:49.740 | First, you need to be very careful about how you live and what you do.
00:22:54.380 | You should be very careful and scrupulous in all your affairs so that you avoid breaking
00:22:59.180 | the law.
00:23:01.100 | Now unfortunately, no matter how hard you try, it is impossible for you in our modern
00:23:06.420 | world, especially in the US American system, it is impossible for you to avoid breaking
00:23:11.140 | the law.
00:23:12.760 | The estimates by some scholars, famously with one book, that the authors I think did a good
00:23:18.780 | job defending their case, but the estimates are that most of us commit on average about
00:23:22.540 | three felonies a day.
00:23:25.780 | Now we don't know what they are.
00:23:26.940 | We're not intentionally committing wrong.
00:23:29.780 | But when you have a world of crimes that are not immoral, they're just criminal conduct,
00:23:38.860 | crimes that are malaprohibita instead of malaensae, when you have a world in which these crimes
00:23:42.940 | exist, you can't avoid breaking the law.
00:23:44.740 | The question is just simply, have you been caught?
00:23:47.940 | Have you come under scrutiny for your behavior, for your actions?
00:23:52.620 | Now you can protect yourself from the world of criminality.
00:23:55.260 | I've talked extensively on Radical Personal Finance about how to protect yourself from
00:23:58.980 | the police, how to protect yourself from criminal charges, how to make sure that you've done
00:24:03.460 | everything possible to protect yourself from criminal charges being brought against you.
00:24:07.460 | You can also protect your finances in case criminal charges are brought against you,
00:24:11.020 | even if you are found guilty and you face some penalty for the criminal crimes that
00:24:16.060 | you are convicted of.
00:24:18.280 | But the risk of that is much smaller than the risk of your facing civil litigation.
00:24:25.280 | The risk of facing civil litigation is very high.
00:24:27.420 | But how does that work?
00:24:28.420 | Well, somebody has a complaint against you.
00:24:32.260 | Whether that complaint is real and legitimate because of some wrong that you have committed,
00:24:37.420 | or whether that complaint is illegitimate or made up in some way or exaggerated, is
00:24:43.620 | relatively immaterial to have a complaint against you.
00:24:47.600 | Now for them to come after you, most people want it to be worth their time.
00:24:52.840 | There are some people who will come after you based upon the principle of the thing.
00:24:58.100 | They will spend their time, spend their money, spend their emotional energy seeking your
00:25:02.140 | prosecution because they want you to be held accountable for the wrong that you have allegedly
00:25:08.060 | committed.
00:25:09.060 | I respect that.
00:25:10.820 | Unfortunately, the number of people there is very small.
00:25:14.980 | And that number seems to be declining, at least by my account.
00:25:19.380 | In civil litigation, if you are found guilty of a wrong, in civil litigation, there are
00:25:25.500 | three different kinds of monetary damages that the court can award to the plaintiff.
00:25:29.300 | And those three kinds of monetary damages are compensatory damages, nominal damages,
00:25:32.860 | and punitive damages.
00:25:34.340 | So compensatory damages, this award has the goal of making the plaintiff whole for the
00:25:42.700 | economic harm suffered.
00:25:44.620 | And so that's where, what's the actual way to make somebody whole?
00:25:48.940 | Very good.
00:25:50.100 | Nominal damages are a symbolic award where somebody is found to have done wrong, but
00:25:56.180 | perhaps the award is not monetarily large, something like a dollar.
00:26:00.220 | And so yes, there was an actual problem found.
00:26:04.320 | There was somebody who was guilty of malfeasance, but the nominal award is just symbolic in
00:26:09.500 | nature.
00:26:10.500 | They are guilty and they owe $1 in nominal damages.
00:26:13.060 | And then of course, punitive damages, the goal of assessing punitive damages on a plaintiff
00:26:18.920 | is to punish them for their conduct and to deter future conduct.
00:26:26.940 | Now in the past, seeking nominal damages was more common when legal fees and court costs
00:26:32.820 | were lower.
00:26:33.980 | Somebody would take you to court in order to seek to be vindicated for what you have
00:26:38.460 | done wrong.
00:26:39.460 | But today with court costs and legal fees being quite significant, it's less common
00:26:44.940 | for a plaintiff to take you to court and not be seeking significant compensatory or punitive
00:26:50.020 | damages.
00:26:51.340 | Now what practically happens when somebody wants to take you to court?
00:26:56.920 | The reality is it's almost always about money.
00:27:02.520 | After all, an attorney that somebody is going to hire and they bring in a lawsuit against
00:27:08.020 | you, the attorney works for a living and they've got to pay their bills and fund their retirement,
00:27:12.380 | pay for their kid's college, just like anything else.
00:27:15.700 | And so an attorney may agree to take a case against you and they may even agree to take
00:27:20.820 | it on a contingency basis where there's no guarantee of payment unless they actually
00:27:24.580 | win.
00:27:25.580 | But they're normally only going to do that if they believe they're actually going to
00:27:30.060 | get paid.
00:27:31.060 | Now of course, there are attorneys who will take a case on a contingency basis because
00:27:35.260 | that's an important stand or an important legal work that they do, but that's pretty
00:27:40.220 | few and far in between.
00:27:41.500 | Most attorneys are only going to take a case if they believe they're going to get paid
00:27:45.700 | for their work.
00:27:47.660 | Now if a potential defendant in a case doesn't have any assets to collect on, the attorney
00:27:57.540 | isn't going to get paid.
00:27:59.940 | And so one of the first standard practices in somebody who is actually bringing a complaint
00:28:05.700 | against you is for the plaintiff's attorney to do an asset search on that potential defendant
00:28:12.460 | in order to find out what they have.
00:28:16.540 | They're certainly going to do that before they commit themselves to taking the case
00:28:19.940 | on the basis of a contingency fee.
00:28:22.460 | Now if the plaintiff is willing to pay the attorney for their work, then they might be
00:28:26.580 | willing to do it whether or not you have assets or not.
00:28:29.460 | But if the asset search doesn't reveal any significant assets because you have practiced
00:28:36.260 | obscurity, you have put in place systems for your financial privacy, or if you've protected
00:28:41.420 | your assets very well, the attorney has to sit down and make a calculation.
00:28:47.940 | Is it really worth their time?
00:28:51.220 | Are they likely to be paid for their efforts?
00:28:55.880 | Because even if you have assets, if the attorney can see that they're well protected, first
00:29:01.340 | if the attorney can't find them, that sows doubt into their mind.
00:29:04.460 | But if they can see that they're well protected, then even if they win the case, they can know
00:29:08.620 | that collecting on the judgment may be a very long and expensive battle that is fraught
00:29:19.180 | with problems and troubles.
00:29:23.240 | And this is one of the goals of good asset protection planning.
00:29:25.700 | If you've positioned yourself first through obscurity and second through a vigorous defense,
00:29:35.340 | through obvious forms of protection, think back to my silly little example of going to
00:29:39.260 | the bad restaurant in the bad part of town.
00:29:42.220 | You first practice obscurity.
00:29:44.680 | And then if somebody pierces your obscurity, your privacy, then you want to make sure that
00:29:49.300 | you look like a strong person.
00:29:51.420 | Well even very practically, if the attorney wants to take that case, they're going to
00:29:55.540 | tell the plaintiff, "Hey, listen, I'm willing to take it, but I want some big fees up front."
00:30:02.100 | And all of a sudden, instead of the plaintiff being able to bring the case with the attorney
00:30:06.140 | against you, with no attorney's fees up front, all of a sudden if the plaintiff has to come
00:30:10.300 | up with 10, 20, $30,000, there's a good chance of their not being able to come up with the
00:30:16.620 | money.
00:30:17.620 | Now, the discussion of being physically strong, of displaying that strength financially, that's
00:30:24.700 | a discussion that goes on.
00:30:25.900 | Because even if, and it plays into, it's very important in asset protection planning, as
00:30:30.820 | I just went through.
00:30:31.820 | If somebody brings, they've got to find an attorney, they may have to come up with significant
00:30:36.340 | fees.
00:30:37.340 | And then even another important part of good asset protection planning is you're trying
00:30:40.460 | very hard to make sure that you seem so strong that the plaintiff will settle, that they'll
00:30:47.820 | fold more quickly, and that they'll fold out of court.
00:30:50.140 | The vast majority of civil litigation is settle out of court.
00:30:52.740 | I think it's something like 90, 95%.
00:30:54.800 | And so one of your most important goals is to be a strong defendant so that you can use
00:31:01.380 | that leverage if the suit is brought, to at least get them to settle out of court quickly.
00:31:09.260 | And also to be a strong defendant so that even if things go all the way through, you
00:31:12.660 | lose the case, that the judgment is difficult or impossible to collect against you.
00:31:19.340 | So that's for another day when we talk about being physically strong.
00:31:22.340 | But today I'm just simply focusing on obscurity.
00:31:25.300 | Because if you could just simply not be targeted in the first place, if a potential plaintiff
00:31:31.220 | didn't know that you were wealthy, you've cut them off at the knees.
00:31:38.340 | They're not even going to go and consult the attorney.
00:31:40.900 | I mean, simple, obvious example.
00:31:46.140 | Normal person runs into you and you're driving a $500 Beater Toyota Camry.
00:31:51.220 | Are they going to look at you and say, "Well, you probably have deep pockets.
00:31:55.580 | I'm going to sue you."
00:31:58.260 | Now flip that around, you're driving a $200,000 Bentley.
00:32:05.300 | The person is going to have a very different response based upon their perception of you.
00:32:11.660 | Now here's what's cool.
00:32:15.420 | Frugality and obscurity are things that you can do.
00:32:20.660 | You don't need a financial advisor.
00:32:22.700 | You don't need to put in place any kind of a dramatic, exotic strategies.
00:32:28.780 | You just practice frugality and you shut up.
00:32:35.140 | So let me finish today's show with just some suggestions for you to consider.
00:32:40.820 | Think creatively on these.
00:32:42.060 | You adjust these for your situation.
00:32:45.460 | But one of the best lines of defense for you financially to protect your assets, frugality
00:32:51.020 | helps you accumulate them, obscurity helps you protect them.
00:32:53.620 | One of the best lines of defense is simply for people not to know what you own.
00:33:00.260 | It's simply for people not to have any idea about your financial affairs.
00:33:05.040 | Now there are different levels that you can take this based upon your own understanding
00:33:09.660 | of the ethical nature of these suggestions.
00:33:13.180 | So first, you can simply avoid giving information about your affairs to others.
00:33:18.420 | You can choose never to talk about how much money you earn.
00:33:23.540 | You can choose never to talk about how much money you have.
00:33:27.800 | You can choose never to talk about what assets you own.
00:33:32.380 | You can just simply never tell anybody where and how you invest.
00:33:38.320 | You can shut your mouth.
00:33:40.240 | You have the right to be silent.
00:33:42.420 | Nobody can force you to open your mouth and say anything about what you own.
00:33:49.440 | With the exception of a debtor's examination, if you lose a judgment in court or what's
00:33:54.660 | it called in divorce, where they can force you to disclose your assets in a divorce proceeding.
00:34:01.060 | With those exceptions, nobody can force you to talk about what things you own.
00:34:03.900 | But remember here, we're talking about just avoiding the complaint in the first place.
00:34:07.340 | So if nobody knows how much money you earn, how much money you have, what assets you own,
00:34:10.580 | where and how you invest, they don't need to know.
00:34:15.780 | And you can extend this to whatever degree you want.
00:34:19.740 | For example, let's say you own a couple of rental houses or a handful or a dozen rental
00:34:23.820 | houses.
00:34:25.060 | Do your tenants really need to know how many rental units you have?
00:34:29.900 | Does anybody need to know how many rental properties you have?
00:34:35.500 | Do your tenants need to know that you own any other units at all?
00:34:40.820 | Does anyone need to know?
00:34:44.420 | Or where your assets are or even that you own real estate?
00:34:49.340 | Nobody actually has to know what you do in your time away from work, other than perhaps
00:34:53.620 | your spouse or your close family.
00:34:56.320 | And even they don't necessarily have to know the extent of your holdings.
00:35:01.880 | Now you could keep these things circumspect.
00:35:06.320 | If you have a tenant in a property, that tenant could easily believe that that one property
00:35:12.480 | is the only property that you have.
00:35:15.520 | Now think about it from the tenant's perspective.
00:35:18.240 | You may actually have 50 individual pieces of real estate.
00:35:22.560 | But if all 50 of those individual pieces of real estate are compartmentalized, they're
00:35:26.680 | privately owned with no paper trail easily back to your name, if you don't represent
00:35:31.280 | yourself as being the big hot shot on top of owning these 50 units, if you just seem
00:35:39.240 | like an average guy, an average gal coming by in a kind of a mediocre car, keeping the
00:35:45.000 | place up, doing okay, then something happens.
00:35:49.960 | They slip.
00:35:50.960 | They fall.
00:35:51.960 | What's wrong with the property?
00:35:52.960 | Are they going to be as incentivized to sue you if they think you have one property or
00:36:00.080 | if they think you have 50?
00:36:03.080 | If they think you have one, they don't know anything about the depths of your pockets.
00:36:07.800 | Now you could take this on.
00:36:08.920 | For example, you could feed out false information or misinformation.
00:36:12.440 | This can range from simply misleading people by staying silent or choosing the information
00:36:17.760 | that you declare to outright lies.
00:36:22.200 | For example, if you have a tenant, but that tenant believes because it's either true or
00:36:28.200 | because they're simply led to believe by your absence of statements that your property is
00:36:34.060 | heavily indebted and you have no equity and you're having a tough time right now keeping
00:36:38.500 | your business afloat.
00:36:39.500 | Well, now all of a sudden you've gone from possibly wealthy real estate investor with
00:36:45.460 | one property to, "Hey, this guy's not doing very well.
00:36:50.040 | He only has one property and it's got a big old mortgage on it.
00:36:54.240 | Can't get much out of him."
00:36:56.720 | Now you can extract this and extrapolate this to other areas as well.
00:37:02.080 | Perhaps you own multiple businesses.
00:37:03.740 | If so, do your employees in one business need to know about your other businesses?
00:37:08.320 | Do they need to know anything about your assets?
00:37:11.600 | You don't have to tell them.
00:37:15.400 | Perhaps the most obvious example, do you need to post anything on social media about what
00:37:19.400 | you own or what you do?
00:37:22.580 | Do you need to post pictures of yourself out on your boat, out on your ranch, having a
00:37:26.200 | great time?
00:37:28.120 | Now this is hard when it comes to ego.
00:37:30.200 | This is hard.
00:37:32.200 | Interestingly, one of the things that my wife and I have chosen to do is to stop using social
00:37:36.620 | media.
00:37:37.620 | And so as we travel around the country, we haven't posted anything on social media about
00:37:41.360 | where we are and what we're doing.
00:37:42.760 | We don't take pictures of ourselves in all these peak locations to try to make our friends
00:37:46.000 | jealous.
00:37:47.000 | That was hard.
00:37:49.240 | Now I don't think of myself as a very ego-driven person.
00:37:51.720 | I think of myself as, or I try to be, a fairly humble person.
00:37:55.680 | But it's funny how even in the first few weeks of us being on the road, we were so ingrained
00:38:00.640 | with this cultural attitude that I've got to put it on Facebook in order for people
00:38:05.360 | to think I'm cool, that I can travel the world full-time.
00:38:09.160 | I got to put this on my blog so my listeners will think I'm cool.
00:38:15.520 | Nobody needs to know.
00:38:18.200 | And if you avoid doing that, you can avoid a lot of potential attacks.
00:38:25.720 | So you can just simply avoid giving information about your affairs to others.
00:38:29.440 | You can give out false information or misinformation, as the case may be.
00:38:33.440 | And again, that could range from just misleading statements to omitting talking about things
00:38:37.880 | to give people the impression without making an explicit statement that is factually wrong.
00:38:42.560 | You could easily give people certain impressions about your wealth.
00:38:46.300 | People do this all the time.
00:38:47.300 | This is part of signaling theory, which is a conversation for another day.
00:38:49.620 | But I could lead you to believe that I were totally broke, or I could lead you to believe
00:38:54.480 | that I were extremely wealthy based upon what I said without ever saying an actual outright
00:38:58.760 | lie.
00:39:00.420 | So you could casually give off the impression of your lack of financial status.
00:39:04.640 | If you dress and act and live in a fairly ordinary way and you don't advertise your
00:39:08.600 | expensive experiences, if they happen, you keep them private, you keep the records of
00:39:12.320 | those to the minimum and you don't put them on Facebook, most people will just assume
00:39:15.320 | you not to have a lot of money because you don't dress rich, you don't drive rich,
00:39:18.520 | and you don't act rich.
00:39:20.560 | You could talk about your financial woes.
00:39:22.480 | A simple statement, "I'll be working until the day I die."
00:39:25.440 | Or "Man, debt just gets more expensive."
00:39:27.960 | Things like that could adjust people's perceptions of you.
00:39:31.720 | And then of course you can always adjust the ownership of your assets.
00:39:36.000 | You could actually use assets that are not owned, which leads to less of a paper trail.
00:39:40.200 | You could use a boat club rather than owning a boat, or you could rent an airplane or rent
00:39:43.880 | an RV.
00:39:44.880 | Instead of owning them, you get the same experience, but you adjust your perception of why people
00:39:48.980 | think you're rich or not.
00:39:51.440 | You could lead statements like, "I rent this house that I live in."
00:39:55.040 | Even if that rental is a mere administrative fact, you actually own the corporation that
00:40:00.140 | owns the house and you rent from the corporation.
00:40:02.480 | It's a simple administrative fact, we're not getting into the taxation of it, but it gives
00:40:06.040 | you the ability to tell something true.
00:40:07.600 | "I rent this house."
00:40:10.280 | Nobody needs to know what trust actually, who's the beneficiary of a trust that owns
00:40:13.880 | the house, etc.
00:40:14.880 | We can go down that road as far as you want.
00:40:17.740 | And of course here are some other things I got to wrap up.
00:40:22.400 | Here are some simple action steps for you to consider.
00:40:24.600 | Downplay the wealth signals you send out.
00:40:26.600 | If you want to drive a luxury car, drive a luxury Toyota instead of a Lexus.
00:40:30.560 | You get the same features, the same drivability without the indication of prestige.
00:40:35.520 | Focus on living in a comfortable, pleasant house instead of an ostentatious house.
00:40:39.660 | Don't talk about your wealth or your assets or your investments, especially stop posting
00:40:43.580 | online or displaying them on social media.
00:40:47.140 | And again, the only reason you would ever make these statements is if it's part of your
00:40:49.820 | signaling work that you're trying to adjust how you're perceived because it benefits your
00:40:53.540 | career in some way.
00:40:54.900 | This is why financial advisors always drive BMWs.
00:40:57.760 | They're leased.
00:40:58.760 | They don't have a dime to their name, but they drive a BMW because they want you to
00:41:01.120 | think they're doing well.
00:41:02.960 | This is why attorneys wear flashy clothes.
00:41:07.140 | This is why people who give off seminar courses talk about how much money they have and the
00:41:10.480 | assets that they have because they want you to think they're doing well so that you'll
00:41:13.840 | buy their stuff.
00:41:15.680 | And so you could also diversify the storage of your wealth and your assets so that the
00:41:19.760 | total amount of your assets isn't obvious to any one person.
00:41:23.000 | Don't have everything you own in one place.
00:41:25.220 | Do you really have to have all of your cars and your motorcycles and your boats and your
00:41:29.180 | RVs?
00:41:30.180 | Do those things really need to be parked on the same piece of property where your house
00:41:33.380 | is, where you casually have people over?
00:41:36.460 | I don't think so.
00:41:38.460 | You don't have to have all of those things right in one specific place.
00:41:42.700 | You could have all of those things diversified.
00:41:45.060 | You could have a modest, comfortable house and you could keep your RV and your boat and
00:41:51.940 | your airplane in a private hangar that you don't talk about.
00:41:56.660 | So then when somebody comes over to your house and they slip and fall on your front sidewalk,
00:42:00.460 | they don't look up at your $800,000 motor coach and say, "Man, I got to sue this guy."
00:42:04.980 | They just say, "This guy's got a house and a fairly ordinary car."
00:42:09.660 | Similar things don't have all your bank accounts or investment accounts with a single
00:42:12.460 | institution.
00:42:13.460 | Diversify those things.
00:42:15.060 | And then you could physically obscure them, obscure the ownership of your assets.
00:42:19.260 | You could, again, physically obscure that you own them with diversification strategies.
00:42:25.120 | You could legally obscure the ownership.
00:42:26.940 | You can compartmentalize your life and your activities.
00:42:31.460 | If you like fancy cars and nice clubs, consider partaking of them on your own time and in
00:42:35.540 | your own place.
00:42:37.480 | Keep the flashy car parked in your garage at your house in Palm Beach.
00:42:42.540 | And that's what you use to take to the Everglades Club.
00:42:45.340 | At your business in Jacksonville or in Newark, New Jersey, just keep that old F-150 handy
00:42:54.060 | so that when your tenants and your business partners see you, you're driving the F-150
00:42:58.140 | and keep your wealthy, flashy lifestyle constrained to the island of Palm Beach.
00:43:04.220 | Closing comments.
00:43:06.940 | If you want to lead the lifestyle of the rich and famous, make sure that you're with people
00:43:10.180 | who are rich and famous.
00:43:12.980 | Don't lead the lifestyle of the rich and famous in front of or with people who are not rich
00:43:17.060 | and famous.
00:43:19.420 | But I would commend to you that a lot of the joy of living a rich and meaningful life now
00:43:26.260 | is more available to you if you practice frugality and obscurity.
00:43:31.660 | And you have a much higher certainty of building financial freedom in 10 years or less if you
00:43:36.780 | will practice frugality and obscurity.
00:43:42.020 | And after you've built financial freedom, you'll have a much better chance of maintaining
00:43:46.780 | your financial freedom with your practice of frugality and obscurity.
00:43:55.540 | The lifestyles of the rich and famous may be what people look up to.
00:43:59.860 | It might be what people aspire to.
00:44:02.020 | But the lifestyles of the frugal and obscure are well worth your consideration.
00:44:09.500 | Thank you for listening to today's show.
00:44:11.260 | Before we go, I want to thank you to many of you, several hundred of you who have purchased
00:44:15.340 | the credit card course that I have created for you.
00:44:18.380 | The course is called How to Borrow Money Safely and Never Pay Interest Using Credit Cards.
00:44:22.380 | And credit cards can be so valuable and even this approach.
00:44:26.100 | Credit cards can be so valuable.
00:44:27.620 | I'm out of time.
00:44:28.620 | I got to take a call right now.
00:44:30.260 | But let me just tell you this.
00:44:31.260 | If you have a credit card, if you think you'll have a credit card in the future, the simple
00:44:34.460 | ad is go to radicalpersonalfinance.com/creditcardcourse.
00:44:37.820 | The feedback so far has been overwhelmingly positive.
00:44:40.380 | I haven't had one negative complaint about it.
00:44:42.780 | I haven't had one dissatisfied buyer yet request a refund.
00:44:45.740 | I'll probably get some of those in a couple of weeks.
00:44:47.980 | Anything you buy from me, 30-day money back guarantee, no question.
00:44:50.660 | I won't be a big deal.
00:44:51.940 | But so far, I haven't even had a single refund.
00:44:54.400 | So I would encourage you.
00:44:55.920 | This is really, really good.
00:44:57.660 | Go to radicalpersonalfinance.com/creditcardcourse.
00:45:01.300 | Sign up to buy the course.
00:45:02.300 | It's 39 bucks.
00:45:03.300 | 39 bucks, it's the price of interest that most people pay if they have a couple thousand
00:45:07.380 | bucks of credit card debt in a month.
00:45:09.460 | And I can teach you how to eliminate that interest payment, how to use credit cards
00:45:13.380 | as a valuable tool to help you get out of debt faster and cheaper, and to help you protect
00:45:18.900 | yourself.
00:45:19.900 | That's part of asset protection, helping you to protect yourself.
00:45:22.700 | So go to radicalpersonalfinance.com/creditcardcourse.
00:45:25.860 | Sign up and buy the course, please, if you haven't done it yet.
00:45:27.720 | It's really good.
00:45:28.720 | You'll like it.
00:45:29.720 | Guarantee 30-day money back guarantee.
00:45:30.720 | If you don't like it, if you don't think it's worth 40 bucks, just write me an email and
00:45:33.620 | I'll refund your money.
00:45:34.620 | Thank you for listening.