LMM_Joshua_Sheats_RPF

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00:00:26.360 | ♪ Gannon Zone, Auto Zone ♪

00:00:28.880 | - Restrictions apply.

00:00:30.640 | - Within the realm of financial planning,

00:00:32.520 | risk management generates lots of discussion.

00:00:35.400 | You've got questions, and today's show has the answers.

00:00:38.900 | Is your cash stash big enough?

00:00:40.640 | I want you to pile that stuff up to the ceiling.

00:00:42.960 | When you travel in foreign parts,

00:00:44.560 | do you keep a credit card in your shoe?

00:00:46.400 | My guess does.

00:00:47.840 | Are you walking around uninsured or underinsured

00:00:50.920 | for a $4 million, $6 million, or $10 million asset you own?

00:00:55.560 | Unless you thoroughly understand

00:00:57.040 | your disability income insurance,

00:00:58.800 | it's likely that you are.

00:01:00.560 | What about physical preparation?

00:01:02.280 | How did you fare through

00:01:03.560 | the great toilet paper crisis of 2020?

00:01:06.500 | It's a lighthearted question,

00:01:07.800 | and I ask it to highlight the importance

00:01:09.480 | of financial and physical preparedness.

00:01:12.200 | If you weren't financially prepared for 2020

00:01:14.280 | in your lifestyle and career,

00:01:15.640 | this has been a tough year.

00:01:17.460 | And if you weren't physically prepared,

00:01:19.200 | it's been a headache.

00:01:20.560 | Today's show focuses on what you can do

00:01:22.960 | to meet any exigency the world sends your way.

00:01:25.480 | It's how to wade through the manure

00:01:27.040 | and come up smelling like a rose.

00:01:29.440 | Hey, and welcome to the Life Meets Money podcast.

00:01:32.200 | I'm so glad you're here.

00:01:33.760 | I'm Matt Miner, your money guide,

00:01:35.600 | and Life Meets Money exists

00:01:37.120 | to help you plan to fund the life you love.

00:01:39.360 | It's the show for MBAs, entrepreneurs,

00:01:41.740 | and other professionals who want their financial plan

00:01:43.760 | to work as hard as they do.

00:01:45.120 | Today's Money Guide Quick Tip is in two parts.

00:01:51.720 | First, on disability insurance,

00:01:53.360 | and then on applying the lessons of COVID-19 pandemic

00:01:56.280 | to your financial plan.

00:01:57.480 | Disability insurance is a cornerstone of financial planning.

00:02:01.960 | In your life, make sure the disability insurance you carry,

00:02:04.920 | whether through your employer or privately,

00:02:07.120 | addresses your family's actual needs and goals.

00:02:10.540 | I'll go on the record right now, along with my guest,

00:02:13.160 | and say that I would do without any other type of insurance

00:02:15.760 | in order to have the disability income insurance

00:02:17.660 | my family needs.

00:02:19.120 | I prefer to give a TED Talk in Spiderman underpants

00:02:22.880 | rather than be uninsured for disability.

00:02:25.480 | I don't sell the stuff,

00:02:26.560 | but if you or your family counts on your income to live,

00:02:29.360 | DI is incredibly important.

00:02:31.820 | Now, as you've lived through COVID-19 in 2020,

00:02:35.120 | what have you learned about your life or your money?

00:02:37.620 | Where, for example, can you cut back your spending

00:02:40.260 | to increase your cash on hand?

00:02:42.520 | Alternately, what areas of your life

00:02:44.360 | cry out for increased spending?

00:02:46.480 | Do you need to make your home office

00:02:47.700 | more comfortable or professional?

00:02:49.280 | Would you enjoy converting your back deck to a screen porch

00:02:52.360 | so you can take some of your calls in the fresh air?

00:02:55.000 | While COVID is still fresh in your mind,

00:02:57.120 | take stock of what you've learned

00:02:58.240 | and prepare some changes for the future.

00:03:00.240 | Today's show features an influential voice in my life

00:03:04.120 | as I made the switch from corporate work

00:03:05.720 | to financial planning.

00:03:07.440 | And as you radicals know,

00:03:08.720 | my guest's opinions generate strong feelings,

00:03:11.280 | and he's not bashful sharing ideas

00:03:13.200 | that push the boundaries of our thinking.

00:03:15.240 | I know you'll enjoy listening in on our conversation

00:03:17.600 | addressing the broad topic of risk management,

00:03:20.000 | including emergency funds, insurance planning,

00:03:22.540 | and physical preparedness.

00:03:24.400 | Today's episode was recorded on September 24th, 2020,

00:03:27.760 | and released on the Life Meets Money podcast in two parts,

00:03:30.720 | October 8th and 15th, 2020.

00:03:33.600 | You can read more at lifemeetsmoney.com/joshuasheats.

00:03:37.920 | (upbeat music)

00:03:40.500 | Joshua, I am absolutely delighted to be here with you today.

00:03:48.040 | I feel like this is a huge milestone on the show

00:03:50.800 | to have you on.

00:03:51.640 | Thank you so much for spending some time

00:03:53.180 | with the Life Meets Money listeners.

00:03:54.680 | - Thank you for having me.

00:03:56.080 | - So I always start by asking my guests

00:03:58.260 | to give us a little bit of background on their history,

00:04:00.940 | both personally and professionally,

00:04:02.320 | whatever you'd like to share on this show

00:04:04.120 | to introduce yourself to people who haven't met you before.

00:04:06.740 | - Yeah, I have an interesting background in the sense

00:04:08.840 | that especially for a financial show,

00:04:10.300 | that I feel like I have a decent understanding

00:04:14.080 | of most parts of finance.

00:04:16.800 | And really, that really crosses the gamut.

00:04:20.480 | When I was younger,

00:04:21.480 | I was very interested in personal finance.

00:04:23.800 | I remember being a teenager

00:04:25.480 | and getting all the classic mainstream personal finance books

00:04:28.640 | from the library and from the bookstore.

00:04:31.280 | I would read "The Automatic Millionaire."

00:04:33.580 | And I remember when I was in high school,

00:04:35.640 | I would go to tickets.

00:04:37.120 | I went to T. Harv Ecker's Millionaire Mind weekend event,

00:04:41.040 | and I was really interested in becoming wealthy.

00:04:44.040 | And so I studied most personal finance stuff

00:04:47.280 | from the perspective of a consumer.

00:04:49.280 | After college, I went and joined a marketing

00:04:52.560 | and brand management consulting company,

00:04:54.160 | and I got laid off from that job in 2008,

00:04:56.760 | and I didn't know what I wanted to do.

00:04:58.480 | I knew I wanted to run my own business in some capacity.

00:05:01.760 | And my former boss suggested

00:05:03.320 | that I consider becoming a financial advisor,

00:05:04.960 | 'cause he knew about my interest in personal finance.

00:05:06.680 | I was the nerd who I would hand out

00:05:08.880 | personal finance books at work.

00:05:10.480 | And I'm not making that up.

00:05:12.480 | I remember I gave him a copy of "My Total Money Makeover"

00:05:16.240 | by Dave Ramsey, had been very influential for me.

00:05:18.040 | It's like, "Here, you should read this."

00:05:19.160 | And so he read it, and we talked about it

00:05:21.040 | when he was done with it.

00:05:22.320 | And so he said, "You should go be a financial advisor."

00:05:24.320 | And so I went and started interviewing

00:05:26.320 | around the financial advice industry,

00:05:27.760 | and I realized that I could probably build

00:05:30.240 | a lot of my personal lifestyle ambitions

00:05:32.800 | by becoming a professional financial advisor.

00:05:35.120 | So in 2008, I started that process.

00:05:37.360 | I started with a life insurance company,

00:05:39.360 | primarily selling life insurance, disability insurance,

00:05:41.720 | long-term care insurance,

00:05:42.720 | little bit of health insurance on the side.

00:05:44.520 | And then I went on and started working my way

00:05:47.120 | through the process of becoming licensed

00:05:49.840 | with the securities, on the security side of the business,

00:05:52.000 | became a financial advisor,

00:05:53.680 | started managing portfolios, et cetera.

00:05:55.920 | And along the way, I invested heavily

00:05:57.240 | in my professional education.

00:05:58.480 | I became a certified financial planner,

00:06:00.120 | a chartered life underwriter,

00:06:01.200 | a chartered financial consultant.

00:06:02.840 | I studied group benefits, I studied health insurance,

00:06:05.640 | I studied charitable planning.

00:06:07.720 | I wound up getting a master's degree in financial planning.

00:06:10.680 | And in that context, I learned a lot

00:06:13.840 | that in some ways enhanced what I had learned

00:06:17.720 | as a personal finance aficionado,

00:06:21.200 | but in some cases, contradicted it.

00:06:24.400 | And along the way, I continued to consume

00:06:26.360 | mainstream personal finance stuff.

00:06:28.440 | I listened to Clark Howard, I listened to Dave Ramsey,

00:06:30.520 | I enjoyed that kind of content,

00:06:33.120 | but I would find myself shaking my fist at the radio saying,

00:06:35.880 | "Come on, Dave," or "Come on, Clark,

00:06:37.280 | "you don't understand this,"

00:06:38.840 | or "You're not articulating that."

00:06:40.520 | And so in 2014, I decided to start a podcast

00:06:43.960 | and I launched a show called Radical Personal Finance.

00:06:47.200 | My goal was to take some of my background and knowledge

00:06:51.680 | and bridge the gap between personal financial advice

00:06:54.520 | and professional financial advice.

00:06:55.880 | Because in my experience, that gap was very, very large.

00:06:59.200 | That professional financial advisors

00:07:01.280 | with a deep background in the technical forms of analysis,

00:07:05.280 | number one, they can't really talk to the public,

00:07:07.520 | legally speaking, about a lot of the intricate stuff.

00:07:10.200 | Number two, when they do talk to the public,

00:07:11.720 | everybody just zones out

00:07:12.880 | because it's horribly uninteresting.

00:07:15.440 | But yet in the personal finance world,

00:07:17.540 | that's where the listeners are,

00:07:18.780 | that's where the education is,

00:07:20.440 | but a lot of times, the people speaking

00:07:22.080 | don't have the deep technical background.

00:07:24.240 | And a professional advisor wants to beat their head

00:07:26.840 | against the wall sometimes in listening to it.

00:07:28.680 | And I thought, "Somebody with my background

00:07:30.120 | "should cross the divide."

00:07:31.860 | So I had to leave the financial planning advice industry

00:07:34.760 | in order to be able to do it effectively

00:07:36.120 | the way that I wanted to.

00:07:37.460 | So I closed my firm

00:07:38.640 | and I launched Radical Personal Finance in 2014.

00:07:41.680 | And so now, about six years later,

00:07:43.800 | I have a podcast, it's a primary outlet,

00:07:46.500 | a podcast of about 750 episodes

00:07:49.100 | where I teach financial planning in public.

00:07:50.720 | And the tagline of the show

00:07:52.200 | is how to live a rich and meaningful life now

00:07:55.040 | while building a plan for financial freedom

00:07:57.040 | in 10 years or less.

00:07:58.440 | What I try to do is I try to show

00:08:01.460 | how having a clear understanding

00:08:04.520 | of what you're working towards in personal finance

00:08:07.440 | is the foundation.

00:08:09.080 | And then having a good understanding

00:08:10.880 | of the technical tools involved

00:08:14.800 | and how that understanding and that education

00:08:17.020 | will help you achieve those goals faster.

00:08:18.760 | So that's my personal story.

00:08:20.840 | - This is a fun and poignant interview for me

00:08:24.480 | because one of your key tenets,

00:08:26.880 | or at least one of the ones that I love most from your show,

00:08:29.440 | and I've been following along since about 2015,

00:08:31.840 | is the idea of doing work that you would do

00:08:34.040 | if you would never retire.

00:08:35.680 | And that was a key kind of philosophical motivator

00:08:39.640 | to the big career switch that I made

00:08:41.500 | about two and a half years ago,

00:08:43.600 | following you into the financial advice profession

00:08:46.460 | where I plan to stay.

00:08:47.880 | But I found a way to do this media stuff on the side

00:08:51.420 | and in a compliant way and in a way that's helpful.

00:08:53.640 | And I'm enjoying doing both right now.

00:08:56.440 | So thank you for all the service that you've rendered to me

00:08:58.560 | and my career and to my family along the way.

00:09:01.080 | - My pleasure.

00:09:01.920 | I think that's one of the ideas

00:09:03.320 | that I have sought to popularize

00:09:05.160 | because if you're working at work that you care about

00:09:08.820 | for reasons that are important to you

00:09:10.960 | and you don't want to retire,

00:09:13.460 | then in many cases, all of your financial planning

00:09:16.320 | becomes simpler and easier.

00:09:18.640 | And it's dramatically easier to find and develop a job

00:09:22.600 | or a business that you love

00:09:24.040 | that provides you with a really excellent lifestyle

00:09:26.760 | than it is for many people to accumulate

00:09:28.960 | the millions of dollars that most of us need

00:09:31.280 | to never work again.

00:09:32.720 | And so I'm all about doing an 80/20 analysis on life

00:09:36.320 | and going with the few things

00:09:37.940 | that are gonna make the biggest difference.

00:09:39.360 | And I'm convinced that that's a cornerstone idea.

00:09:41.880 | And I applaud you for being willing to engage in the training

00:09:45.960 | and the hard work necessary to make that career switch.

00:09:49.520 | - One of your go-to pieces

00:09:52.200 | and another one of the things that I enjoy from your show

00:09:54.420 | is your framework for the stages of financial independence.

00:09:57.520 | And I'll save you mentioning

00:09:58.720 | that you cribbed this from Tony Robbins.

00:10:00.560 | And anyway, I like the way you say it

00:10:02.280 | better than the way he says it.

00:10:03.320 | And your advice is better than his too.

00:10:04.760 | So even if he owns more islands,

00:10:06.400 | I'm interested in your ideas.

00:10:07.920 | I wonder if you'd walk us through those stages.

00:10:10.120 | - Yeah, this came from reading the money book

00:10:13.280 | that Tony Robbins wrote

00:10:14.440 | after many years of not writing books.

00:10:16.220 | He published a book called "Money, Master the Game."

00:10:19.280 | In that book, he was talking about

00:10:20.880 | the stages of financial independence.

00:10:22.680 | And I was inspired by what he said,

00:10:25.080 | but I disagreed with some of it.

00:10:26.320 | And so I wrote my own.

00:10:27.800 | And the basic idea behind developing stages

00:10:30.360 | is to break down large goals into more meaningful steps.

00:10:35.360 | Because most of us understand

00:10:38.520 | that the way that you accomplish a big challenging goal

00:10:42.120 | is by understanding the basic steps

00:10:45.000 | and the levels to that goal.

00:10:46.840 | And in my experience

00:10:47.660 | working as a professional financial advisor,

00:10:49.520 | I learned that if I just told someone,

00:10:51.400 | "Oh, look, you need $4 million,"

00:10:53.120 | and they had $30,000,

00:10:55.440 | they would often walk out of my office demotivated

00:10:58.600 | and lacking clarity on anything that they needed to do

00:11:02.700 | because the goal wasn't tangible.

00:11:05.060 | It was far off.

00:11:06.240 | It wasn't meaningful to their life.

00:11:07.920 | And it was just a number,

00:11:09.060 | which is hard for the human brain to grasp.

00:11:12.160 | And so I developed these stages

00:11:13.360 | to try to give somebody an idea

00:11:15.560 | that when you're working

00:11:17.080 | towards personal financial independence,

00:11:19.920 | it comes at different levels.

00:11:22.280 | It's not like you're either dependent or independent.

00:11:27.560 | Rather, we're dealing with ranges

00:11:30.280 | or percentages of independence.

00:11:33.040 | And so I began it with stage zero,

00:11:35.640 | which is financial dependence.

00:11:37.640 | We all begin our financial lives

00:11:39.380 | from a place of financial dependence.

00:11:41.920 | My children are totally dependent on me for their living,

00:11:46.920 | for their food, for everything.

00:11:48.580 | They're totally dependent on me.

00:11:50.480 | And this can apply to adults as well.

00:11:52.120 | We might be a dependent adult.

00:11:53.820 | Perhaps we've suffered some kind of setback,

00:11:56.160 | lost a job, went through a health scare of some kind,

00:11:59.280 | and we find ourselves depending

00:12:01.480 | on other people to provide for us.

00:12:03.760 | That's where we begin.

00:12:04.920 | So the first goal is to move from stage zero,

00:12:08.360 | which is financial dependence,

00:12:10.800 | to stage one, which is financial solvency.

00:12:14.040 | And I define financial solvency

00:12:15.800 | as simply the ability to pay for your living expenses

00:12:20.520 | and being current on your debts.

00:12:22.840 | One place of dependence that many people find themselves

00:12:25.240 | is they find themselves behind on debts,

00:12:26.920 | unable to make their required payments.

00:12:28.920 | And so the first goal is to get current,

00:12:31.340 | get current on your debts,

00:12:32.500 | and to be able to cover your own living expenses.

00:12:35.040 | And that's solvency, stage one, financial solvency.

00:12:38.880 | Then from financial solvency,

00:12:40.800 | we wanna move on to financial stability, which is stage two.

00:12:45.240 | Financial stability simply means

00:12:47.360 | that you have some margin in your finances.

00:12:51.200 | And this means you have some savings.

00:12:53.680 | This can be as simple as developing

00:12:56.000 | a beginning emergency fund.

00:12:58.100 | For a young person, perhaps you have an 18-year-old son

00:13:01.440 | who is leaving the house.

00:13:03.480 | Well, if he doesn't have any debts

00:13:05.980 | and he's able to get a job to pay his living expenses,

00:13:08.480 | he's solvent, he's no longer dependent on you.

00:13:11.560 | And if that same son saves $1,000,

00:13:14.760 | he's now starting to accumulate

00:13:17.440 | some measure of financial stability.

00:13:19.680 | If he needs a new tire on his car,

00:13:21.520 | it's not gonna sink him.

00:13:22.400 | He's not gonna fall into debt for that.

00:13:24.000 | And so that's financial stability.

00:13:25.800 | For most of us who are adults,

00:13:27.080 | financial stability brings in some larger numbers.

00:13:29.800 | But the basic idea is you wanna figure out

00:13:31.960 | how much of an emergency fund do I want to have?

00:13:34.360 | How much savings do I want to have?

00:13:36.480 | And start to accumulate that.

00:13:38.240 | I think there are a number of numbers that are useful.

00:13:41.000 | Might be $1,000, might be $10,000,

00:13:43.920 | might be three months of expenses

00:13:45.560 | or six months of expenses.

00:13:46.720 | For some people, maybe a year's worth of expenses.

00:13:49.160 | But you want to develop some form of savings

00:13:51.880 | so that you are financially stable.

00:13:54.120 | That's stage two.

00:13:55.520 | Now, the next thing that I talk about,

00:13:57.160 | and I put it at stage three,

00:13:58.600 | although it may not go at stage three,

00:14:01.560 | is debt freedom.

00:14:03.000 | The goal that many of us have of living a life

00:14:06.080 | free from the encumbrances of debt

00:14:08.120 | is a very worthy goal.

00:14:10.120 | Because if somebody is debt free,

00:14:12.200 | that means they have full control over their future.

00:14:15.240 | I'm not arguing that debt may not be a very useful tool

00:14:19.160 | at some points in life.

00:14:20.760 | But any form of debt commits you

00:14:23.440 | to certain actions in the future.

00:14:25.640 | And so if you want freedom and independence in your life,

00:14:29.600 | being debt free should be on your list of priorities.

00:14:33.120 | And so I put it here as stage three,

00:14:35.440 | that the goal is to be debt free.

00:14:37.280 | If somebody has enough money to pay their living expenses,

00:14:41.400 | if they're current on all their bills,

00:14:43.520 | if they have an emergency fund of,

00:14:46.160 | let's just say $10,000,

00:14:48.000 | and if they don't have any debt,

00:14:50.360 | or at least don't have any consumer debt,

00:14:52.240 | they may have a mortgage on their house,

00:14:54.160 | but they don't have car debt, credit card debt, et cetera,

00:14:57.240 | that person is very, very independent.

00:15:00.520 | That person has the ability to change

00:15:02.480 | almost anything in their life.

00:15:03.560 | They can leave one career,

00:15:05.160 | retrain and start another career.

00:15:06.680 | They can move across the country.

00:15:08.000 | They can move from a house that doesn't suit them

00:15:10.200 | into a better house that does suit them.

00:15:12.280 | If their elderly mother gets sick

00:15:14.200 | and they want to go and nurse their elderly mother,

00:15:16.480 | they can submit their notice at their work

00:15:18.640 | and go and nurse their elderly mother.

00:15:20.200 | They have independence.

00:15:21.880 | And so independence can be won fairly simply

00:15:26.080 | through those basic steps.

00:15:28.280 | Now there are four remaining stages,

00:15:30.200 | and the next three, stage four, five, and six,

00:15:33.560 | are basically variations on a theme.

00:15:37.040 | Most of my listeners and clients

00:15:39.760 | have a goal of being able to work because they want to,

00:15:43.200 | not because they have to.

00:15:44.880 | Most of my listeners and clients

00:15:46.440 | have a goal of being able to live on the income

00:15:48.680 | from their investment portfolio.

00:15:50.760 | But there are wide ranges of income that they could live on.

00:15:55.680 | If you tell me, Joshua,

00:15:58.400 | how much money do you want to retire?

00:16:00.040 | I'm probably gonna give you a big number

00:16:02.080 | that involves extravagant international travel,

00:16:05.240 | lots of consumption items,

00:16:06.960 | lots of expensive experiences, et cetera.

00:16:10.440 | But if you said, Joshua,

00:16:11.320 | what's the bare minimum that you would need to retire?

00:16:14.280 | Well, there's a big difference in those numbers.

00:16:16.840 | I might want to live in a beautiful home on the lake,

00:16:19.640 | but I could live in a small trailer

00:16:22.260 | in a modest trailer park in Central Florida.

00:16:24.720 | I might want to take international vacations every year,

00:16:27.800 | but I could take a domestic hiking vacation if I wanted to.

00:16:32.120 | So what I did was I broke this

00:16:34.080 | into stage four, financial security,

00:16:36.320 | stage five, financial independence,

00:16:38.240 | and stage six, financial freedom.

00:16:40.280 | And I defined these in this way.

00:16:42.760 | Stage four, financial security means

00:16:44.640 | you have enough money coming in

00:16:46.600 | from your investment portfolio

00:16:49.520 | for you to cover your basic living expenses,

00:16:53.480 | for you to cover the rent on your apartment,

00:16:55.600 | the mortgage on your house,

00:16:57.320 | a food in the pantry, basic utilities, et cetera.

00:17:01.800 | If you have enough income coming in

00:17:03.760 | from your investment portfolio

00:17:05.840 | that covers your basic living expenses,

00:17:08.600 | then you have a degree of financial security.

00:17:10.800 | If you were disabled

00:17:11.640 | and you could never work again the rest of your life,

00:17:13.520 | you would be okay.

00:17:14.440 | That's what I call stage four, financial security.

00:17:17.000 | Stage five is financial independence.

00:17:19.200 | Financial independence means

00:17:20.600 | you can cover your current living expenses

00:17:24.160 | based upon the income from your portfolio.

00:17:26.560 | Maybe you could live on $3,000 a month if you had to,

00:17:30.940 | but you're currently spending $7,000 a month

00:17:34.060 | because you do a lot of things that you enjoy doing.

00:17:36.880 | And so financial independence means

00:17:38.800 | covering your current living expenses.

00:17:42.640 | And I use that word independence

00:17:44.200 | because that's what most of us think of.

00:17:46.640 | I can live at my current lifestyle

00:17:48.400 | on the income from my portfolio.

00:17:50.560 | But I think there is another level that we wanna consider,

00:17:54.120 | and I call it stage six, financial freedom.

00:17:56.840 | Although I could live at my current lifestyle forever,

00:18:00.960 | there may very well be some additional things

00:18:05.240 | I'd like to do or some additional things I'd like to own.

00:18:08.720 | Maybe I'd like to own the lake house

00:18:10.920 | and I'd like to go ahead and put a nice ski boat there

00:18:13.440 | and maybe a pontoon boat as well, so we have options.

00:18:16.680 | Maybe we're currently going around

00:18:19.400 | and spending our summer vacations in a small travel trailer,

00:18:21.800 | but I'd like a luxurious motor home of some kind.

00:18:25.280 | And I know that that's gonna add another $10,000

00:18:27.920 | a year of operating costs.

00:18:29.740 | And so what I define as stage six financial freedom

00:18:31.960 | is simply you lay out

00:18:33.800 | all of your personal spending ambitions,

00:18:37.040 | your personal lifestyle goals,

00:18:39.040 | and you cover those expenses from your portfolio.

00:18:42.960 | And when you do that, you're totally financially free.

00:18:45.580 | You could spend more than what you have right now

00:18:49.700 | if you wanted to.

00:18:50.540 | You could spend more than what you're currently spending.

00:18:52.560 | And then stage seven is financial abundance,

00:18:54.680 | which I think is simply an expression

00:18:57.960 | that if you continue to live the way that you're living

00:19:01.600 | as an accumulator of wealth,

00:19:04.120 | in the fullness of time,

00:19:05.320 | you're gonna have more money than you need,

00:19:08.760 | you're gonna have more money than you want,

00:19:11.240 | and many people are gonna have more money

00:19:12.960 | than they could ever practically spend.

00:19:15.400 | And that's what I call stage seven financial abundance,

00:19:17.560 | which means I have more money than I could ever spend

00:19:21.400 | than I want to spend, so now what do I do with it?

00:19:24.300 | Money is no longer a constraining factor,

00:19:26.680 | but now we move into the point where I have to say,

00:19:29.280 | I'm the steward of this wealth.

00:19:31.480 | How do I make sure that this wealth flows

00:19:33.760 | to places where it's productive, where it's useful,

00:19:36.200 | where it does good in the world?

00:19:37.660 | Do I give it to people?

00:19:39.000 | What do I do with it?

00:19:39.960 | And that's what I term financial abundance, stage seven.

00:19:43.520 | - I really appreciate you walking us through those.

00:19:45.560 | One of the things that I just noticed practically

00:19:48.040 | with clients, this is a simplification,

00:19:51.480 | but at retirement, there are two kinds of people

00:19:54.160 | in the world, and those are the kind of people

00:19:56.800 | that are trying with tears in their eyes

00:19:59.800 | and by the skin of their teeth

00:20:01.000 | to achieve financial security in their late 60s,

00:20:05.160 | and then there are those people who come in

00:20:08.040 | with financial freedom or financial abundance.

00:20:11.080 | There's not usually, usually if you're trying to solve

00:20:14.940 | for some exact retirement number,

00:20:16.680 | that's just not the way it works out.

00:20:18.320 | Instead, people who are accumulators accumulate

00:20:21.360 | vastly more than they could ever use

00:20:24.700 | based on their own desires and goals,

00:20:27.680 | or they're just wondering how they're gonna be able

00:20:30.120 | to get by in retirement.

00:20:31.240 | And so I appreciate you illustrating those stages,

00:20:34.480 | and I don't know if that was ever something

00:20:35.840 | that you ran into with clients as well,

00:20:37.160 | but I see that.

00:20:39.120 | - I think it is, certainly.

00:20:40.480 | In my experience, I experienced the same frustration

00:20:43.840 | when I worked with individual clients,

00:20:45.840 | because it seemed to me that the people

00:20:49.080 | who were the most desperate to retire,

00:20:51.200 | the people who very much wanted to retire,

00:20:55.280 | it was very difficult for me to figure out

00:20:56.880 | how they could retire.

00:20:58.280 | And on the other hand, the people who could easily retire

00:21:02.160 | because they had loads and loads of money

00:21:04.680 | generally didn't have very much interest in retirement.

00:21:08.100 | Earlier we mentioned the concept

00:21:09.920 | of finding work that you like.

00:21:12.080 | That was one of the lessons that I learned

00:21:14.280 | from analyzing the problem.

00:21:15.680 | I discovered that people who couldn't retire,

00:21:19.680 | but who very much wanted to,

00:21:21.680 | were often trying to retire so that they could get away

00:21:24.480 | from a life they didn't like.

00:21:26.420 | They were anxious to stop working at a job

00:21:28.960 | that they considered to be a soul-sucking job.

00:21:31.860 | They were anxious to be able to have more control

00:21:34.980 | over their life.

00:21:36.180 | And yet, that kind of anxiety had often led them

00:21:40.020 | to building a lifestyle that sucked up

00:21:41.860 | most of their investable cash flow.

00:21:44.340 | Thus, they didn't accumulate enough wealth

00:21:46.180 | to be able to retire.

00:21:47.700 | Whereas people who started by building a life

00:21:50.420 | that they weren't desperate to retire from,

00:21:52.620 | they had a job that was a good fit for them,

00:21:54.260 | they built a business that they enjoyed running,

00:21:57.060 | for them, they accumulated wealth,

00:21:59.220 | but it wasn't connected to an extremely important goal

00:22:03.520 | that at age 63.5, I'm going to retire.

00:22:07.400 | That's where I've developed the philosophy

00:22:09.960 | of starting people, not by trying to figure out

00:22:13.320 | how much money you need to retire,

00:22:15.060 | but by trying to help people imagine

00:22:17.520 | what a life that they wouldn't want to retire from

00:22:19.960 | would look like.

00:22:21.100 | What would it look like if you knew

00:22:23.660 | that you could never retire?

00:22:25.260 | That's the question that I like to ask.

00:22:27.060 | I've found a lot of value in asking people,

00:22:28.880 | what would you do if your rich uncle died

00:22:31.340 | and left you $5 million tax-free?

00:22:33.460 | Well, that's a useful question for you to think about.

00:22:36.060 | But another useful question that I personally developed

00:22:38.760 | was simply, what would you do if you knew

00:22:40.780 | you could never retire?

00:22:42.060 | What would you do if you knew

00:22:44.120 | you would never be able to retire?

00:22:46.380 | And I think that when people stop

00:22:50.020 | and really consider the answer to that question,

00:22:53.900 | generally, what they would do is focus on building a life

00:22:57.980 | that they love rather than building a life

00:23:01.280 | that they want to escape from.

00:23:03.040 | And so a simple example, I often hear people say,

00:23:05.680 | when I retire, I wanna have more time to fish.

00:23:09.280 | Okay, fair enough.

00:23:10.840 | But did you know that if you like fishing,

00:23:12.800 | you can go now and build a life

00:23:15.900 | where you generate your income as a fishing guide?

00:23:19.720 | Or people say, when I retire, I wanna travel a lot.

00:23:22.680 | Fair enough.

00:23:23.660 | You can go now and you can build a lifestyle

00:23:25.940 | where you make your living traveling.

00:23:28.320 | It's not easy, but there are many, many ways to do it.

00:23:32.800 | Everything from starting a tour company

00:23:34.920 | where you get paid to organize tours

00:23:36.640 | to going and being a work camper, living in an RV

00:23:39.900 | as many 60s and 70 year old people

00:23:42.580 | all across the United States do.

00:23:44.440 | And so begin by building a life

00:23:46.240 | that you don't wanna retire from,

00:23:48.560 | and then bring that into your overall financial plan

00:23:51.920 | so that you're enjoying the process of life now

00:23:55.460 | while accumulating for the day

00:23:56.960 | in which you either choose not to work

00:23:58.540 | or in which you can't physically work.

00:24:00.520 | - Good stuff.

00:24:01.360 | I think that that first question about the rich uncle

00:24:03.760 | lets you answer in your own life

00:24:06.100 | whether what you're doing right now

00:24:08.080 | is in alignment with who you are and what you value.

00:24:10.620 | Like how much your life would change

00:24:12.760 | if you got the rich uncle result,

00:24:15.580 | lets you know maybe how you should be looking

00:24:17.900 | to change your life right now.

00:24:19.080 | And then that other question is a great way

00:24:21.520 | to sort of craft your vocation

00:24:23.560 | and figure out how to spend your time.

00:24:25.540 | Well, I brought you on the show for a couple of reasons.

00:24:28.160 | You have deep formal expertise in the insurance area,

00:24:32.360 | but you also founded a podcast

00:24:34.040 | called Radical Personal Finance

00:24:35.800 | because your views are not entirely conventional.

00:24:38.520 | And so I am very interested to talk with you today

00:24:42.480 | about the big topic of risk management,

00:24:45.080 | including both the traditional insurance part

00:24:47.600 | as well as other ways that ordinary people

00:24:50.360 | should be thinking about that.

00:24:52.120 | So one of the things, because you've gone so far

00:24:54.200 | as to build an internet course about this

00:24:56.320 | that I wanna ask you about is if you'd share your views

00:24:58.480 | on how having money, particularly cash in the bank,

00:25:02.280 | currency on hand and credit cards

00:25:04.520 | is a big part of a risk management strategy

00:25:07.480 | within a financial plan.

00:25:09.240 | - When you think about risk management planning,

00:25:12.240 | there are some common threads that go through

00:25:16.120 | all the different kinds of risks that you're facing.

00:25:19.560 | When you're trying to prepare for risks,

00:25:21.200 | you need to start by analyzing, is this a problem

00:25:24.800 | or is this a risk that can be solved by money?

00:25:27.520 | Or is this not a risk or problem

00:25:29.680 | that can be solved by money?

00:25:31.600 | Many years ago, I heard somebody say

00:25:33.560 | that if your problems can be solved by money,

00:25:35.840 | they're not actually problems.

00:25:37.680 | Now, that's probably a little bit too far

00:25:40.360 | because certainly money problems

00:25:41.720 | have very real consequences in our lives,

00:25:44.880 | but there's an element of truth

00:25:46.840 | that makes us nod along with a statement like that.

00:25:49.400 | We understand that if my son was just in a terrible accident

00:25:54.400 | then it's a very severe problem

00:25:56.800 | and I can't just necessarily throw money at the problem

00:25:58.920 | and fix it.

00:25:59.760 | Whereas if I just drove over some broken glass on the highway

00:26:03.880 | and I need new tires, okay, it's frustrating

00:26:06.680 | and it's an inconvenience, but I can solve it with money.

00:26:09.680 | And so I like to analyze problems and say,

00:26:12.120 | is this a problem that can be solved by money

00:26:14.600 | or is this a problem that can't be solved by money?

00:26:17.480 | That helps us to understand where our solutions are.

00:26:20.760 | Now, money will be used to solve

00:26:24.460 | all of the problems related to money

00:26:26.120 | and it will influence many of the problems

00:26:29.480 | that are not directly caused by money.

00:26:32.760 | You may have personal health problems.

00:26:35.700 | Well, you can't just simply buy a solution to those problems

00:26:40.240 | but your ability to have money

00:26:42.400 | will certainly probably contribute to the solutions.

00:26:45.620 | Money might allow you to take time off

00:26:48.480 | from your normal activities, your normal work,

00:26:50.620 | so you can spend more time focusing on your health.

00:26:52.940 | Money might allow you to pay for better medical care.

00:26:56.160 | Money might allow you to get a second opinion.

00:26:58.200 | Money might allow you to transport yourself

00:27:00.000 | to the other side of the world

00:27:01.320 | where some novel treatment is being developed

00:27:03.600 | for your personal situation.

00:27:05.760 | And so we can see that even in situations

00:27:08.400 | that are not directly caused by lack of money,

00:27:11.460 | money is itself useful.

00:27:13.840 | So if money is useful,

00:27:15.000 | we need to pay a high amount of attention

00:27:17.740 | to how to have it when we need it,

00:27:21.280 | which comes into the topic of savings.

00:27:23.840 | And so the basic formal approach to savings

00:27:28.000 | is to use an emergency fund.

00:27:30.320 | When I was becoming a certified financial planner,

00:27:32.720 | I was taught in my classes that you, as a financial planner,

00:27:36.600 | were to recommend to your clients

00:27:38.760 | that they generate an emergency fund

00:27:40.880 | of three to six months worth of expenses.

00:27:43.480 | I believe that's good, right?

00:27:44.640 | That's a significant number.

00:27:46.040 | Most people don't have three to six months worth of expenses.

00:27:48.880 | And the way that you decide whether it should be

00:27:50.120 | three months versus six months is you analyze carefully

00:27:53.640 | how likely it is that your income would be affected.

00:27:57.280 | So if you have a household

00:27:59.640 | where there's a dual income household with low debt

00:28:02.840 | and generally good financial planning,

00:28:05.120 | then you say, well, three months of expenses is adequate

00:28:07.140 | because if one of you loses your job,

00:28:08.440 | the other one probably won't.

00:28:09.840 | Whereas if you have a household with a single income

00:28:12.120 | or perhaps a household where somebody's engaged

00:28:14.240 | in a riskier occupation that's more likely to lose income,

00:28:18.000 | then you point the client towards six months of expenses.

00:28:20.640 | I think that's important.

00:28:22.160 | But in my experience, there's a little bit more texture

00:28:24.600 | that could really be added to that.

00:28:26.660 | The first thing is many people

00:28:29.360 | keep all of their emergency funds exclusively in the bank.

00:28:33.200 | And I think that's a real mistake

00:28:34.840 | because there are times that you need money

00:28:37.720 | and what you need is physical money, physical currency,

00:28:41.560 | stacks of green papers with dead presidents on them

00:28:46.560 | if you're in the United States

00:28:47.920 | or multicolored papers in other countries.

00:28:50.560 | But what you need is physical cash.

00:28:52.440 | And so there are a number of things that can happen

00:28:55.440 | where you need to gain access to cash.

00:28:57.680 | And if all the money is locked in the bank,

00:28:59.760 | then it's not available to you.

00:29:01.760 | So I'm well known for encouraging people

00:29:04.020 | to have significant portions of their emergency funds

00:29:07.160 | available to them in physical cash,

00:29:10.020 | assuming they have a place that is secure and private

00:29:13.440 | where they can keep the money.

00:29:14.480 | You don't wanna be foolish.

00:29:15.800 | If you're talking to your 18 year old daughter

00:29:18.860 | and she has nosy roommates

00:29:20.540 | and lives in a college dorm with four other girls,

00:29:23.480 | then she should be very cautious

00:29:25.640 | about keeping significant amounts of physical cash

00:29:28.520 | in her dorm room.

00:29:29.540 | But that's not the situation that most of us are in.

00:29:31.880 | So I encourage people to make a list

00:29:33.440 | of what are the kinds of things

00:29:34.480 | that you might need money for.

00:29:36.140 | Now, I come from hurricane country.

00:29:38.400 | That influences a lot of my personal thinking

00:29:41.420 | because when the hurricanes come through,

00:29:43.640 | everything is shut down.

00:29:44.680 | The banks are shut down, the ATMs are shut down.

00:29:46.520 | When the power is out, you can't access money.

00:29:48.840 | And so I often think, well, how much money would I need

00:29:51.420 | to get myself through a couple of weeks without power?

00:29:54.160 | You see this when there are other kinds of blackouts.

00:29:56.700 | For example, the famous blackout in New York

00:29:58.960 | or over the last years,

00:30:00.440 | there've been significant blackouts

00:30:01.960 | across the United States.

00:30:03.340 | Well, in a blackout, most of the payment systems

00:30:06.700 | that a store relies on don't work.

00:30:08.440 | The credit card machines don't work.

00:30:09.820 | They can't accept electronic payments.

00:30:11.620 | And so they can't take your money.

00:30:13.360 | And so it may be very important for you to be able

00:30:15.400 | to buy something in those times.

00:30:17.800 | And so some spending money can be useful.

00:30:20.640 | There might also be expenses

00:30:22.240 | that are suddenly forced upon you that are unforeseen.

00:30:25.880 | I think of what do you do if somebody that you know

00:30:28.760 | or somebody in your family goes to prison unexpectedly

00:30:31.860 | and you've got to come up with cash bail?

00:30:33.640 | Do you have the ability to go and pay bail

00:30:36.220 | so that you can spring them out of prison?

00:30:38.760 | That might sound like a funny example to use, but it's not.

00:30:41.600 | It's a very serious example.

00:30:42.920 | It's the kind of thing that happens to a lot of people

00:30:45.160 | and prisons are generally really nasty places.

00:30:48.040 | And I don't want one of my family members

00:30:49.720 | to be stuck in prison a minute longer

00:30:52.160 | than is absolutely necessary.

00:30:54.560 | Other examples as to why cash might be useful.

00:30:57.840 | Where I find that I use cash the most

00:30:59.720 | is simply to take advantage of opportunities.

00:31:02.440 | You're driving down the road

00:31:03.840 | and you see in some beautiful backyard

00:31:07.060 | that a guy just put a for sale sign

00:31:08.980 | on this really beautiful ski boat.

00:31:10.700 | And you've been thinking about getting a ski boat

00:31:12.640 | and you walk over and you say,

00:31:13.820 | "Hey man, tell me about the ski boat."

00:31:15.020 | And he says, "Yeah, this was my grandfather's.

00:31:17.220 | "He died and I'm just putting it out for him.

00:31:19.760 | "You know, we need to sell it quick

00:31:20.800 | "because I need to get, you know, I'm here in Illinois

00:31:22.580 | "and I need to get on an airplane

00:31:23.500 | "and fly back to Florida tomorrow.

00:31:25.260 | "But I was figured I'd put it out here

00:31:26.580 | "and see if anyone's interested.

00:31:27.860 | "It's worth 20 grand, but if you give me 10 grand a day,

00:31:30.180 | "I'd be happy to sell it to you."

00:31:31.660 | I've done this.

00:31:32.620 | I didn't do it with a ski boat, I did it with a car.

00:31:34.440 | Where it taught me was I went and I was like,

00:31:35.600 | "Okay, I need to go get money."

00:31:36.560 | But all my money was locked in the bank.

00:31:37.880 | And so I'm going to the ATM

00:31:38.880 | and I'm trying to take out money,

00:31:39.960 | but the ATMs are locked at a stupid 400 or $500 limit.

00:31:44.200 | And then my bank has the money locked down

00:31:45.880 | and I'm going around to 10 different banks

00:31:47.760 | trying to get money out of the ATM.

00:31:49.000 | And I vowed, never again will I not have enough money

00:31:52.360 | to buy something that would be reasonable

00:31:54.960 | and get myself a deal on something like a ski boat

00:31:57.080 | or a car or whatever little toy or something that you need.

00:32:00.280 | And so those are some reasons that are just practical

00:32:03.700 | examples as to why I encourage people to have

00:32:06.060 | physical currency as their savings.

00:32:08.420 | The second component of savings

00:32:09.700 | is you want to have substantial savings in the bank.

00:32:12.580 | There are different ways that you do that.

00:32:14.540 | And that's, I think, the most discussed part

00:32:16.960 | of personal finance, but you want to have the ability

00:32:18.940 | to get access to those savings.

00:32:20.980 | What I would encourage people to think about

00:32:22.500 | is setting up in their banking infrastructure

00:32:25.380 | a bit of diversity.

00:32:26.700 | What you don't want to have is all of your money

00:32:29.100 | in one bank, in one bank account,

00:32:31.400 | and then all of a sudden you get flagged

00:32:33.560 | with one questionable transaction

00:32:36.600 | and the bank locks your funds down and says,

00:32:38.320 | we're not gonna let any more money pass whatsoever.

00:32:40.720 | I travel a lot internationally.

00:32:42.760 | I have spoken to many travelers who made the mistake

00:32:46.640 | of going off on some long-term adventure.

00:32:49.040 | I've spoken to people who sail around the world

00:32:50.880 | for months or years at a time,

00:32:53.080 | or who travel or live outside the United States.

00:32:55.240 | And all of a sudden, something at their bank

00:32:57.560 | gets triggered by some automatic law,

00:33:00.800 | some automatic flag.

00:33:02.600 | Now they have to literally fly back to the United States

00:33:05.600 | to talk to their bank,

00:33:06.880 | to get their bank to release their own money.

00:33:09.340 | And it's a catastrophic scenario in some cases.

00:33:13.060 | I've had this happen multiple times on my accounts

00:33:15.340 | where I get triggered, I can't get something out of the ATM,

00:33:18.420 | they block my debit card or something like that.

00:33:21.020 | And then I can't get through to the bank

00:33:22.680 | because it's heavy, right?

00:33:24.500 | Activity is busy or something like that.

00:33:26.460 | So you wanna have multiple banks

00:33:28.060 | and you wanna think about having access to your money

00:33:30.640 | with the form of multiple debit cards

00:33:32.180 | would be another example.

00:33:33.700 | Then the third thing I would point out

00:33:35.100 | is the use of credit cards.

00:33:37.660 | Credit cards are an interesting thing to talk about

00:33:41.140 | because they receive a lot of abuse.

00:33:44.060 | And I think rightly so.

00:33:45.140 | Credit cards for many people can facilitate overspending,

00:33:48.300 | which is catastrophic to a financial plan.

00:33:51.440 | There's good evidence to indicate that we spend more money

00:33:53.940 | when we swipe a credit card

00:33:55.400 | versus when we spend with physical currency

00:33:57.780 | or possibly even with a debit card.

00:33:59.980 | We spend more money.

00:34:01.220 | It's very easy to make impulse purchases,

00:34:03.980 | which if those impulse purchases are for consumption items

00:34:06.500 | can often put us in debt.

00:34:08.060 | The terms of borrowing on credit cards are often difficult,

00:34:12.060 | come with significantly high interest rates, et cetera.

00:34:15.380 | We've all known a lot of people

00:34:16.860 | who've had a lot of trouble with credit cards.

00:34:19.260 | On the other hand,

00:34:20.340 | credit cards can be an extraordinarily valuable tool

00:34:24.060 | if somebody understands their dangers and the risks.

00:34:27.060 | So when my debit card gets locked

00:34:29.800 | and I can't get physical currency out of the bank,

00:34:32.960 | if I've got a pocket full of credit cards,

00:34:35.000 | I have the ability still to spend.

00:34:37.080 | So when I travel,

00:34:37.920 | I always travel with a pocket full of credit cards.

00:34:39.860 | And I put one credit card in my wallet,

00:34:41.760 | I put one credit card with my passport

00:34:43.400 | secured in another place.

00:34:44.340 | I put a credit card in my shoe.

00:34:45.560 | I put a credit card in my bag.

00:34:47.680 | I put a credit card in my hotel room.

00:34:49.520 | I just have a half a dozen credit cards that I go with

00:34:51.620 | because I've had my stuff stolen.

00:34:53.180 | I've had my wallet stolen.

00:34:54.200 | I've had all those things stolen and it stinks,

00:34:56.800 | but it's a whole lot easier to handle

00:34:58.560 | if you have access to money.

00:34:59.800 | And so credit cards give you very nice access to money.

00:35:03.380 | Credit cards also have some interesting benefits

00:35:05.660 | that many people don't understand.

00:35:07.520 | One of the biggest benefits of credit cards

00:35:09.640 | is that they are unsecured debt,

00:35:13.120 | which means that if you don't pay them,

00:35:15.120 | there's not an automatic process for somebody

00:35:17.440 | to come and repossess your property.

00:35:19.520 | If you don't pay your mortgage,

00:35:21.080 | your mortgage lender can very quickly start

00:35:23.940 | the process of foreclosure.

00:35:25.360 | And within a period of months,

00:35:27.040 | you may wind up moving out of your house

00:35:30.320 | with the sheriff watching you,

00:35:31.720 | making sure that you're gone by the certain date.

00:35:34.280 | If you don't pay your car payment,

00:35:36.520 | you may have the unpleasant experience

00:35:38.400 | of coming out from your job

00:35:39.600 | and watching your car roll away on the back of a tow truck.

00:35:43.920 | But if you buy something with a credit card,

00:35:47.480 | although in time you can be sued,

00:35:51.060 | there's no direct connection between the thing that you buy

00:35:54.980 | or the money that you spend

00:35:56.880 | and the credit card company's ability to repossess that.

00:36:00.180 | So if I go and I buy a piece of equipment,

00:36:02.800 | maybe I'm totally broke,

00:36:04.000 | and I go and I buy a piece of equipment

00:36:05.920 | that I'm using to generate money,

00:36:08.200 | then I'm using it and maybe I get hurt and I can't use it

00:36:11.400 | and now I'm three months behind,

00:36:12.760 | I can still own the piece of equipment

00:36:14.960 | until eventually the credit card company sues me,

00:36:17.600 | possibly gets a judgment against me in court.

00:36:19.440 | That process is very, very long.

00:36:21.420 | So credit card debt can be very, very safe debt

00:36:24.100 | because it's unsecured debt.

00:36:25.780 | And that's a powerful thing to recognize

00:36:27.660 | when you do disaster planning.

00:36:29.520 | In addition, credit cards,

00:36:31.620 | for somebody with a high credit score

00:36:34.780 | and for somebody who understands how the game is played,

00:36:37.920 | credit cards can have extraordinarily low borrowing costs,

00:36:42.920 | far lower costs than almost any other form of debt.

00:36:46.500 | Now notice I'm trying to be very clear.

00:36:48.360 | I'm not saying that they're always that way.

00:36:51.140 | Credit cards can very quickly put you at 19.99% interest

00:36:54.380 | or 23.99% interest, which is very, very high.

00:36:58.380 | But if you understand how the game is played,

00:37:00.960 | and here I'm simply talking about the 0% credit card offers

00:37:03.740 | that you get in the mail,

00:37:04.940 | and if you understand how to use that system,

00:37:07.500 | you can use that system to allow you to borrow money

00:37:10.900 | at a very low cost.

00:37:12.580 | And I teach a whole course on this.

00:37:14.820 | It's called "How to Borrow Money Safely

00:37:16.500 | and Never Pay Interest Using Credit Cards."

00:37:18.660 | And I teach the details of it,

00:37:20.700 | because if you put these things together,

00:37:23.180 | what a credit card portfolio can allow you to do

00:37:25.860 | is it can allow you to keep your money in the bank

00:37:28.560 | during times when it's advantageous

00:37:30.280 | for it to be in the bank and to use credit cards,

00:37:32.820 | and then on the other hand,

00:37:34.300 | to withdraw your money from the bank when you need it.

00:37:36.940 | And so for me, for example,

00:37:38.260 | the way that I handle my emergency fund

00:37:40.740 | is I have some money in physical currency.

00:37:43.800 | I have some money in the bank,

00:37:45.560 | but I keep the bulk of my large emergency funds

00:37:48.900 | not just in my checking account,

00:37:50.480 | not easily connected to my debit card.

00:37:53.540 | My plan A, if I had a significant form of emergencies,

00:37:57.660 | would be to use credit cards.

00:37:59.420 | I would use 0% credit cards

00:38:01.220 | to cover my expenses for a period of time,

00:38:03.540 | but I have the money in the bank

00:38:04.900 | that I could pay off those credit cards if I needed to.

00:38:07.500 | And so this allows me to keep my money

00:38:09.340 | invested a little bit more efficiently,

00:38:10.860 | getting slightly higher interest rates

00:38:12.560 | than just what the bank may be offering

00:38:14.300 | on a savings account,

00:38:15.660 | but to do it safely with the backup of credit cards.

00:38:18.860 | So that's a little bit of a renegade approach.

00:38:22.700 | Most financial advisors aren't that comfortable with it,

00:38:25.720 | and I would point out that it can be extremely risky.

00:38:28.540 | In my course on the subject, I talk a lot about the risk,

00:38:30.820 | and you have to understand,

00:38:31.700 | is this a good risk for me or not?

00:38:33.500 | But having access to money when you need it

00:38:36.620 | can be an incredibly valuable asset,

00:38:39.260 | and those three different things

00:38:41.020 | that you want to think about,

00:38:41.940 | number one, physical currency when you need it,

00:38:43.900 | number two, access to savings due to proper planning,

00:38:47.380 | and number three, credit cards

00:38:48.940 | can be some of your best ways

00:38:50.180 | to actually solve your problem.

00:38:52.380 | - You've talked elsewhere about how

00:38:55.340 | a well-designed financial plan

00:38:57.500 | fits with overall risk management goals,

00:39:00.140 | and in fact, a lot of those goals

00:39:01.700 | are accomplished in that plan.

00:39:03.320 | And as we sort of begin to broaden up this discussion

00:39:05.820 | on risk management,

00:39:07.020 | I'd like to ask how a financial plan fits

00:39:09.180 | with the overall topic of risk management.

00:39:12.060 | - The first thing that a financial plan should cover

00:39:14.020 | is the positive side.

00:39:15.620 | The financial plan should cover,

00:39:16.820 | what are my goals, what am I working towards?

00:39:19.700 | As financial planners, we usually use the term

00:39:23.080 | in a fairly structured way.

00:39:25.420 | You know, we have financial planning software,

00:39:27.140 | we're doing projections on how long will your money last,

00:39:29.920 | and we're looking at investments, et cetera.

00:39:33.460 | I do like to talk about it in a large frame,

00:39:36.580 | from the big perspective,

00:39:38.800 | because somebody's financial goals

00:39:41.900 | should influence their financial plan.

00:39:44.100 | If somebody has the goal of becoming a billionaire,

00:39:48.460 | their financial plan is going to look very different

00:39:51.900 | than somebody who has the goal

00:39:54.240 | of simply making sure that they're out of debt.

00:39:57.740 | And so you wanna begin with the positive side,

00:40:00.200 | with the goals.

00:40:01.500 | Then, backing up from those things,

00:40:03.940 | you wanna look very carefully at the risk management side.

00:40:06.740 | So let me use an example like asset protection planning.

00:40:09.920 | If my aunt comes to me and she says,

00:40:13.560 | you know, Joshua, I have a little bit of money,

00:40:15.780 | I wanna make sure that I'm secure in my older age,

00:40:19.020 | and so how can I do that?

00:40:21.700 | The plan is fairly simple.

00:40:23.320 | I'm gonna encourage her,

00:40:24.160 | well, you know, make sure you invest the money,

00:40:26.200 | let's talk about a good portfolio that's widely diversified,

00:40:29.320 | that should be safe,

00:40:30.140 | should give you the rate of return that you need.

00:40:32.040 | I'm not gonna get into any kind of exotic packages,

00:40:34.920 | any kind of exotic investments,

00:40:36.300 | any kind of exotic forms of wealth, et cetera.

00:40:39.140 | On the other hand, if somebody comes to me

00:40:41.740 | and let's say I'm dealing with a very successful

00:40:44.060 | 35 year old business guy, who's just a total shark,

00:40:47.600 | and he says, I wanna be a billionaire.

00:40:49.400 | Well, in this situation now,

00:40:51.260 | I need to think really carefully about the risks

00:40:53.460 | that are gonna emerge from his business activities.

00:40:55.980 | And we're gonna spend most of our time

00:40:58.020 | carefully segmenting risk.

00:40:59.940 | We're gonna make sure that his debt

00:41:01.420 | is carefully segmented onto assets

00:41:03.660 | that he's not personally liable for.

00:41:05.540 | We're gonna make sure that he has abundant resources,

00:41:08.760 | segmented where his creditors can't access it.

00:41:11.420 | We're gonna do a whole lot of asset protection planning

00:41:14.500 | in that situation, because we understand

00:41:16.680 | the game that he's playing is probably a lot riskier

00:41:20.220 | than my aunt's game, right?

00:41:21.620 | My aunt may have a car accident and somebody may sue her.

00:41:24.340 | That's very different than my big shot shark

00:41:27.500 | of a business client, who's going out there

00:41:29.900 | and spending all of his time

00:41:31.720 | doing global international deals.

00:41:33.900 | And so the goal is always to say

00:41:35.780 | what risks does somebody face

00:41:37.720 | and then develop a plan that manages those risks

00:41:41.160 | appropriately and at an appropriate cost.

00:41:44.060 | I don't see how you can get away from it,

00:41:45.600 | because one of the things that you realize

00:41:47.640 | is to do well financially,

00:41:51.140 | you don't necessarily have to have a home run.

00:41:53.420 | There are lots of people who become very wealthy

00:41:55.420 | without ever having a home run.

00:41:57.500 | If you have an abundant amount of time,

00:42:00.580 | you can work a job, a standard job that fits you well,

00:42:03.820 | that pays you a decent salary.

00:42:06.320 | You can live well, but modestly.

00:42:09.280 | You can save and invest.

00:42:10.900 | You can purchase mainstream investments

00:42:13.260 | that are very good, very safe, et cetera.

00:42:15.860 | And you can do well.

00:42:16.700 | You don't have to have a home run.

00:42:18.860 | But what you can't have is you can't have a big loss

00:42:22.880 | or a few big losses.

00:42:24.700 | So a good example would be

00:42:26.580 | something like disability insurance.

00:42:28.940 | If somebody is 35 years old and they're working a job,

00:42:32.700 | they're saying, "I wanna retire when I'm 65."

00:42:35.300 | That plan may work out really, really well,

00:42:38.540 | unless they get in a car accident when they're 38

00:42:41.180 | and they can't work.

00:42:42.400 | Then the whole plan falls apart.

00:42:45.060 | And so you've gotta look and say,

00:42:46.300 | "What are the big risks

00:42:47.740 | "that can cause this plan to fall apart

00:42:49.540 | "and how do we protect against them?"

00:42:51.280 | And that to me is what risk management planning is

00:42:53.300 | and it's fundamental.

00:42:55.320 | - Yeah.

00:42:56.160 | You got right into disability insurance

00:42:58.160 | and I feel like it's one of the most likely to be overlooked

00:43:01.740 | and something that I always talk to folks about.

00:43:04.460 | I wanna ask, do you feel like it's wise

00:43:06.020 | to only own it through work

00:43:07.580 | or are there times when private disability insurance

00:43:10.580 | is also very necessary?

00:43:12.660 | - I'll give you Joshua's short lecture on insurance.

00:43:15.820 | If I could only own one kind of insurance, only one,

00:43:19.980 | that one kind of insurance that I would own

00:43:21.740 | would be disability income insurance.

00:43:24.080 | I wouldn't own life insurance.

00:43:25.620 | I wouldn't own health insurance.

00:43:27.300 | I wouldn't own any kind of car insurance

00:43:30.260 | or other property insurance.

00:43:31.700 | I would own disability income insurance.

00:43:34.820 | And that's surprising because I think disability insurance

00:43:37.820 | is one of the least owned

00:43:39.860 | or if it fails that test

00:43:41.300 | due to the widespread use of group disability policies,

00:43:44.380 | it's one of the least understood

00:43:45.740 | or the least paid attention to.

00:43:47.740 | But if you think about the things

00:43:48.880 | that could happen to you in life,

00:43:50.500 | becoming sick or hurt and unable to work

00:43:52.900 | is one of the most significant things

00:43:55.140 | that has the widest range of consequences.

00:43:58.380 | Most people go to life insurance.

00:44:00.180 | Well, I have four children.

00:44:01.580 | I love my wife dearly.

00:44:03.380 | But if I die unexpectedly and I don't have life insurance,

00:44:08.280 | that would put them in a difficult position.

00:44:10.700 | But they could figure something out, right?

00:44:12.960 | I'm dead, I'm gone.

00:44:14.260 | My wife could go and could get a better job.

00:44:17.740 | She could move in with family and they could support her.

00:44:20.780 | She might remarry.

00:44:22.620 | There are many number of situations that she could go into.

00:44:25.860 | And at least the fact that I'm dead and gone

00:44:28.220 | means that her personal situation is a little bit simpler

00:44:32.020 | than it would be if I were still here.

00:44:33.740 | But if I'm disabled, now things are more difficult

00:44:36.660 | because it's harder for her to go and get a job

00:44:39.220 | because she's gotta take care of me.

00:44:41.740 | It's harder for her to move in with family

00:44:43.360 | because what if I need a specialized hospital bed

00:44:45.820 | for my medical condition?

00:44:47.420 | Everything becomes difficult.

00:44:48.900 | She can't remarry 'cause she's still married to me.

00:44:51.740 | And so everything becomes more difficult if I'm disabled.

00:44:54.620 | So if I'm disabled and we still have income coming in,

00:44:57.820 | we can make it through.

00:44:59.380 | But if we don't have income coming in,

00:45:01.180 | we've got significant problems.

00:45:03.180 | Or I mentioned health insurance.

00:45:04.780 | Why do I think disability income insurance

00:45:06.500 | is more important than health insurance?

00:45:08.260 | Let's pretend that I got sick and hurt.

00:45:10.580 | I couldn't work, but now I've got to go to the hospital.

00:45:12.980 | I'm spending significant amounts of time in the hospital.

00:45:15.700 | In most places, even if I don't have any money,

00:45:19.160 | I can be treated for my medical needs.

00:45:22.180 | My medical expenses can be covered.

00:45:24.460 | Even if I wind up owing the hospital

00:45:26.180 | hundreds of thousands of dollars,

00:45:27.420 | they'll still provide treatment for me.

00:45:29.740 | But if I'm in the hospital

00:45:31.020 | accumulating hundreds of thousands of dollars

00:45:32.700 | and I can't work,

00:45:34.100 | and my family's getting ejected from our home,

00:45:36.800 | my family has no food to eat,

00:45:38.620 | now I've got major, major problems.

00:45:40.780 | If I have disability insurance,

00:45:42.180 | I have money coming in

00:45:43.440 | that can cover my living expenses at home,

00:45:46.300 | and then I can figure out

00:45:47.340 | how to pay off the hospital bills down the road.

00:45:49.700 | In a worst case scenario, I may declare bankruptcy

00:45:52.300 | and the bankruptcy court will remove my obligation

00:45:55.300 | to pay those hospital bills.

00:45:56.900 | So the disability insurance

00:45:58.180 | is the cornerstone insurance policy,

00:46:00.780 | more important than almost anything else.

00:46:02.300 | What about car insurance?

00:46:03.520 | I have a car accident.

00:46:04.620 | I commit $40,000 worth of property damage

00:46:07.100 | and I owe $100,000 worth of bills.

00:46:09.140 | Well, if I'm still working, I can eventually pay that.

00:46:12.180 | I can sell some assets.

00:46:13.840 | I may eventually bankrupt out of it.

00:46:15.540 | Bankruptcy is always an option.

00:46:17.420 | But if I'm not working,

00:46:18.620 | nobody's gonna come and pay me income

00:46:20.740 | if I'm not working

00:46:21.820 | because I got sick or hurt and can't work.

00:46:23.660 | So disability insurance is the cornerstone.

00:46:26.380 | Now in the United States,

00:46:27.660 | most disability insurance policies

00:46:29.500 | come through some form of a group disability insurance plan.

00:46:32.860 | And I have asked hundreds and hundreds and hundreds

00:46:34.860 | and hundreds of people

00:46:36.060 | about their disability insurance plan at work.

00:46:38.340 | And those same hundreds and hundreds and hundreds

00:46:40.240 | and hundreds of people can tell me nothing about it

00:46:42.460 | because nobody understands it.

00:46:43.680 | They don't understand whether it's good,

00:46:45.300 | whether it's bad, what it covers, what it doesn't cover,

00:46:47.900 | what it costs, et cetera.

00:46:49.620 | And so put simply, the answer is it depends.

00:46:53.820 | You have to analyze the policy.

00:46:55.940 | Many companies have disability insurance policies

00:46:59.740 | that they offer through work that are excellent.

00:47:02.420 | They're really, really good.

00:47:04.340 | And if the coverage is sufficient

00:47:07.540 | for the individual involved,

00:47:09.660 | then there's no need for any additional insurance.

00:47:11.700 | Why pay money for insurance that you don't need?

00:47:13.900 | On the other hand,

00:47:14.960 | I have reviewed many group disability insurance policies

00:47:17.520 | that were truly terrible

00:47:18.980 | and they didn't have good coverages at all.

00:47:21.480 | In which case, the person thinks they're covered,

00:47:24.260 | but they're not.

00:47:25.260 | And the way that you do that

00:47:26.260 | is you have to ask some specific questions.

00:47:28.260 | You have to either read the policy documents

00:47:29.820 | or ask some specific questions of the insurance agent

00:47:32.100 | or the human resources agent

00:47:33.820 | to find out what the policy covers.

00:47:36.060 | Now, if somebody has a disability insurance policy at work,

00:47:39.780 | they may be able to get a small supplemental policy.

00:47:42.780 | And if they need it, if it makes sense,

00:47:44.720 | then yes, it's a good idea.

00:47:46.260 | The nice thing about supplemental policies

00:47:48.220 | is supplemental policies are not constrained to your work.

00:47:50.940 | If you get a disability insurance policy individually,

00:47:54.780 | that policy can go with you in any circumstance.

00:47:57.140 | I'll give you an example.

00:47:58.020 | I used to do a lot of work with lawyers

00:47:59.820 | and other professions as well.

00:48:00.780 | What I'd try to do is I'd try to get them

00:48:03.020 | to get large individual disability insurance policies

00:48:06.300 | that they owned privately,

00:48:07.420 | not through their group benefits,

00:48:09.740 | but that they own privately.

00:48:11.260 | Because the nice thing about it is a lawyer

00:48:13.980 | is one of the safest, technically speaking,

00:48:16.100 | job classifications that you can have.

00:48:18.220 | And so lawyers can get these awesome policies

00:48:20.500 | with amazing benefits at a very low cost.

00:48:23.460 | And once they have those benefits,

00:48:25.980 | they can go to any company, they can travel around,

00:48:28.900 | they can start their own firm,

00:48:30.020 | and they can still keep their coverage.

00:48:31.380 | One thing that's very difficult

00:48:32.860 | is when people are starting a new business,

00:48:34.220 | it's very difficult to get disability insurance coverage.

00:48:36.980 | And yet that's one of the times

00:48:38.000 | when you really need it the most.

00:48:39.660 | And so once you have it,

00:48:40.980 | because you got your first job out of law school,

00:48:43.220 | you can take it with you even when you go out on your own

00:48:44.980 | and start your own practice.

00:48:46.420 | But in addition, one of the nice things

00:48:47.880 | about an individual disability insurance policy

00:48:50.380 | is it actually goes with you regardless of your job.

00:48:53.660 | And so I would tell lawyers,

00:48:55.340 | and this sounds like an exaggeration,

00:48:57.500 | but technically it's not.

00:48:58.620 | Nobody does this, of course,

00:48:59.820 | but technically it's not an exaggeration.

00:49:01.540 | I would tell them, listen,

00:49:02.820 | if you get this policy now

00:49:04.220 | that underwrites you individually,

00:49:05.880 | this is a guaranteed renewable policy,

00:49:07.660 | which means that the insurance company

00:49:09.380 | can't take the policy away from you.

00:49:11.140 | As long as you pay your premiums,

00:49:12.220 | they can't take the policy away from you.

00:49:14.100 | So I said, you've got this as a lawyer.

00:49:16.000 | You can go and you can start a roofing company.

00:49:19.060 | And maybe you decide that you can make all kinds of money

00:49:21.300 | as a roofer.

00:49:22.140 | You can go and start a roofing company

00:49:23.740 | and you still have this policy.

00:49:25.140 | 20 years from now, you fall off a roof.

00:49:27.280 | And if you're disabled from the job

00:49:28.920 | that you were doing at the time of disability,

00:49:30.740 | you're disabled from being a roofer

00:49:31.980 | because you fell off the roof,

00:49:33.740 | this policy will pay out because it's an individual policy.

00:49:37.180 | I don't know any lawyers who actually went

00:49:39.260 | and became roofers,

00:49:40.660 | but I sold a lot of policies with that language

00:49:43.860 | because it's technically true.

00:49:45.440 | And it's really valuable to have the coverage individually.

00:49:48.420 | So should people have coverage

00:49:50.580 | more than what's at their work?

00:49:51.860 | It depends.

00:49:52.740 | Depends on the individual analysis,

00:49:54.940 | but they definitely, if you can't stop working today

00:49:58.340 | and be completely fine financially

00:50:00.980 | for the rest of your life,

00:50:01.820 | if you're not at least stage,

00:50:03.460 | what is it, four, financially independent

00:50:04.820 | or stage five, financially independent,

00:50:06.700 | if you're not at least there,

00:50:07.800 | you probably need some form

00:50:09.460 | of disability insurance coverage.

00:50:11.620 | - So I knew what your answer was gonna be on this one.

00:50:13.900 | I always talk to clients about this.

00:50:16.460 | You mentioned sort of the positive reason

00:50:18.420 | to have private coverage of going out

00:50:20.420 | and starting your own thing.

00:50:22.020 | That's a great reason.

00:50:23.780 | One, besides becoming a professional chainsaw juggler,

00:50:26.940 | which I had never thought of as a possible career change

00:50:29.460 | or roofer for that matter.

00:50:31.180 | The other one that I think about would be

00:50:32.380 | if you became disabled between jobs,

00:50:35.100 | if you were in a layoff situation

00:50:37.060 | is another good reason to have that coverage

00:50:40.300 | that's separate and apart from your employer.

00:50:41.940 | - I think people underestimate

00:50:43.100 | how important their income is.

00:50:44.740 | I used to use this very simple sales technique

00:50:47.540 | when I was selling disability insurance policies

00:50:49.340 | and I would draw a picture.

00:50:50.440 | So just imagine in your mind,

00:50:52.260 | my legal pad and my pen,

00:50:54.100 | and I would draw a picture on the left-hand side

00:50:57.160 | that was your car.

00:50:58.700 | And I would say, how much is your car?

00:51:00.140 | And you would say, it's $42,000.

00:51:02.180 | And so I would write $42,000

00:51:03.820 | and I would ask you how much you spend on car insurance.

00:51:05.620 | And I would write that below.

00:51:06.900 | And you would say, I spend $140 a month on car insurance.

00:51:09.920 | Then I would talk about your house.

00:51:10.900 | How much is your house worth?

00:51:11.780 | You can say, $340,000.

00:51:13.460 | And I'd ask you how much you spend on homeowner's insurance.

00:51:15.860 | And then I would ask you,

00:51:16.700 | I knew how much money you make and how old you were.

00:51:18.940 | So I'd take your income,

00:51:20.580 | let's say you're 35 years old

00:51:22.220 | and you make $100,000 a year.

00:51:24.060 | Well, 35 years old at $100,000 a year,

00:51:27.460 | 30 times 100,000 is $3 million.

00:51:30.860 | That's the value of your income.

00:51:32.340 | And that's not adjusted for inflation.

00:51:33.660 | If we give you decent raises for inflation,

00:51:35.820 | it's very likely to be 5 million, $6 million

00:51:38.860 | that you may earn over the course of the next 30 years.

00:51:41.500 | And I would just simply say,

00:51:43.220 | how much money do you spend

00:51:46.100 | to protect this $3 to $6 million asset?

00:51:49.000 | And it's a very persuasive picture

00:51:54.180 | because if you've got $3 to $6 million coming in,

00:51:58.060 | you can easily pay for a car.

00:52:00.500 | If your car just becomes totally destroyed

00:52:02.740 | and you have to buy another one, you can easily do that.

00:52:04.180 | If you destroy someone else's car

00:52:05.300 | and you have to buy them another one,

00:52:06.180 | if you got $3 to $6 million, you can do that.

00:52:07.780 | It's not a big deal.

00:52:08.900 | If your house burns down

00:52:10.460 | and you've got $3 to $6 million of income coming in,

00:52:12.740 | you can buy another $340,000 house.

00:52:15.580 | But if that $3 to $6 million goes away,

00:52:17.900 | everything goes away.

00:52:19.740 | And it's so important.

00:52:21.500 | The final point I wanna make on it,

00:52:22.860 | 'cause you're pushing my buttons intentionally

00:52:24.540 | because it's a big deal to me,

00:52:26.180 | is people underestimate how much better life is

00:52:29.220 | when they're properly insured for disability.

00:52:31.540 | I had a client of mine who was a,

00:52:34.980 | I think he may have been a cardiologist.

00:52:37.360 | He had been diagnosed with cancer.

00:52:38.700 | He was 51 years old.

00:52:39.740 | He'd been diagnosed with cancer.

00:52:41.340 | And he had a very nice disability insurance policy.

00:52:45.820 | He was disabled from his ability to work as a physician.

00:52:49.700 | And so he was collecting disability benefits.

00:52:51.940 | I think his benefits were something like $15,000 a month.

00:52:54.820 | When I came along, he was doing fine with his life.

00:52:58.260 | He had $15,000 a month coming in.

00:53:00.540 | He was entirely focused on getting better.

00:53:02.780 | He was doing all these wacky health protocols.

00:53:05.220 | He was working with his oncologists.

00:53:07.740 | The rest of the time, he was taking his children

00:53:09.100 | to work, to school every day.

00:53:10.740 | He was spending time working on some personal projects.

00:53:12.900 | He was playing, he was golfing.

00:53:14.260 | He was doing all this stuff

00:53:15.620 | that he'd wanted to do for a while

00:53:17.380 | because he had the money coming in.

00:53:19.220 | And the cancer diagnosis,

00:53:21.300 | certainly it was a big medical problem,

00:53:23.140 | but the cancer diagnosis was not something

00:53:25.700 | that changed his lifestyle.

00:53:27.260 | He didn't have to, in the middle of this health scare,

00:53:29.460 | move his family out of their beautiful house.

00:53:31.200 | He didn't have to immediately pull his children

00:53:32.900 | out of their private schools.

00:53:34.220 | Life was able to go on.

00:53:36.020 | Having worked with people

00:53:37.360 | in some really dire circumstances,

00:53:39.080 | just impressed upon me how,

00:53:41.980 | if you've got money coming in,

00:53:43.360 | when you're sick or hurt and can't work,

00:53:45.300 | everything is smoother.

00:53:47.200 | And it helps you, as we talked about earlier,

00:53:48.980 | it helps you to solve the health issue much more easily

00:53:52.780 | than if you didn't have it.

00:53:54.700 | - Last thing on this from my side,

00:53:56.100 | and then we can stop banging this drum,

00:53:57.880 | is just that I've known some older people who died,

00:54:01.580 | maybe had whole life policies in place,

00:54:03.300 | managed to collect on those.

00:54:04.500 | I don't know a single person in my life,

00:54:06.180 | there may be, I take it back,

00:54:07.580 | I know one person who has ever collected

00:54:09.200 | on a term life insurance policy

00:54:10.600 | of all the hundreds of people that I know.

00:54:12.920 | But I just was in another podcast conversation

00:54:16.360 | a week or two ago,

00:54:17.460 | and the person I was visiting with

00:54:19.100 | personally knew two people

00:54:20.440 | who had made disability insurance claims

00:54:22.740 | within the last year.

00:54:24.180 | And so it's just, it's a type of event

00:54:26.720 | that is statistically much more likely

00:54:29.540 | than some other types of insurance claims.

00:54:32.040 | As we've talked a lot about insurance,

00:54:35.160 | I wonder whether you have any thoughts

00:54:37.200 | on percentage of income that is reasonable

00:54:41.040 | to go towards disability, health,

00:54:44.640 | life and property and casualty insurances.

00:54:47.160 | This is something that comes up with clients

00:54:48.680 | because you wanna have some insurance,

00:54:51.780 | but you also don't want to devote

00:54:55.160 | an unreasonable portion of your budget

00:54:57.320 | to insurance premium.

00:54:59.160 | - Definitely.

00:54:59.980 | It's a difficult question because

00:55:02.620 | I don't know of any of us

00:55:03.600 | who like to pay insurance premiums.

00:55:05.760 | Insurance premiums generally feel like a total waste.

00:55:08.680 | And so we're usually working

00:55:10.800 | to get those insurance premiums as low as possible.

00:55:13.760 | Now, I think those of us who've lived

00:55:14.960 | for a little while understand

00:55:16.260 | that when insurance pays out,

00:55:18.920 | all of a sudden it's nice to have it.

00:55:21.240 | But when we're dealing with something

00:55:22.560 | like disability insurance or life insurance as well,

00:55:25.520 | we probably have less exposure to people

00:55:28.900 | who've experienced the benefits of it.

00:55:30.400 | You and I are unusual in the fact

00:55:32.200 | that we talk to people who are experiencing these,

00:55:33.920 | but most people don't know that many people

00:55:36.120 | who have collected from a disability insurance policy.

00:55:38.840 | And so it's difficult.

00:55:40.120 | And of these, I think disability insurance

00:55:42.320 | is the more difficult one to reconcile

00:55:45.400 | because the premiums are much bigger

00:55:48.240 | than life insurance, generally speaking.

00:55:50.680 | And so let me talk about kind of

00:55:52.880 | how I encourage people to think about it.

00:55:55.140 | The first question that you have to think about

00:55:56.940 | is do you need the insurance

00:55:58.720 | or do you not need the insurance?

00:56:00.540 | That's question one.

00:56:01.380 | Do you need it or do you not need it?

00:56:03.440 | If I am 40 years old and I don't have any money in the bank

00:56:08.160 | and I've got four children,

00:56:10.000 | my wife is home with the children

00:56:12.000 | and everyone is depending on my income,

00:56:14.360 | I need the insurance.

00:56:15.880 | And so it doesn't matter what it costs, I need it.

00:56:20.120 | On the other hand, if I'm 40 years old

00:56:22.600 | and I have $4 million in the bank

00:56:24.600 | and we spend $5,000 a month, I don't need the insurance.

00:56:28.960 | If I got disabled, we could live on the $4 million

00:56:31.480 | in the income that that's generating for us.

00:56:33.760 | I don't need the insurance.

00:56:35.200 | So question number one is do I need the insurance?

00:56:37.880 | Question number two, do I want the insurance?

00:56:40.840 | Because just because I may not need it,

00:56:42.680 | I might still want it.

00:56:44.600 | A couple of years ago, I had an experience

00:56:46.200 | where I bought a truck and I was getting ready to go.

00:56:50.480 | I bought the truck to pull a camper and I took my family

00:56:52.840 | and we lived in a camper full-time

00:56:54.080 | and traveled all around the country.

00:56:55.820 | I bought this truck and I didn't need

00:56:58.080 | to put comprehensive insurance on it.

00:56:59.800 | I only needed legally liability insurance.

00:57:02.480 | But I ran the numbers and I said,

00:57:04.040 | "Yeah, okay, I'll go ahead and put comprehensive

00:57:05.840 | and collision on it and cover it properly."

00:57:08.960 | It wasn't that much more.

00:57:10.280 | I didn't need it.

00:57:11.120 | I could have easily afforded to go out

00:57:12.680 | and buy another truck if the truck were totaled.

00:57:14.760 | I had the liability covered, but I decided I want it.

00:57:18.320 | Well, in my situation, it actually turned out

00:57:20.200 | very much in my favor because my truck got stolen

00:57:23.760 | a week before my trip.

00:57:26.120 | Literally a week before we were planning,

00:57:27.920 | my truck got stolen from the parking lot.

00:57:30.240 | I was having the tinting replaced.

00:57:31.520 | It got stolen from the tint.

00:57:33.240 | And the guys that stole it used it to bash

00:57:35.940 | into a race car trailer and they wound up totaling my truck.

00:57:40.000 | And then through some negotiations

00:57:42.280 | with the insurance company, I was able to get

00:57:44.960 | a very fair settlement for the truck,

00:57:48.040 | which allowed me to be more than whole financially

00:57:52.560 | when I was in that situation.

00:57:54.900 | But the nice thing about it was because I knew

00:57:56.960 | that I had the comprehensive coverage,

00:57:58.600 | comprehensive in collision, I was able

00:58:00.800 | to just immediately go out and I bought another truck.

00:58:03.120 | I wasn't able to leave right on time,

00:58:04.600 | but I only left on my trip one week late

00:58:06.680 | because a week and a half later, I bought another truck

00:58:08.960 | and I knew that I was totally fine.

00:58:11.240 | And so having that insurance coverage made me feel good.

00:58:15.320 | So I think similar things come into disability insurance.

00:58:18.060 | One of the reasons we buy insurance is because we want it.

00:58:20.980 | Now, I said a moment ago that most of us

00:58:22.960 | don't like paying for it, but I think genuinely

00:58:25.480 | if you get someone in the right frame of mind

00:58:27.640 | away from a pushy life insurance agent

00:58:30.160 | and you say, think, do you want this?

00:58:32.820 | Most of us want what insurance has.

00:58:34.920 | Why do I have tons of life insurance?

00:58:36.680 | Because I want to know that if I'm dead,

00:58:39.960 | that all of my family's financial goals

00:58:42.240 | are still achieved, right?

00:58:43.580 | I don't want my wife sitting there staring at my casket

00:58:47.120 | to be thinking about, well, what am I gonna do for money?

00:58:49.880 | Or what other rich guy do I go and marry

00:58:52.920 | to support all these children that Joshua and I have?

00:58:55.280 | I want her to know that I've got plenty of money

00:58:57.920 | and I can do what's right for me

00:58:59.380 | without regard to the money.

00:59:00.640 | And I'm happy to pay those insurance premiums

00:59:02.480 | because of that.

00:59:03.300 | So number two, do I want it?

00:59:05.140 | Number three is what are the actual premiums

00:59:07.920 | and what do I actually need versus how do I actually want?

00:59:10.440 | Now, here's the thing about disability insurance.

00:59:13.320 | Disability insurance is priced more fairly

00:59:16.480 | than almost anything else, which means the price

00:59:18.880 | of the policy is very much driven by the risk.

00:59:22.340 | And disability insurance is hard to teach about

00:59:24.760 | because it's so complex.

00:59:26.600 | With life insurance, especially term life insurance,

00:59:29.060 | people understand it.

00:59:30.300 | They understand that if I want a million dollars

00:59:31.920 | of insurance and I'm 45 years old and I don't smoke,

00:59:34.880 | it costs X number of dollars.

00:59:36.200 | And if I do smoke, it costs more.

00:59:38.000 | But disability insurance has a lot of options

00:59:40.600 | that life insurance doesn't have.

00:59:42.160 | So the first thing is, what is your job?

00:59:44.520 | What occupation do you have?

00:59:46.160 | And this is the biggest factor in a policy.

00:59:48.920 | A lawyer is a 5A classification.

00:59:51.560 | So the lawyer is very unlikely to be disabled.

00:59:54.280 | A lawyer who falls in a skiing accident,

00:59:57.040 | breaks his leg, is not disabled from being a lawyer.

01:00:00.120 | Whereas that same person, if the roofer falls

01:00:03.160 | and breaks his leg in a skiing accident,

01:00:04.840 | is disabled from being a roofer.

01:00:06.740 | So the lawyer has a lower risk.

01:00:09.160 | And so the cost of disability insurance

01:00:10.720 | for lawyers is much lower.

01:00:12.480 | The next thing is, how much money do we cover?

01:00:15.120 | So a disability policy that gives you $15,000 a month

01:00:18.680 | is a very significant risk for the insurance company

01:00:22.240 | versus a policy that gives you $3,000 a month.

01:00:24.560 | You can choose how much money you need.

01:00:26.960 | And so that's a big thing that you can adjust.

01:00:30.000 | The third thing that you can use to adjust a policy,

01:00:33.200 | you can adjust the policy based upon

01:00:36.000 | when the policy benefits start and how long they last.

01:00:39.760 | You can sometimes have a policy,

01:00:41.840 | I guess, usually this is not the realm we're talking about,

01:00:44.600 | but you can buy a short-term disability insurance policy

01:00:47.840 | that will pay you an insurance claim

01:00:49.680 | after as little as a week of being disabled.

01:00:52.000 | So this would be the common thing,

01:00:53.360 | Aflac is a big brand name in this space.

01:00:55.560 | So this is common among blue collar workers

01:00:57.880 | where they say, "If I got sick or hurt

01:00:59.560 | "and I couldn't work for a week, I'd have a problem."

01:01:01.200 | You can buy an Aflac policy,

01:01:02.560 | a short-term disability insurance policy

01:01:04.480 | that pays you benefits after a week.

01:01:06.840 | And those policies will usually pay you benefits

01:01:08.960 | up to three months or in some cases, six months.

01:01:11.680 | For most of white collar workers, that's not necessary

01:01:15.320 | because you can easily self-insure

01:01:17.240 | through two weeks of no pay.

01:01:18.920 | And for white collar people or wealthier people,

01:01:22.160 | generally, you don't even need coverage in that situation

01:01:24.880 | because your salary would continue,

01:01:26.320 | you have sick days, et cetera.

01:01:28.240 | But for a blue collar worker,

01:01:29.920 | somebody who doesn't have money,

01:01:31.000 | that kind of policy is a real lifesaver for them

01:01:33.760 | if they get sick for a few weeks.

01:01:34.960 | It keeps their rent current,

01:01:36.360 | it keeps their mortgage current,

01:01:37.320 | it keeps their car payments current.

01:01:38.880 | It's very, very useful.

01:01:40.560 | Now, for somebody with more money,

01:01:42.200 | what you can do is you can stretch out the start date.

01:01:45.160 | So I've sold policies that began

01:01:46.840 | after a year's worth of disability.

01:01:48.900 | And so that makes a big cut in the premiums

01:01:51.080 | because if you think about it,

01:01:52.340 | how likely are you to be disabled for more than a year?

01:01:55.480 | Not very for most of us.

01:01:58.560 | - You'll either be dead or better.

01:02:00.480 | - Right, right.

01:02:01.320 | It's hard to be disabled for more than a year.

01:02:03.200 | If you have a skiing accident,

01:02:04.560 | you might be out of work for two months,

01:02:06.040 | but you're not gonna be out of work for a year.

01:02:08.240 | The kinds of things that disable you for more than a year

01:02:11.280 | are a very severe medical condition,

01:02:14.360 | very severe heart disease, very severe cancer,

01:02:17.280 | or very more frequently, some kind of psychological problem.

01:02:21.420 | You can't deal with the stress of the job anymore.

01:02:23.980 | You go through some kind of personal mental trauma.

01:02:26.660 | You suffer some kind of breakdown.

01:02:28.900 | You experience early onset Parkinson's disease

01:02:32.340 | or something like that.

01:02:33.700 | Those are the kinds of risks that are more than a year.

01:02:35.940 | And so if you push the start date of a disability policy

01:02:38.340 | out to more than a year,

01:02:39.660 | then the premiums drop dramatically.

01:02:42.180 | The next option that you can adjust

01:02:43.540 | is you can adjust how long the policy pays you benefits.

01:02:46.420 | So you might have a policy

01:02:47.760 | that starts after 90 days of disability

01:02:50.080 | and pays you benefits out for two years.

01:02:52.660 | Or you might have a policy that pays you for five years,

01:02:54.800 | a maximum of five years, or for a maximum of 10 years.

01:02:58.520 | But there are policies that will pay you out

01:02:59.960 | up through age 65 or age 70.

01:03:02.320 | And so if you're young, of course,

01:03:04.200 | I'd like you to be covered for that up through age 70,

01:03:07.100 | but that's not strictly always necessary.

01:03:09.160 | And so if you wanna spend less money

01:03:10.720 | on disability insurance premiums,

01:03:12.840 | you could simply drop the coverage period.

01:03:15.120 | And so maybe I'm working with somebody and they say,

01:03:17.800 | I've got money in the bank, I've got money in 401ks,

01:03:21.280 | I don't have enough to be self-insured,

01:03:23.540 | but what I'd like to do is I'd like to cut

01:03:24.920 | my disability insurance policy premiums.

01:03:27.440 | So what I'll do is I'll take a policy

01:03:29.880 | with a maximum benefit of five years.

01:03:32.160 | There's a very small chance that I'll be disabled

01:03:34.200 | for more than five years,

01:03:35.800 | but five years would give me enough time to adjust.

01:03:39.360 | It would give me enough time for my wife to get a job.

01:03:42.020 | It would give me enough time

01:03:43.440 | for us to sell our fancy expensive house

01:03:46.160 | and move into a more modest apartment

01:03:47.960 | so that we could cut our expenses.

01:03:49.600 | Right now we're living a lifestyle of $12,000 a month,

01:03:53.020 | but if we had to, we could live on $4,000 a month

01:03:56.000 | and five years would give me enough time

01:03:58.420 | to adjust our living expenses.

01:04:00.620 | And then what we would do is we have enough money

01:04:02.920 | in our 401k, in our savings, in our one rental property,

01:04:06.100 | we have enough money from those things

01:04:07.680 | that we could cover ourselves at $4,000 a month

01:04:09.980 | for the rest of our lives and be totally fine.

01:04:12.080 | So I'll buy a five-year policy.

01:04:14.100 | So you can cut the benefit period.

01:04:16.120 | And then the final thing that you can adjust

01:04:17.800 | is you can adjust the definition of disability.

01:04:21.200 | So you can choose, and I'll use the generic terms

01:04:24.520 | rather than any company specific terms,

01:04:26.180 | but you can choose a policy that has

01:04:28.520 | an own occupation benefit

01:04:30.240 | or an any occupation benefit in it.

01:04:32.640 | An example of an own occupation benefit

01:04:34.800 | would be the insurance company says,

01:04:36.720 | if you're disabled from your occupation,

01:04:40.300 | then you qualify as being disabled.

01:04:42.600 | So this is very important to the physician,

01:04:44.500 | to the attorney, to the white collar professional,

01:04:47.240 | because yes, I know that I could go and say,

01:04:50.040 | welcome to Walmart in theory.

01:04:51.820 | I know I could do that in theory and make $1,500 a month,

01:04:55.200 | but give me a break.

01:04:56.560 | I'm making $15,000 a month as a financial planner

01:04:59.560 | or as an attorney or whatever.

01:05:01.200 | And so I want a policy that covers me from my attorney work

01:05:05.380 | back to my physician client.

01:05:07.280 | His policy covered him.

01:05:08.640 | If he was disabled from being a physician, he was covered.

01:05:11.200 | He didn't have to sneak around

01:05:12.540 | and pretend that he couldn't do anything.

01:05:14.240 | He was golfing, but he couldn't go and be a physician

01:05:17.420 | because he couldn't put in the time

01:05:19.000 | and the stress associated with that.

01:05:21.080 | On the other hand, you could always adjust down

01:05:23.040 | and you could take a policy that was a catastrophic policy

01:05:25.400 | that said, we'll cover you and we'll consider you disabled

01:05:29.400 | if you're ineligible to do any occupation

01:05:31.960 | or any occupation which is suitable for you

01:05:34.560 | based upon education, training, and experience.

01:05:37.000 | And so those kinds of definitions are much broader

01:05:40.720 | and they give the insurance company the ability to say,

01:05:43.000 | okay, we understand that you can't be a physician,

01:05:45.080 | but could you go and be an accountant?

01:05:47.120 | Could you go and provide legal consulting services?

01:05:49.640 | So we're not gonna pay you.

01:05:50.480 | And those all cost of premiums.

01:05:52.040 | So that's some insight into the world.

01:05:54.660 | What I would say is what an individual should do

01:05:57.080 | is they should answer those questions.

01:05:58.520 | Do I need it?

01:05:59.360 | Do I want it?

01:06:00.180 | And they should talk with their insurance agent

01:06:02.040 | or their financial advisor about how to adjust the policy

01:06:06.840 | to fit them.

01:06:08.120 | And it's not right or wrong.

01:06:09.480 | It's a matter of what do you want

01:06:11.280 | and what level of premiums is comfortable for you.

01:06:14.900 | But I think that in general,

01:06:16.520 | you have to start with persuading somebody that yes,

01:06:19.500 | this genuinely is a very, very valuable asset for me

01:06:23.120 | and thus it's worth insuring properly.

01:06:25.660 | - Great stuff.

01:06:26.500 | And I'll just note there that one of the things too

01:06:28.620 | that I've seen frequently

01:06:30.000 | with company provided insurance policies

01:06:33.600 | is any occupation definitions of disability

01:06:36.840 | within the employer provided coverage.

01:06:38.680 | Meaning that the employer is really looking

01:06:40.240 | to insure the worker in the event

01:06:43.160 | that they in some sense become totally disabled

01:06:45.960 | and not necessarily insuring their income

01:06:48.420 | in the event that they are unable to do

01:06:50.280 | the thing that they trained for

01:06:51.480 | or the thing that they like to do with their career.

01:06:54.040 | (upbeat music)

01:06:56.920 | Today's show is so big, it needs three sponsors.

01:07:00.520 | First, it's brought to you by Radical Personal Finance

01:07:03.120 | where Joshua Sheets provides the knowledge, skills,

01:07:06.040 | insight and encouragement you need

01:07:08.040 | to live a rich and meaningful life now

01:07:09.860 | while building a plan for financial freedom

01:07:11.800 | in 10 years or less.

01:07:13.640 | Second, big thanks to Josh Self and PLC Wealth Management

01:07:17.560 | for your support of the Life Meets Money show.

01:07:20.640 | And last but not least,

01:07:21.920 | today's episode is brought to you by Matt Miner,

01:07:24.200 | founder and host of the Life Meets Money podcast.

01:07:27.080 | Life Meets Money exists to help you plan to fund

01:07:29.560 | the life you love.

01:07:30.760 | It's the show for MBAs, entrepreneurs

01:07:32.800 | and other professionals who want their financial plan

01:07:35.280 | to work as hard as they do.

01:07:37.120 | And with all the discussion of toilet paper,

01:07:38.960 | I also tried to contact David Taylor,

01:07:40.960 | CEO of Procter & Gamble on Twitter

01:07:43.120 | to get him to sponsor the episode on behalf of Charmin,

01:07:45.900 | but he wasn't interested.

01:07:47.640 | Despite that disappointment,

01:07:49.240 | you can go to lifemeetsmoney.com/start

01:07:52.340 | to make sure your backside is covered

01:07:54.200 | whenever the next catastrophe happens along.

01:08:01.440 | Transitioning a little bit from

01:08:02.920 | the totally traditional topics to the more fun stuff,

01:08:06.320 | I wanted to ask you,

01:08:07.880 | physical preparedness is a key part of risk management.

01:08:10.500 | And sometimes people take this in kind of goofy directions,

01:08:13.900 | even neglecting things that they shouldn't neglect

01:08:15.760 | in order to do that, which is not my goal today.

01:08:18.240 | But there are some basic physical preparedness items

01:08:21.720 | that should be addressed kind of with the same urgency

01:08:24.600 | as an emergency fund and basic insurance.

01:08:26.820 | And I wonder if you'd talk us through what those are

01:08:29.160 | from your perspective.

01:08:31.400 | - You got about four or five hours here that we can--

01:08:34.400 | - I don't know, you're gonna run out of water to sip on here.

01:08:36.680 | I've seen your cups, they're not as big as mine.

01:08:38.640 | So you're gonna have to meter your response

01:08:41.520 | to match your supply of beverages.

01:08:44.040 | - Exactly.

01:08:44.960 | So first, let me make the case for physical preparedness,

01:08:49.120 | because I think that this is underrepresented

01:08:51.400 | in the field of financial planning.

01:08:53.600 | I believe that money is generally

01:08:57.120 | the best form of preparedness.

01:08:59.640 | I had a friend of mine who coined the term,

01:09:02.200 | money is an omni-tool.

01:09:04.320 | He said that money is that thing

01:09:06.140 | that can get you almost anything else.

01:09:08.320 | And that's true.

01:09:09.440 | Money can be converted into almost anything in the world.

01:09:13.600 | The definition I like of money

01:09:15.280 | is that money is the most marketable commodity in the world.

01:09:18.360 | Money is the thing that everybody will accept.

01:09:20.600 | And so with money, you can buy almost anything out there

01:09:25.440 | that you need.

01:09:26.440 | You can convert money into anything in any circumstance

01:09:29.920 | in any corner of the world,

01:09:31.360 | unless the marketplace is so messed up

01:09:36.600 | that money is not working for now.

01:09:39.200 | Now, usually that's a temporary condition.

01:09:41.920 | But if the marketplace is messed up,

01:09:45.000 | then money is not working for now.

01:09:47.000 | And so let me give a few examples as I answer your question.

01:09:50.960 | I think it's very fortunate

01:09:52.160 | that we're recording this podcast in the fall of 2020,

01:09:54.600 | because if we were recording this in the fall of 2019,

01:09:57.640 | people would have been looking at me saying,

01:09:59.280 | "Joshua, I don't really get it,

01:10:00.520 | but I like to refer to the great toilet paper crisis of 2020

01:10:03.640 | and simply say that in the great toilet paper crisis of 2020,

01:10:07.200 | we see the perfect example of when money stops working."

01:10:10.660 | Now, this is an imperfect example

01:10:12.600 | because I don't think there's anybody out there

01:10:16.200 | who genuinely went without toilet paper

01:10:18.600 | just because the stores were wiped out.

01:10:21.280 | If you had a $20 bill

01:10:22.720 | and you needed a roll of toilet paper for your household,

01:10:25.200 | you could walk up and down your block,

01:10:26.840 | knocking on your neighbor's doors and say,

01:10:28.720 | "I will trade you this $20 bill for a roll of toilet paper."

01:10:31.440 | And everybody found somebody

01:10:33.760 | who would make that trade with them.

01:10:35.920 | However, it's illustrative

01:10:37.780 | because we know that the stores

01:10:39.520 | were wiped out of toilet paper.

01:10:41.100 | This very, very simple, basic thing

01:10:43.360 | that many people all around the world use on a daily basis,

01:10:47.060 | it's the simplest thing possible,

01:10:49.160 | and except it was unavailable

01:10:50.720 | for a significant period of time.

01:10:52.840 | And so what you'll see if you think about that

01:10:55.120 | is that this was the easiest crisis in the world to avoid

01:10:58.920 | through a simple strategy of stockpiling.

01:11:01.600 | That any thoughtful person who sits down

01:11:04.720 | and confronts the problem and says,

01:11:06.300 | "You know what?

01:11:07.140 | Something could happen that could disrupt this market.

01:11:10.600 | Here's this product that we use every day in our household

01:11:13.840 | that is a very important, valuable part of life.

01:11:17.240 | I need to plan and place for

01:11:19.160 | if this product doesn't exist."

01:11:21.760 | That would lead somebody into a few basic, obvious steps.

01:11:25.560 | The first obvious step is you set aside

01:11:27.800 | a couple extra cases of toilet paper.

01:11:29.680 | And if you just made a habit

01:11:31.160 | of not only buying one case at a time

01:11:34.680 | and then waiting till your case was depleted

01:11:38.000 | and then going back to Costco and getting another case,

01:11:40.120 | but simply maintaining a spot on your shelf

01:11:42.700 | where you put two extra cases of toilet paper,

01:11:45.520 | then you weren't freaking out

01:11:46.760 | during the great toilet paper crisis of 2020.

01:11:48.720 | You knew, "I've got two cases of toilet paper.

01:11:50.760 | That's two months of toilet paper.

01:11:51.920 | They'll fix this within two months.

01:11:53.660 | The market will provide."

01:11:55.120 | And so you stockpiled the thing that you needed,

01:11:59.120 | and then you weren't worrying

01:12:00.520 | when the market was messed up temporarily.

01:12:03.160 | And so that's a very simple thing,

01:12:05.420 | but it was a genuine point of panic for people.

01:12:07.880 | You could go into Costco during the toilet paper crisis,

01:12:10.480 | and you could see people pull up in a Mercedes Benz

01:12:12.920 | wearing a Rolex on their wrist, clearly well-heeled,

01:12:16.920 | and yet here they are basically tussling with people

01:12:20.960 | to try to get the last couple cases of toilet paper.

01:12:23.600 | That's pathetic if you think about it.

01:12:25.200 | It's totally pathetic,

01:12:26.560 | but a little bit of thoughtful planning could say,

01:12:28.320 | "I should stockpile this thing that we use."

01:12:31.260 | Now, of course, your plan could be more robust,

01:12:33.520 | and if I were teaching this course,

01:12:34.680 | what I would say, this is a class,

01:12:36.680 | I would say, "Well, let's develop three different ways

01:12:40.320 | to meet this need."

01:12:41.480 | So you would say, "The first thing I could do

01:12:43.180 | is I could stockpile."

01:12:44.480 | And so we need toilet paper,

01:12:46.040 | so what we'll do is we'll stockpile

01:12:47.480 | extra cases of toilet paper,

01:12:48.880 | and I would teach someone how to say,

01:12:50.400 | "How much time worth of toilet paper do you need?

01:12:53.120 | I want three months of toilet paper."

01:12:54.960 | You calculate what that is,

01:12:56.120 | and you stockpile three months of toilet paper.

01:12:58.280 | Then we would say, "Well, I wanna protect you,

01:13:00.740 | so you need a second way to provide for this need."

01:13:02.800 | And so maybe it would be something like washable cloths.

01:13:06.160 | So maybe instead of just buying toilet paper,

01:13:08.760 | you buy a large jumbo pack of washable cotton cloths

01:13:12.200 | that if necessary, this could be used as toilet paper

01:13:14.360 | and then washed afterwards.

01:13:15.440 | And maybe the third thing is you install

01:13:17.920 | in your house a bidet,

01:13:19.240 | and whether that's a built-in appliance that you install

01:13:22.120 | or something that you would get out,

01:13:23.960 | they sell portable bidets, something like that,

01:13:26.080 | you have the ability now to manage this basic human need

01:13:29.800 | in three different ways

01:13:31.040 | if the market doesn't deliver for you.

01:13:32.640 | That's good preparedness planning.

01:13:33.760 | That's robust preparedness planning.

01:13:35.960 | But the point is that all of those things

01:13:37.320 | are easy to do before the fact,

01:13:39.280 | but they're hard to do after the fact.

01:13:41.160 | And so life continues,

01:13:43.800 | and things can be much more dire.

01:13:45.720 | So let's give another example.

01:13:47.800 | The toilet paper crisis is funny,

01:13:49.960 | because it's a little bit of a difficult thing

01:13:51.920 | for us to talk about,

01:13:52.840 | because it's a little bit off color,

01:13:54.920 | but we lived through it,

01:13:55.880 | which is why I like to start with it.

01:13:57.400 | But what about something like a building fire?

01:14:00.360 | Maybe you work downtown and you recognize

01:14:03.200 | that there could be a building fire.

01:14:04.840 | Recently, we've celebrated the 19th anniversary

01:14:07.040 | of the 9/11 attacks.

01:14:08.880 | So I want you to imagine you work in downtown New York City,

01:14:13.560 | and it is possible that there could be a terrorist attack,

01:14:16.920 | or it's possible that there could be rioters

01:14:19.280 | setting fires outside your office,

01:14:21.320 | or it's possible that the power could go down,

01:14:23.960 | and the elevators might not work.

01:14:27.060 | So do you have a plan that you could get safely

01:14:29.360 | out of your building if the fire alarm goes off,

01:14:31.960 | or if you turn on the news and see that an airplane

01:14:34.340 | has flown into a tower?

01:14:36.080 | Well, I think this is an important area of discussion,

01:14:38.040 | and so it starts with the simple things.

01:14:39.960 | Now, you've got all the money in the world,

01:14:41.760 | but do you have a pair of comfortable walking shoes

01:14:44.640 | at your desk?

01:14:46.240 | There are legions of office workers, male and female,

01:14:50.240 | who wear the most stunningly beautiful fashionable shoes

01:14:53.960 | to work every single day.

01:14:55.720 | And I like fashion.

01:14:57.120 | I like my nice leather dress shoes.

01:14:59.400 | I don't wanna walk five miles out of downtown New York City

01:15:02.720 | in my nice dress shoes.

01:15:04.320 | I don't want my wife with her three-inch heels

01:15:07.400 | to try to walk five miles out of downtown New York City.

01:15:11.000 | And so preparedness planning is very simple.

01:15:13.400 | You say, here, I've got a pair of walking shoes,

01:15:16.040 | or tennis shoes, or sneakers, or whatever,

01:15:18.000 | that these are getting a little bit ratty.

01:15:19.280 | I'm just gonna take these to work,

01:15:20.840 | and I'm gonna tuck them into the back corner of my drawer,

01:15:23.960 | in my desk, or down in the filing cabin,

01:15:25.940 | or in the break room, or something.

01:15:27.800 | And then, if there's a fire alarm,

01:15:29.920 | I'm gonna discipline myself to immediately stop,

01:15:32.600 | take off my high heels, or take off my dress shoes,

01:15:34.960 | and put on these walking shoes,

01:15:36.620 | so that I can walk down 35 flights of stairs

01:15:39.400 | and walk out of the building.

01:15:41.120 | That's a very simple thing,

01:15:43.000 | but it can possibly save your life,

01:15:44.920 | as it allows you to quickly escape a building

01:15:46.800 | before the building collapses.

01:15:48.520 | And I'm not being at all flippant with this.

01:15:50.040 | This is real stuff.

01:15:51.480 | So you wanna think about these things that could happen.

01:15:54.240 | Your biggest priority, generally, is to get home.

01:15:56.600 | And so you think about, what would I do?

01:15:58.720 | How would I collect my children if, all of a sudden,

01:16:01.880 | there were some major physical emergency

01:16:04.840 | declared in my town?

01:16:06.360 | Right, I've gotta figure out how to get out from work.

01:16:08.360 | I've gotta figure out how to get to my children's school.

01:16:10.680 | How could I do that?

01:16:11.760 | What would we do?

01:16:12.600 | And you sit down, and you talk with your spouse,

01:16:14.600 | and you make a plan.

01:16:15.840 | Here's what we'll do.

01:16:16.760 | If there's an emergency, if there's a threat of some kind,

01:16:20.400 | it could be a snowstorm, or an ice storm,

01:16:23.100 | or any number of things, you're gonna go,

01:16:25.700 | and you're gonna get our son from that school.

01:16:27.220 | I'm gonna go and get our daughter from this other school.

01:16:29.480 | And then we're gonna get home.

01:16:30.680 | Well, how are you gonna get home?

01:16:32.200 | So, again, I said I could teach a four or five hour class

01:16:35.020 | on it, but if you start thinking through these questions,

01:16:36.800 | what you find is you find some very consistent solutions.

01:16:41.360 | And so let me just give an example here

01:16:43.640 | from the perspective of the office worker.

01:16:46.360 | If I worked in downtown New York City,

01:16:48.680 | but I lived in the suburbs,

01:16:51.400 | whether it's across the river or not, who knows,

01:16:52.860 | I lived in the suburbs, or if I commute to any downtown,

01:16:55.800 | New York's hard because so much is public transportation,

01:16:59.160 | I would think this through, and I would start

01:17:01.200 | by having a pair of comfortable walking shoes

01:17:03.420 | and a good pair of socks,

01:17:04.920 | so that if the electricity goes out

01:17:06.960 | and the subways aren't working

01:17:07.960 | because the electricity's out, I can walk.

01:17:10.680 | More importantly, I would do something simple.

01:17:12.840 | Like, I might be personally, if I were commuting,

01:17:14.560 | I would keep a folding bicycle in the trunk of my car.

01:17:18.680 | So if I've got a folding bicycle and I need to get home

01:17:20.800 | and I need to go and collect my children,

01:17:22.480 | then I have the ability to simply go to the trunk of my car

01:17:25.500 | and maybe the roads are jammed or there's an earthquake,

01:17:28.480 | right, maybe you live in an earthquake zone,

01:17:30.120 | and I would have a bicycle.

01:17:31.040 | Of course, the primary goal is the car.

01:17:33.160 | And so I always make sure that I keep my car

01:17:35.640 | with at least a third of a tank or a half of a tank

01:17:37.760 | or a quarter of a tank, so you pick some number.

01:17:39.600 | So you never wanna find yourself in a situation

01:17:41.320 | where you don't have gas in your car.

01:17:42.760 | You wanna have a couple ways of getting yourself home.

01:17:44.940 | You have walking shoes, you have a bicycle, you have a car.

01:17:47.600 | You wanna know how to get there.

01:17:49.280 | So if you look at a map,

01:17:51.000 | and you don't have to necessarily go and walk it,

01:17:52.760 | but how would I get home if the bridge was blocked?

01:17:55.640 | Right, I'm thinking about 9/11

01:17:57.040 | because of all of the recent media stuff,

01:17:59.440 | but the bridges are blocked, the roads are closed down.

01:18:03.000 | Everything is stopped.

01:18:04.080 | How do I get there?

01:18:04.920 | I have to physically walk out of the city.

01:18:06.920 | So do I know where to go?

01:18:08.220 | And I would keep some basic provisions.

01:18:11.000 | Back in the 1800s, there was this horrible ice storm

01:18:13.640 | that came in the Midwest

01:18:15.540 | that wound up killing hundreds of students

01:18:17.440 | because they went to school in the morning,

01:18:19.120 | it was very warm, and the temperature plummeted

01:18:21.020 | something like 60 or 80 degrees Fahrenheit

01:18:23.700 | within the course of an hour and a half or two hours.

01:18:26.360 | And I'm not exaggerating.

01:18:27.640 | It was this catastrophic scenario.

01:18:30.000 | And so all of these children were walking home,

01:18:31.940 | and they died of exposure

01:18:33.680 | because of this catastrophic plummeting temperatures.

01:18:36.960 | So imagine you're at work.

01:18:38.300 | What would you need if you needed to hole up

01:18:39.920 | in your office for a day or two?

01:18:41.920 | Maybe there's a catastrophic ice storm,

01:18:44.000 | and it's not safe for you to go home.

01:18:45.760 | Wouldn't you rather simply be able to call your,

01:18:48.800 | an ice storm is a good example.

01:18:50.280 | Many people die in accidents when they're driving home.

01:18:52.840 | Wouldn't you rather call your wife and say,

01:18:55.040 | "It's not safe to drive right now.

01:18:56.960 | "I'm at the office.

01:18:57.800 | "We're totally fine here.

01:18:59.240 | "I'm just gonna stay here at the office until tomorrow

01:19:01.560 | "till they get the roads clear,

01:19:02.560 | "they get the roads salted or whatever happens,

01:19:04.500 | "and I'll see you tomorrow."

01:19:05.980 | And so I would keep in my office,

01:19:07.260 | I would keep a couple gallons of water,

01:19:08.720 | I would keep a little bit of food, some snacks,

01:19:11.520 | some basic things.

01:19:12.580 | You could maybe stick a wool blanket somewhere.

01:19:14.580 | And now you've got an office emergency kit squared away.

01:19:18.380 | Other things like a first aid kit.

01:19:21.180 | Whenever I go hiking with my children,

01:19:23.000 | I always carry a first aid kit

01:19:24.260 | because I don't wanna be that father

01:19:26.180 | who is sitting there with a child

01:19:28.400 | that slipped and fell on a rock and now has a bloodied knee

01:19:31.140 | who doesn't have anything at all.

01:19:33.060 | And so having a first aid kit with you

01:19:34.580 | when you go in the woods,

01:19:35.500 | having a first aid kit in the car with you.

01:19:38.780 | If you're gonna go deep in the woods,

01:19:39.980 | making sure that you have a way to get out.

01:19:41.540 | Your cell phone is great,

01:19:42.860 | but what if you're beyond cell phone distance?

01:19:44.580 | So simple thing like having an emergency locator beacon

01:19:47.860 | is not difficult to have, costs a couple hundred bucks,

01:19:50.600 | but you read a story about a guy

01:19:52.100 | who was the guy that was out hiking and rocks fell

01:19:54.780 | and he had to cut his arm off because he got caught.

01:19:57.340 | That's awful, right?

01:19:58.560 | And I'm glad he got out and he didn't die.

01:20:00.980 | Better to be alive, less one arm

01:20:03.580 | than to not be alive at all, but that's terrible.

01:20:07.260 | And so with those of us who have enough money,

01:20:09.300 | it's not hard to spend a couple hundred dollars

01:20:11.420 | and put an emergency locator beacon in your backpack.

01:20:13.940 | So if a rock falls on you and you're stuck,

01:20:16.340 | you pull out your backpack,

01:20:17.460 | you pull out this flexible antenna,

01:20:18.940 | you point it at the sky and you press SOS

01:20:21.260 | and the emergency people show up

01:20:22.580 | two or three, four hours later and they rescue you.

01:20:24.980 | These are all just components

01:20:26.420 | of emergency and disaster planning.

01:20:28.360 | There's plenty of good education out there available.

01:20:30.780 | And so I don't wanna go more than that,

01:20:33.460 | but it's important that we think about it

01:20:35.740 | because there are times in which money doesn't work.

01:20:39.260 | And in those times at which money doesn't work,

01:20:41.380 | your physical preparedness will make the difference,

01:20:45.200 | maybe not between you're surviving or not surviving.

01:20:47.660 | That's rare, but it does happen, but it's rare.

01:20:51.140 | And I don't like to be so apocalyptic

01:20:52.700 | and say, you're gonna die.

01:20:53.900 | You might, right?

01:20:54.720 | And we wanna avoid that.

01:20:55.940 | But what I would say is your physical preparedness

01:20:59.380 | can make the difference between something being

01:21:02.180 | a perhaps dire and in most cases,

01:21:05.580 | very uncomfortable experience

01:21:08.660 | versus being a minor inconvenience, a minor nuisance.

01:21:12.740 | It's not always life or death,

01:21:14.620 | but you can turn a very uncomfortable experience

01:21:18.520 | into a minor nuisance.

01:21:20.380 | And to me, that is worth it.

01:21:22.220 | That's worth it to pay attention to

01:21:24.420 | and to engage in good personal preparedness planning.

01:21:27.760 | - I have a couple of things I wanna share back

01:21:29.800 | by way of response.

01:21:31.340 | The first actually relates to you again.

01:21:33.700 | I don't remember the exact day,

01:21:34.840 | but it was around February 24th or February 26th.

01:21:38.220 | You released a show on COVID

01:21:40.820 | and what you saw that was coming.

01:21:43.480 | And it was before,

01:21:45.620 | COVID was certainly in the news at that point.

01:21:47.380 | It's been in the news since January.

01:21:49.540 | We didn't really know what the disease was gonna be like.

01:21:51.540 | And we can criticize all we want,

01:21:53.820 | the policy responses through the spring of 2020

01:21:56.900 | in the United States.

01:21:58.300 | Around that time, I went to Costco.

01:22:00.920 | I did buy toilet paper extra,

01:22:03.020 | even though we had a case already

01:22:04.420 | and stocked up on some food.

01:22:06.380 | And the result of that was that we didn't go to Costco

01:22:08.420 | for about four to five weeks in the first part of COVID

01:22:11.260 | 'cause we were all still grappling with

01:22:12.780 | what does it mean to live in these conditions

01:22:14.700 | and exactly how bad is this thing?

01:22:16.460 | Anyway, so I wanted to say nice shot on calling that one

01:22:21.020 | in time that our family was able to do something about it

01:22:24.460 | specifically because of that show,

01:22:26.700 | even if toilet paper was the only thing

01:22:28.460 | that we had plenty of.

01:22:29.780 | And then the other thing was that like

01:22:31.180 | through these principles of lifestyle design

01:22:33.020 | that are so important to me and to you,

01:22:36.140 | we live where we want

01:22:37.200 | and we have the stuff that we want around us.

01:22:39.260 | And it was no great hardship for us to be here at the house

01:22:43.140 | and have our things and have each other.

01:22:45.640 | We certainly missed social interaction

01:22:47.720 | and seeing the people that we love.

01:22:49.820 | But because we'd put some thought

01:22:51.900 | into the preparedness stuff

01:22:53.220 | and then also into designing the life that we want,

01:22:56.540 | it was really, we are thankful to say,

01:22:59.580 | much more of a non-event than so many people experienced.

01:23:03.980 | - Yeah, and I think that it's important to focus on that

01:23:06.540 | because as we record this in the fall of 2020,

01:23:09.980 | COVID is much clearer than it was in the spring of 2020.

01:23:14.260 | It was not clear at the time

01:23:15.820 | what the actual circumstances were.

01:23:17.820 | It was not clear how bad the disease was going to be.

01:23:21.020 | It wasn't clear what the risk was.

01:23:23.140 | It simply was not clear.

01:23:24.680 | You had videos coming out of China

01:23:26.740 | of people dead on the street and you're thinking,

01:23:28.540 | are we dealing with a minor flu

01:23:30.740 | or are we dealing with Ebola, right?

01:23:32.940 | There was just no way to know.

01:23:34.780 | And that's normal.

01:23:35.740 | That's a normal part of most disasters.

01:23:38.580 | It's unclear.

01:23:39.940 | And so to me, what I would encourage

01:23:42.700 | every one of your listeners to do

01:23:44.200 | is to learn the lessons from COVID

01:23:48.440 | because while COVID is definitely a significant pandemic,

01:23:52.740 | I'm personally persuaded at this point in time

01:23:54.820 | that we dodged the big one, right?

01:23:56.580 | That COVID is not going to be the big one.

01:23:59.240 | That sounds a little bit harsh and uncaring

01:24:01.020 | when you're dealing with hundreds of thousands

01:24:02.440 | of people dead around the world as we speak.

01:24:04.540 | And this is going to continue for a long time.

01:24:07.140 | But it's a matter of fact that it could have been far worse.

01:24:11.140 | If we look at these examples,

01:24:13.180 | it shows us what we need and what we don't need.

01:24:16.620 | When we analyze a subject like COVID,

01:24:19.380 | it gives us a good war game, right?

01:24:22.640 | A good test that we can look at.

01:24:24.580 | And now we're close enough to those early days

01:24:27.980 | that we can remember what happened,

01:24:29.980 | but we're far enough away that we can make plans

01:24:32.640 | for the next thing.

01:24:34.140 | It's important to look at it and to recognize

01:24:37.180 | that although this one case didn't turn out to be dire

01:24:41.300 | for most of us, right?

01:24:42.780 | I want to be thoughtful and respectful in my language,

01:24:45.500 | especially towards those who have become sick by it

01:24:47.940 | and faced death from it.

01:24:49.820 | But speaking very broadly,

01:24:51.680 | although in many cases for many families,

01:24:54.220 | it's not the physical sickness,

01:24:56.100 | you didn't know that at the beginning.

01:24:58.140 | And so you were able to be cautious at the beginning

01:25:01.020 | if you had good physical preparedness in place.

01:25:03.740 | So let me use another example.

01:25:06.140 | If you have food in your house so that you know

01:25:09.260 | that when the ice storm comes,

01:25:10.700 | you don't have to run to the grocery store

01:25:12.560 | to stock up on milk and eggs,

01:25:14.340 | it may very well keep you from being out

01:25:17.820 | in dangerous conditions that can result

01:25:20.060 | in a bad car accident or death.

01:25:22.120 | If you have food in the house and your boss,

01:25:24.360 | or sorry, if you have money in the house

01:25:26.800 | and you're not living on the razor's edge financially,

01:25:30.480 | and your boss says, "You better get down here today

01:25:32.560 | "because I need you, but you know it's not safe

01:25:35.380 | "for you to drive."

01:25:36.700 | You say, "I'm sorry, boss.

01:25:37.960 | "I want the job, but I can't come in safely today.

01:25:40.980 | "I'll come in another day."

01:25:42.400 | And you can do that.

01:25:44.600 | And so when you pull back from being

01:25:47.320 | at the very edge of risk,

01:25:49.400 | when you minimize your exposure

01:25:50.980 | because you don't have to go to Costco

01:25:52.620 | with the crowds in the early days of the pandemic

01:25:54.660 | when you're not sure how bad it is,

01:25:56.900 | and you can stay at home,

01:25:58.340 | you can make everything better.

01:26:01.100 | And on almost every level of emergency that can happen,

01:26:05.780 | that improves things.

01:26:06.620 | So for example, you're better off getting COVID

01:26:09.020 | in September of 2020 than you were in March of 2020

01:26:13.060 | because now the medical professionals

01:26:15.100 | have a much better understanding of the therapies

01:26:17.940 | that are gonna help you beat it

01:26:19.060 | than they did in March.

01:26:20.320 | And so if you could sit home and minimize your exposure

01:26:23.800 | for that period of time,

01:26:25.240 | you maximize your probability of surviving the disease

01:26:28.880 | and of thriving during the disease because of that buffer.

01:26:33.640 | So I don't wanna go on with example after example.

01:26:36.160 | I just wanna emphasize that these things

01:26:38.120 | work harmoniously together,

01:26:40.280 | that physical preparedness and financial preparedness

01:26:43.760 | make otherwise catastrophic situations

01:26:48.040 | non-catastrophic,

01:26:49.600 | and they make difficult situations more comfortable.

01:26:52.960 | And although we often feel a little bit of guilty

01:26:55.220 | to say what you said, Matt,

01:26:56.440 | I say the same thing that, hey, it hasn't been that bad.

01:26:59.100 | I think it's important to say it

01:27:00.920 | with appreciation for the benefits that we have,

01:27:04.480 | but it's also due to good planning.

01:27:06.120 | COVID has not been a hardship for me and my family

01:27:09.100 | because we have a lifestyle that is designed to be resilient.

01:27:12.200 | It's been frustrating, it's been annoying,

01:27:14.780 | but it hasn't been a hardship.

01:27:16.040 | My marriage is not on the rocks

01:27:17.460 | because of constant fights and strains.

01:27:20.340 | My business is not in shambles,

01:27:22.060 | and our household is not filled with sickness,

01:27:24.340 | but it's because of taking the prior steps of planning

01:27:26.920 | that have made everything smoother

01:27:28.680 | and turned a difficult situation

01:27:30.440 | into more of an inconvenience rather than into a catastrophe.

01:27:34.440 | - All right, well, I think that we have

01:27:36.720 | about plumbed the depths,

01:27:38.760 | at least relative to what we can handle in a single show,

01:27:42.200 | some of this risk management and expanded that

01:27:44.600 | beyond both traditional financial planning

01:27:47.120 | as well as products like insurance.

01:27:49.460 | I'd love to just take a minute and ask you

01:27:52.240 | where you're at with Radical Personal Finance these days

01:27:54.560 | and where you see it headed in the future.

01:27:57.000 | In specific, I'm curious how you see it going

01:28:00.000 | in the next year or two,

01:28:01.700 | and what's a stretch goal for you

01:28:03.960 | that would represent you

01:28:05.920 | exceeding what you dreamed about there?

01:28:08.480 | - When I started Radical Personal Finance,

01:28:10.440 | I loved the format of a podcast.

01:28:14.080 | I feel that a podcast, meaning an audio podcast,

01:28:17.960 | is one of the most effective tools of communication

01:28:21.160 | and education that is available.

01:28:23.760 | Audio is much more accessible for most people to create

01:28:27.720 | than is video.

01:28:29.360 | Audio is easier to consume than is video

01:28:32.160 | because you can do it while you're doing other things.

01:28:34.640 | And so I had this dream that I would be able to provide

01:28:37.760 | a world-class financial education in an audio podcast.

01:28:41.400 | And I think I've done a pretty good job with that.

01:28:43.160 | The audience has appreciated what I have done.

01:28:45.600 | What I learned over time is a few things.

01:28:47.780 | Number one, while an audio podcast may be good,

01:28:51.560 | it doesn't get nearly as wide of an exposure

01:28:54.360 | to the marketplace as other forms.

01:28:56.360 | And so from the exposure side of things,

01:29:00.520 | I'm trying to figure out how I,

01:29:02.240 | with the skills and abilities that I have,

01:29:04.560 | can provide excellent educational content

01:29:08.000 | in a format of audio, also in a format of video,

01:29:10.640 | and also provide more written content.

01:29:12.160 | That's number one.

01:29:13.320 | Number two is I've learned that while I can create

01:29:17.240 | a lot of valuable education in an audio podcast,

01:29:20.560 | it's often too unwieldy at answering people's questions.

01:29:24.600 | And so what I need to do is I need to create

01:29:26.840 | more focused, specific courses

01:29:29.360 | that answer people's questions.

01:29:30.980 | And so in the beginning, I thought,

01:29:32.320 | oh, I'm gonna give it all away for free.

01:29:34.320 | Well, now what I understand is that there's no way for me

01:29:37.660 | to give it all away for free because the answers

01:29:40.240 | that people are looking for get mired and buried

01:29:43.520 | in the sheer volume of audio files to wade through.

01:29:47.760 | And so I'm trying to do those,

01:29:49.200 | I'm working on doing those two things.

01:29:50.720 | Number one is I'm increasing my exposure

01:29:53.160 | with more formats to attract people.

01:29:55.940 | And number two is I'm building high quality courses

01:29:59.500 | that answer specific questions that people have

01:30:02.140 | so that the education is tailored to the specific need

01:30:05.420 | that they're in at the moment so that they can have answers.

01:30:07.720 | So those are my projects for 2020 and 2021.

01:30:10.320 | - All right, good deal.

01:30:13.320 | I wanted to ask you, Joshua, what do you love

01:30:15.160 | about where you are today with life, work, and money?

01:30:18.520 | - Years ago, I had a dream.

01:30:20.520 | I do all these weird goal setting exercises.

01:30:23.560 | I would do this dream where I imagined my day,

01:30:27.080 | my perfect day.

01:30:27.960 | I do this journaling exercise where I just think

01:30:29.760 | through my perfect day from beginning to end,

01:30:31.800 | exactly what I would do.

01:30:33.600 | You know, I imagine myself lying in my bed

01:30:35.600 | and I open my eyes and I look around

01:30:37.040 | and I see where am I and what do I do?

01:30:39.000 | And I go through the whole day.

01:30:40.640 | And that perfect day for me had a number

01:30:42.720 | of important components.

01:30:44.320 | One of those components was for me to do work

01:30:46.840 | that I cared about.

01:30:47.760 | I love to educate, I love to teach,

01:30:49.360 | I love to engage with people.

01:30:51.120 | To be able to do it entirely free

01:30:53.200 | of any kind of scheduling encumbrances.

01:30:55.480 | I spent many years as a financial advisor,

01:30:57.400 | you know, with 25 to 30 appointments scheduled

01:31:00.320 | every single week, major constraints on my time

01:31:03.840 | with, you know, scheduled weeks out.

01:31:06.080 | And I didn't want a high scheduled life

01:31:07.720 | and I wanted to be able to live anywhere in the world.

01:31:09.960 | I wanted to be able to run a business anywhere in the world.

01:31:12.240 | And so I dreamed that a number of years ago

01:31:14.640 | and I have achieved that.

01:31:15.960 | And it genuinely is great.

01:31:19.320 | It's not perfect.

01:31:20.560 | I've come to realize some of the things that I miss

01:31:23.800 | about a more traditional looking lifestyle.

01:31:25.820 | Some things I miss about being in an office with coworkers.

01:31:28.400 | There's things that I miss about being anchored

01:31:31.260 | to one place.

01:31:32.440 | But I've been able to build a lifestyle

01:31:35.040 | that is more free than anybody I know.

01:31:37.640 | Where I can come and go on a daily basis,

01:31:40.480 | how I like, when I like.

01:31:42.340 | I can come and go anywhere in the world.

01:31:44.940 | I can do very well.

01:31:46.840 | I can do work that matters to me.

01:31:48.800 | It's just a total blessing.

01:31:49.980 | It's a real blessing.

01:31:51.200 | I believe that these are some of the opportunities

01:31:53.280 | that we have in the modern world

01:31:54.660 | because I'm not financially independent.

01:31:57.080 | I can't live on the income from my investments yet.

01:32:00.080 | I'm not there yet.

01:32:01.260 | But I feel like I'm already living the lifestyle

01:32:03.480 | that I would live if I were financially independent.

01:32:06.520 | And to me, to have the ability to build that,

01:32:10.440 | I'm not in my mid-30s.

01:32:12.960 | To have the ability to have built that,

01:32:15.440 | 'cause I've been living that since I was 30 years old

01:32:17.160 | or a little bit earlier,

01:32:18.720 | is just a remarkable statement on the golden age

01:32:22.880 | that we're living in.

01:32:23.700 | We're genuinely living in a golden age in human history.

01:32:27.320 | There is more opportunity for us now

01:32:29.760 | than there has ever been before.

01:32:30.940 | There's more financial opportunity

01:32:32.440 | than there is now than ever before.

01:32:34.840 | Global wealth is increasing at a rate

01:32:36.840 | that's never been seen before.

01:32:38.100 | We live better than ever before.

01:32:40.280 | And so we're living in a golden age.

01:32:42.080 | And it's such a blessing to be able

01:32:44.240 | to have benefited from that

01:32:46.080 | and to be able to help other people benefit

01:32:47.960 | from this time that we're living in.

01:32:50.000 | - Good deal.

01:32:51.200 | So this is a show, it's all about learning

01:32:53.080 | from the experience of others.

01:32:54.600 | And I wonder, how do you reflect on your decision

01:32:57.320 | to go all in on podcasting in summer of 2014,

01:33:00.280 | which was a big choice that you made at that time.

01:33:02.480 | And then of course we could say expanding more broadly

01:33:04.740 | into personal finance media, since that time.

01:33:09.020 | - When I decided to go all in on podcasting,

01:33:11.480 | it was a difficult decision for me.

01:33:12.800 | It was a very expensive decision for me.

01:33:14.760 | I had to close a financial planning firm

01:33:17.000 | that I'd spent five years building.

01:33:18.860 | I had to walk away from my residuals.

01:33:21.600 | I had to leave clients that I cared deeply about.

01:33:24.720 | And I had to walk away from all of it.

01:33:26.160 | It was extraordinarily expensive.

01:33:28.240 | But at the time I did it when I did it for two reasons.

01:33:33.040 | Number one, I feared having regrets.

01:33:36.480 | I saw the marketplace, I knew what was happening

01:33:39.260 | and I feared having regrets.

01:33:41.520 | I feared not acting and how I would kick myself

01:33:45.360 | for not acting years later versus acting.

01:33:48.560 | The second thing was I saw what was happening

01:33:51.160 | in the marketplace and I saw the timing

01:33:52.800 | that was in the marketplace.

01:33:53.800 | And for me, this has always been something

01:33:55.520 | very difficult for me.

01:33:56.680 | I have always come from a fairly mainstream

01:33:58.920 | financial background, mainstream investing background.

01:34:01.080 | I'm a very conservative guy.

01:34:03.040 | But I would read biographies of people

01:34:05.600 | who were very wealthy and I observed that

01:34:08.240 | what's necessary is that when you see something,

01:34:11.020 | you have to take a bet on it.

01:34:12.800 | That if you read the biographies

01:34:14.060 | of wealthy, successful people,

01:34:16.040 | they see an opportunity and they take the bet.

01:34:18.520 | You have to actually take the shot.

01:34:21.080 | You know, we can of course recite the famous quote,

01:34:23.680 | you miss 100% of the shots you don't take, but it's true.

01:34:26.560 | And so when I was looking at podcasting,

01:34:28.080 | I said, this is a shot I need to take

01:34:30.520 | and I'm glad I did because I hit the timing right.

01:34:34.520 | I rode an increasing wave at a certain point,

01:34:37.760 | technologically, socially, et cetera,

01:34:40.040 | and that laid the foundation for me.

01:34:42.560 | For me, having had the confidence in myself to do that

01:34:47.160 | was a formative thing in my own personal life

01:34:50.120 | because it caused me to come to trust myself

01:34:53.920 | more than I previously did.

01:34:55.760 | When I started Radical Personal Finance,

01:34:58.200 | nobody agreed with me.

01:34:59.880 | Not that people were disagreeable,

01:35:01.880 | but most of my advisors didn't understand.

01:35:05.480 | They didn't know what I knew.

01:35:06.840 | They didn't understand the marketplace

01:35:08.440 | like I thought I understood it.

01:35:10.120 | And so I had to take the bet basically on my own,

01:35:15.120 | which as a man, I'm incredibly grateful that I did it.

01:35:19.720 | And I've continued to take bets on my own,

01:35:21.580 | do things that other people didn't understand.

01:35:23.640 | And as every time I do that, I see the benefits

01:35:26.880 | and I see that it builds my confidence

01:35:29.000 | and allows me to trust my own judgment more.

01:35:31.520 | And so that's been incredibly valuable.

01:35:33.280 | Along the way though, I continue to see the benefits

01:35:35.840 | of good financial planning

01:35:37.160 | because while you have to take some risks in life,

01:35:41.720 | you can dramatically minimize the effects of those risks

01:35:44.560 | with good financial planning.

01:35:46.880 | I'm not willing to take a wipe out risk.

01:35:49.160 | And so good financial planning allows me to feel confident

01:35:52.760 | that it's very unlikely, I won't say impossible,

01:35:55.240 | but it's very unlikely that I'll ever be wiped out

01:35:57.920 | because I don't take wipe out risks.

01:35:59.680 | And to me, that's a very useful and valuable lesson

01:36:04.680 | that I have learned early enough in life

01:36:06.740 | where I hope it'll continue to pay off

01:36:08.000 | throughout my entire lifetime.

01:36:09.600 | - Awesome.

01:36:10.840 | It's a pretty different landscape now than it was in 2014.

01:36:15.040 | And I wonder how you think people like me

01:36:17.400 | in the financial media space should think forward from 2020

01:36:20.880 | rather than looking back at the playbook from five years ago.

01:36:24.120 | - That's a complex question

01:36:25.520 | because it's covering multiple levels.

01:36:29.200 | On the one hand, it's harder to break out in 2020.

01:36:32.940 | We live now in a world

01:36:34.240 | where independent media creation is normal.

01:36:38.520 | Almost all of your listeners have a media creation device

01:36:42.220 | in their pocket or in their hand at this moment.

01:36:44.240 | And that media creation device is single-handedly capable

01:36:47.760 | of making world-class audio, making world-class video.

01:36:52.480 | It's capable of broadcasting to the entire world

01:36:55.440 | at a single moment.

01:36:57.000 | You can make a living, you can make a six-figure income

01:36:59.920 | with nothing more than a Twitter account.

01:37:02.000 | And I'm not exaggerating with that.

01:37:03.960 | If you have interesting things to say,

01:37:06.560 | and if you can generate value, people,

01:37:08.000 | you can generate six figures

01:37:09.360 | from any corner of the world with a Twitter account

01:37:11.640 | and a couple other ways to collect money from people.

01:37:15.120 | But in that context, what I think it means, though,

01:37:18.560 | is there's more of a desire for high quality.

01:37:21.880 | And so the exposure is good because it builds the audience.

01:37:26.880 | The potential listener base for your podcast

01:37:31.240 | is far bigger today than the potential listener base

01:37:34.300 | for my podcast was in 2014.

01:37:37.360 | But what it means, though,

01:37:38.420 | is that we have to create better stuff that attracts people.

01:37:42.920 | And we have to learn the new tools of the marketplace.

01:37:45.560 | And that's where it's difficult.

01:37:46.960 | I think that most of us probably wish sometimes

01:37:51.280 | to go back to a simpler life.

01:37:53.080 | I certainly do.

01:37:54.440 | It seems it's so difficult to keep up in the modern world

01:37:56.840 | because the pace of change is so fast.

01:37:59.120 | The things that worked in 2014 do not work anymore.

01:38:02.520 | And the things that work in 2020 will not work in 2022,

01:38:06.640 | which means that all of us have to be

01:38:08.920 | on the top of our game.

01:38:09.960 | None of us can sit.

01:38:11.720 | We get to choose our mindset, though.

01:38:13.200 | We can either regret that or we can embrace it.

01:38:15.680 | I think it's much more powerful to choose positivity

01:38:18.960 | and choose to embrace it than not.

01:38:21.180 | And so I don't have all the answers.

01:38:23.960 | Although I had an earlier start,

01:38:25.760 | I've not executed well on all the things

01:38:28.080 | that I need to execute on.

01:38:29.440 | And so we're in the same position.

01:38:31.600 | What's remarkable, though, is that in 2020

01:38:34.680 | is that when we do things right,

01:38:36.980 | when we do things effectively,

01:38:39.200 | the growth rates can be astronomical.

01:38:42.280 | And I think that it's important to be gentle with ourselves

01:38:44.720 | and to be important to be willing to try things,

01:38:47.040 | multiple things.

01:38:48.240 | I've recently just simply recognized a number of people

01:38:51.180 | whose stories where they've had these major successes.

01:38:53.680 | But what I have found when I've researched

01:38:55.780 | is that the major success came after three other failures.

01:38:59.020 | And I've seen this with a number of media brands

01:39:01.520 | where they did this, didn't work.

01:39:03.380 | They did that, didn't work.

01:39:04.640 | Did the other thing, didn't work.

01:39:05.640 | And then all of a sudden they tried something new

01:39:07.160 | and boom, it worked.

01:39:08.840 | And so I would point out that you don't need the home run

01:39:13.840 | to be successful, but by continuing to try

01:39:17.320 | and to put yourself in the position

01:39:18.580 | where you can take pitches,

01:39:20.040 | there's a better chance that you will be able

01:39:22.040 | to find the home run.

01:39:24.000 | So that's a bit of a nonspecific answer to your question,

01:39:26.200 | but it's my answer for right now.

01:39:27.480 | - No, I think that's great.

01:39:28.840 | So Joshua, what's one piece of advice

01:39:32.080 | that you've benefited from in life

01:39:33.480 | or that you'd like to share today?

01:39:36.080 | - One great skill that I think all of us can develop

01:39:39.760 | is the skill of weighing alternative courses of action.

01:39:44.760 | As human beings, we have a faculty

01:39:47.040 | that no other creature has, which is abstract thought,

01:39:51.120 | the ability to look to the future

01:39:52.880 | and to imagine different possibilities.

01:39:55.680 | And you can do all of this from your own mind.

01:39:59.200 | And in today's world, one major benefit that we have

01:40:02.700 | that past generations didn't have

01:40:04.840 | is you can, in a way, test drive things

01:40:07.920 | that you're interested in through being exposed

01:40:11.160 | to the experiences of others through good quality media.

01:40:14.760 | A number of years ago, I took my family

01:40:17.240 | on a full-time RV trip.

01:40:19.800 | We sold our house, we sold all our stuff,

01:40:21.700 | we got rid of all our stuff,

01:40:22.680 | and we moved into a 30-foot travel trailer.

01:40:25.640 | I'm the wacky one in the family,

01:40:27.080 | and I was the one who had the idea.

01:40:28.440 | My wife had never in her life sat down and thought,

01:40:30.640 | "Well, maybe I wanna go and live in a travel trailer."

01:40:33.720 | So what I did was I started talking to her about the idea,

01:40:36.440 | and then I started finding YouTube channels

01:40:38.080 | of people doing it.

01:40:39.200 | And I started having her watch YouTube videos

01:40:41.440 | of people doing it.

01:40:43.000 | Over time, she started to realize,

01:40:45.000 | "You know, this isn't as crazy

01:40:46.640 | as it sounded at first glance.

01:40:48.160 | This is possible, this is doable."

01:40:50.080 | And eventually, we came to the point where we said,

01:40:51.620 | "Yeah, let's do it."

01:40:52.460 | And we did it, and we had a great time,

01:40:53.760 | and I'm glad we did it.

01:40:54.800 | We'll do it again.

01:40:56.040 | I think we'll do it again.

01:40:57.500 | Our experience, though, was informed

01:41:01.600 | by the example of other people actually doing it.

01:41:05.440 | And the same thing occurs in life now.

01:41:07.520 | We have access to people's stories,

01:41:09.960 | and we have access to people who transform themselves

01:41:12.760 | from broke to multi-billionaires,

01:41:14.760 | and we have access to people who are broke

01:41:16.560 | and who stay broke,

01:41:17.440 | but who live these really interesting lives,

01:41:20.400 | you know, living in a van in the desert for free.

01:41:22.960 | And you can access all of them

01:41:24.560 | through the palm of your hand, which is just stunning.

01:41:27.280 | And so what I encourage people to do

01:41:29.320 | is develop broad experience.

01:41:31.640 | Expose yourself to what other people are doing,

01:41:33.880 | and then imagine life in the way that you want it to be,

01:41:38.200 | because we have the choice in today's world

01:41:41.400 | to choose the way that we want to live,

01:41:43.000 | and that's awesome.

01:41:44.520 | And so you can think carefully about the paths

01:41:48.080 | that you might want to pursue.

01:41:49.200 | You can think about where you might want to be,

01:41:51.440 | and in your head, as a human being,

01:41:53.360 | you can imagine, "If I do this,

01:41:54.920 | it will point me in that direction.

01:41:56.120 | If I do this other thing,

01:41:57.160 | it'll point me in another direction."

01:41:59.800 | Socrates famously said,

01:42:00.860 | "An unexamined life is not worth living."

01:42:02.940 | I don't know if he was right,

01:42:04.400 | but if he was right,

01:42:06.420 | we have the ability to examine our lives more now

01:42:09.480 | than we ever did before.

01:42:10.640 | And so as I'm growing older,

01:42:13.160 | I'm growing more confident in my willingness

01:42:15.760 | to take advantage of these opportunities we have,

01:42:18.280 | my willingness to try things,

01:42:20.240 | and I see the joy that has come to me from that,

01:42:22.560 | and I want to encourage other people to do that,

01:42:24.320 | to live consciously,

01:42:26.040 | to think, to dream,

01:42:27.560 | and to dream without limitation,

01:42:29.640 | and then work back to today

01:42:31.160 | to where you start to put together a plan

01:42:33.280 | that moves you in the direction of your dream.

01:42:35.880 | - All right, I look forward to continuing

01:42:37.540 | to watch your journey from afar as we continue our own.

01:42:42.320 | Joshua, is there anything else that we haven't covered today?

01:42:44.200 | We've had a big and far-ranging conversation

01:42:46.560 | that I've really enjoyed.

01:42:48.120 | - I think the key thing I'd like to say

01:42:49.680 | is as a plug for the work that financial advisors do.

01:42:54.160 | I'm no longer a licensed financial advisor.

01:42:56.800 | I don't hold any insurance licenses,

01:42:59.000 | any investment licenses.

01:43:00.760 | I don't really even work with individuals anymore.

01:43:03.520 | There's this tremendous challenge that people have

01:43:07.600 | when it comes to how to engage with a financial advisor,

01:43:11.760 | and obviously that's the work that you're doing now

01:43:13.480 | that you've transitioned into

01:43:14.640 | when you weren't previously a financial advisor.

01:43:16.480 | What I want to point out, though,

01:43:18.100 | is that a good financial advisor, a good counselor,

01:43:22.800 | can cut years and years off of the learning curve

01:43:27.800 | that we all have with life.

01:43:31.280 | And a good financial advisor who listens to you

01:43:34.360 | and who helps you to dream and who thinks about that

01:43:36.960 | and then applies that dreaming and that thinking

01:43:39.800 | to the money is an incredibly valuable resource.

01:43:44.100 | Is it possible to do by yourself?

01:43:47.580 | Yes, but it's a whole lot faster and more effective

01:43:51.860 | to work with somebody else.

01:43:53.760 | And I've seen again and again

01:43:54.880 | when I was working as a financial advisor

01:43:56.900 | and I've seen again and again when working with people

01:43:59.200 | how an outside person doesn't have the same emotions

01:44:02.960 | that you have in the middle of your circumstances.

01:44:05.560 | And the emotions get in our way.

01:44:06.880 | They cause us not to see solutions.

01:44:09.360 | And there've been so many times

01:44:10.660 | where I speak to somebody and I say,

01:44:12.080 | "Listen, if you just do this, you'll achieve your goals."

01:44:16.100 | And they look at me and say, "Why didn't I think of that?"

01:44:18.400 | So I just want to encourage you, Matt,

01:44:19.880 | and also to your listeners

01:44:21.120 | that the work that you do as a financial advisor

01:44:23.040 | is extraordinarily valuable.

01:44:25.020 | The financial advisor is and should be

01:44:28.860 | that link between accomplishing your goals

01:44:32.180 | and where you are today.

01:44:33.420 | Because any lifestyle goal,

01:44:35.140 | any dream that you have set out for yourself

01:44:37.380 | is going to include money in some capacity

01:44:40.940 | 'cause money is how we fuel our lives.

01:44:43.020 | And so at its core, it's valuable to dream,

01:44:46.060 | it's valuable to think,

01:44:46.980 | it's valuable to imagine what life could be,

01:44:50.080 | but you've got to bring it back to today,

01:44:51.980 | to what you do today with your time and with your money.

01:44:54.900 | And that's where a good financial advisor

01:44:56.820 | is an incredibly valuable resource.

01:44:59.020 | - I agree, and it's one of the things

01:45:00.300 | that keeps me getting up every morning

01:45:02.140 | and one of the reasons I love my work.

01:45:04.140 | So thanks for sharing that.

01:45:05.800 | Well, Joshua, how would you like people to follow up?

01:45:08.800 | Where should people look for you today?

01:45:11.540 | And what are the things that you are most focused

01:45:14.260 | on promoting from Radical Personal Finance

01:45:16.440 | and the work that you're doing there?

01:45:18.060 | - Best thing to do is if you're listening to this

01:45:19.260 | as a podcast, just go subscribe

01:45:20.500 | to Radical Personal Finance.

01:45:21.480 | There's 750 episodes of life-changing content,

01:45:25.140 | if I do say so myself, of spectacular insights

01:45:28.860 | and riveting stories and incredibly entertaining delivery

01:45:33.220 | all by me.

01:45:34.060 | And so go to find, just find Radical Personal Finance

01:45:36.220 | wherever you like to listen to podcasts and check it out.

01:45:38.800 | The library of titles is voluminous,

01:45:40.780 | but what I would say is just skip through

01:45:42.220 | and grab a couple of titles that sound interesting.

01:45:44.460 | You may get hooked enough,

01:45:45.620 | as many of my listeners have reported to me,

01:45:48.140 | to just go back to episode one and listen your way through.

01:45:51.620 | In addition, I teach a number of courses,

01:45:53.860 | which can be found at radicalpersonalfinance.com

01:45:56.340 | on the store page there.

01:45:57.780 | In those courses, I have a course on credit cards

01:46:00.060 | called "How to Borrow Money Safely

01:46:01.380 | and Never Pay Interest Using Credit Cards,"

01:46:03.260 | which if you have a credit card

01:46:04.740 | or if you ever will have a credit card,

01:46:06.980 | I consider it a mandatory form of education.

01:46:09.820 | I have a course called "How to Survive and Thrive

01:46:11.900 | During the Coming Economic Crisis,"

01:46:13.860 | which is all about how to put in place a plan

01:46:16.200 | that deals with the worst case scenario,

01:46:17.980 | but does it practically,

01:46:18.940 | and there are a number of other things there as well.

01:46:20.740 | So if you're interested in any of those topics,

01:46:22.540 | you can find them at radicalpersonalfinance.com/store.

01:46:26.100 | - All right, terrific.

01:46:27.380 | Well, it has been my pleasure to have you on

01:46:29.740 | Life Meets Money today.

01:46:30.840 | I really have looked forward to this conversation,

01:46:32.980 | and you have definitely delivered the gold.

01:46:35.340 | So thank you for your time and just for your friendship

01:46:38.820 | and support and encouragement

01:46:40.580 | as I've been on this journey for the last few years.

01:46:43.420 | Hope you have a great afternoon, Joshua.

01:46:45.060 | - Thank you for having me on, Matt.

01:46:46.540 | (upbeat music)

01:46:48.700 | - Well, here are the key takeaways from today's show.

01:46:51.700 | Whether you're Joshua Sheets or me,

01:46:53.740 | why publish online at all?

01:46:55.860 | Well, he and I are both looking to provide

01:46:57.780 | high quality web content that can help bridge the gap

01:47:00.860 | between personal finance and professional financial advice.

01:47:04.980 | Next, Joshua took time to walk us through the stages

01:47:07.700 | of financial independence.

01:47:09.420 | First of all, stage zero, total financial dependence.

01:47:13.500 | Moving on from there, hopefully quickly,

01:47:15.460 | into a stage one, financial solvency.

01:47:19.260 | And in this stage, you're able to meet

01:47:21.420 | all of your current obligations.

01:47:23.780 | Progressing from there to financial stability,

01:47:27.060 | where you are able to not only meet today's obligations,

01:47:29.700 | but anticipate how you're going to meet

01:47:31.460 | all of your obligations in the future.

01:47:33.780 | Then comes stage three, debt freedom.

01:47:36.620 | In this stage, your future is no longer mortgaged

01:47:40.140 | by your past.

01:47:41.140 | Your decisions are much freer

01:47:43.140 | when you kick debt out of your life.

01:47:44.940 | Then stage four, financial security.

01:47:48.260 | In this stage, your investments are sufficient

01:47:51.020 | to provide for your minimum living needs.

01:47:54.140 | Then in stage five, financial independence,

01:47:56.540 | your investments are sufficient

01:47:58.060 | to provide your current lifestyle.

01:48:00.780 | Stage six, financial freedom.

01:48:03.100 | Your investments generate enough income for you

01:48:06.300 | that not only can you provide your current lifestyle,

01:48:08.940 | you can also provide for an expanded lifestyle,

01:48:12.220 | baking some of those dreams in the cake.

01:48:14.300 | And then finally, stage seven, financial abundance.

01:48:17.340 | You have so much that you just can't even imagine

01:48:20.660 | what to do with it all.

01:48:21.580 | Your main problem is figuring out how to give it away.

01:48:24.940 | Insurance, which is a focus of Joshua and I's conversation,

01:48:28.860 | comes into your plan at the stage of financial stability.

01:48:32.620 | This is an item that needs to be added

01:48:34.980 | to your financial planning sooner rather than later.

01:48:39.220 | Now, as Joshua and I go on, we talk about other ways

01:48:42.460 | that you can create financial abundance in your life.

01:48:46.660 | And sort of ask the question,

01:48:47.980 | what's easier than retiring

01:48:49.580 | with millions and millions of dollars?

01:48:51.820 | Well, it turns out it's an awful lot easier

01:48:53.980 | to cultivate work you care about

01:48:55.820 | for reasons that are important to you

01:48:58.020 | and to develop a job or a business you love

01:49:00.980 | that provides an excellent lifestyle.

01:49:03.540 | This is a much more achievable solution

01:49:06.740 | than saving three to $6 million

01:49:09.020 | in order to stop working.

01:49:10.260 | In this episode, Joshua urges us to ask,

01:49:13.860 | what would life look like if we could never retire?

01:49:16.700 | This is a recurring theme on his show.

01:49:19.660 | And the answer to that question

01:49:21.260 | shows you what you are aiming for in your life.

01:49:25.020 | He also asked the question,

01:49:26.500 | what would you do if your rich uncle left you $5 million?

01:49:30.020 | And answering this may highlight areas

01:49:32.480 | where you'd like to make changes in your life today.

01:49:35.500 | For example, here in North Carolina,

01:49:37.540 | a common answer from someone who inherited $5 million

01:49:40.260 | might be to buy a really nice beach house.

01:49:42.740 | And I always like to challenge people

01:49:44.020 | on this one a little bit.

01:49:45.420 | I'll ask them, how many weeks

01:49:47.540 | have you ever spent at the beach?

01:49:49.540 | And they may say, well, there was one time

01:49:51.260 | we were able to spend two weeks at a stretch in the summer

01:49:54.540 | and we got to go back for Thanksgiving.

01:49:56.220 | So about two and a half weeks.

01:49:58.180 | And I say, well, how long do you think

01:49:59.820 | that you might like to spend?

01:50:01.180 | And they say, well, maybe we would like to spend

01:50:03.020 | two weeks a couple times

01:50:04.740 | and then maybe the whole week at Thanksgiving

01:50:06.620 | and a week at Christmas.

01:50:07.900 | So about six weeks in a year.

01:50:10.260 | And I love to point out in that instance

01:50:12.500 | that you can rent six weeks in a year at a beach house

01:50:17.020 | for probably 25 to $30,000 at a super nice house

01:50:20.740 | that will hold you and all of your close family members

01:50:24.860 | and go try that for six weeks,

01:50:27.120 | which is more than double the amount of time

01:50:28.740 | that you've ever spent at the beach before.

01:50:30.780 | And for 25 to $30,000, you can test drive

01:50:34.300 | what you were thinking you would spend $2 million on.

01:50:37.460 | And the reason to point this out is just to say,

01:50:40.260 | many of the things that we think that we would do

01:50:43.260 | if we became independently wealthy

01:50:45.740 | are actually within our grasp today.

01:50:48.220 | Going on from there, Joshua encourages us

01:50:51.340 | to define problems as those that can be solved with money

01:50:54.180 | versus those that need to be solved

01:50:56.060 | with something other than money.

01:50:57.700 | And our conversation takes in both kinds of problems.

01:51:00.940 | Now, for problems that can be solved with money,

01:51:02.920 | keeping a big emergency fund

01:51:04.500 | and maybe a pile of credit cards is helpful.

01:51:06.740 | From there, I really agree with Joshua

01:51:09.820 | that disability income insurance is at the top of the heap

01:51:12.540 | in terms of what you need to own.

01:51:14.460 | Yet, despite that fact, it's one of the least owned,

01:51:16.740 | least understood, least paid attention to types of insurance

01:51:19.960 | because people underestimate the value of their income

01:51:22.580 | and underrate how much better life is

01:51:24.540 | when they're properly insured for disability.

01:51:27.220 | As we wrap up our discussion of disability insurance,

01:51:30.780 | Joshua and I pivot to physical preparedness,

01:51:33.380 | which we both believe is underrepresented

01:51:35.360 | in the discipline of financial planning.

01:51:37.500 | So whether it's scatological jokes

01:51:39.460 | like toilet paper preparation

01:51:41.140 | or something much more serious,

01:51:42.920 | giving consideration to this aspect of your plan

01:51:45.400 | is part of providing for your family.

01:51:47.240 | So what are the takeaways?

01:51:49.980 | First, learn what you can from COVID in 2020.

01:51:53.280 | Next, think about the primary, secondary

01:51:57.140 | and tertiary effects of disasters in your area.

01:52:00.340 | Here in the Southeast, for hurricane planning, for example,

01:52:03.220 | primary preparation means knowing where to shelter

01:52:06.060 | in my home during a bad storm.

01:52:07.860 | Secondary preparation involves having batteries,

01:52:10.100 | gasoline, tools, and non-perishable food on hand

01:52:12.660 | to live through the cleanup.

01:52:14.160 | And tertiary planning involves knowing

01:52:15.820 | how I'll provide financially for my family

01:52:17.860 | due to a major disruption from the storm.

01:52:20.740 | Now, when it comes to podcasting,

01:52:22.600 | like Lin-Manuel Miranda in "Hamilton,"

01:52:24.660 | Joshua Sheets did not throw away his shot.

01:52:27.500 | Instead, he learned from his observation

01:52:29.180 | of successful people that when you see an opportunity,

01:52:31.580 | you've got to take it.

01:52:33.020 | Of course, this is no guarantee everything works out,

01:52:35.460 | but as Joshua and others note,

01:52:36.960 | you miss 100% of the shots you don't take,

01:52:39.280 | which Hamilton also discovered at the end of his life.

01:52:42.340 | Now, alongside taking the good shots, do some planning.

01:52:45.580 | Take risks, but minimize the downside

01:52:47.900 | and avoid wipe-out risk.

01:52:49.780 | Joshua and I talked about independent media

01:52:51.660 | like this podcast and like "Radical Personal Finance."

01:52:54.660 | Joshua called independent media normal, not unusual,

01:52:57.860 | and I believe this is more true than ever in 2020.

01:53:00.980 | Since in 2020, you're unlikely to win the internet,

01:53:04.180 | the kind of stuff you should be making

01:53:05.620 | is super high quality with a carefully curated niche.

01:53:09.300 | My niche is MBAs, entrepreneurs,

01:53:11.440 | and other high-income professionals who value planning

01:53:13.700 | and resonate with me personally.

01:53:15.860 | Leave me a review on iTunes

01:53:17.180 | if what I've been talking about

01:53:18.780 | seems to be working for you.

01:53:20.760 | Lastly, Joshua discussed the role good advisors

01:53:23.460 | can have in your life,

01:53:24.680 | cutting years off the learning curve from almost any topic.

01:53:27.740 | And I was touched to hear him call financial advisors

01:53:29.780 | the link between your dreams and where you are today.

01:53:32.660 | It's that purpose that keeps me going in this business.

01:53:35.420 | Thank you so much for being here.

01:53:39.800 | The last show in this risk management series

01:53:42.420 | on lifemeetsmoney.com is scheduled

01:53:44.340 | for Thursday, October 22nd, 2020.

01:53:47.200 | I take Joshua and I's wide-ranging risk management discussion

01:53:50.380 | as a case study and apply these principles

01:53:52.620 | within a hypothetical financial plan.

01:53:55.020 | I look forward to introducing you

01:53:56.260 | to my make-believe clients, Mike and Jennifer Murray.

01:53:59.340 | Mike is a consulting engagement manager

01:54:01.420 | with a big four accounting firm,

01:54:02.860 | earning about $250,000 a year.

01:54:05.580 | His wife homeschools their three children,

01:54:07.460 | ages 10, eight, and six.

01:54:09.620 | They own a $600,000 home in a leafy Atlanta suburb,

01:54:12.860 | and we're going to make sure

01:54:13.980 | that they've taken the necessary steps

01:54:15.760 | to protect their family

01:54:16.860 | in the event something terrible happens.

01:54:19.320 | Until then, this is Matt Miner,

01:54:21.220 | encouraging you to plan to fund the life you love.

01:54:24.640 | (upbeat music)

01:54:26.840 | Matt Miner is a fee-only fiduciary financial advisor

01:54:30.120 | employed by PLC Wealth Management, LLC,

01:54:32.880 | a North Carolina registered investment advisor

01:54:35.520 | where Matt provides personalized,

01:54:37.320 | unconflicted advice to clients for a fee.

01:54:39.720 | He's also my dad, so please be nice when you talk to him.

01:54:42.600 | Matt holds a Series 65 securities license.

01:54:45.680 | Life Meets Money is Matt's financial media business

01:54:48.160 | where he talks about life and money.

01:54:50.200 | LifeMeetsMoney.com exists to share wisdom

01:54:52.640 | and provide general financial information.

01:54:55.000 | It is not financial, tax, or legal advice.

01:54:57.780 | You are an individual and probably need personal advice

01:55:00.440 | for your specific situation.

01:55:02.160 | You should consider building relationships

01:55:03.760 | with helpful, caring, and competent professionals

01:55:06.120 | who understand your unique context

01:55:08.160 | and can provide advice that is tailored to your needs.

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