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NOMADTOGETHER035


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00:00:00.000 | The LA Kings holiday pack is back. The perfect gift for the hockey fan in your life. A three-game
00:00:05.040 | pack starts at just $159 and includes a holiday blanket. Buy today and you'll receive an additional
00:00:10.720 | game for free. Don't miss out. Visit lakings.com/holiday today. Where are we right now?
00:00:16.880 | Here in San Miguel de Allende.
00:00:18.800 | I'm Becky Cortman from Nomad Together podcast for location-independent families and those
00:00:25.280 | who aspire to be one. Get ready for it. Today's podcast is the first of a two-part series on
00:00:32.160 | money. That thing we love, hate, need, want, and spend way too much time thinking about. Essentially
00:00:39.040 | it's what gives us freedom or chains us down. Today's guest is Joshua Sheets from radical
00:00:44.320 | personalfinance.com, who really digs into how to handle money in a radical way. It's not just the
00:00:50.080 | 70s. It's money today, but it's still radical. Parts of this episode might be a little heady
00:00:56.960 | for some of us, like me, who don't necessarily get all the talk about assets and total cost of
00:01:02.160 | ownership calculations, et cetera, et cetera. But stick with Paul and Joshua here as the tips
00:01:06.240 | Joshua gives at the end are fantastic and quite applicable for anyone listening. And listen for
00:01:11.680 | it. Paul almost gets Joshua to say that home ownership is a bad investment. You have to listen
00:01:17.200 | to the whole episode to get the full truth, people. This is episode number 35 of the Nomad
00:01:22.000 | Together podcast. To get the show notes for this episode, please go to nomadtogether.com/financial.
00:01:26.800 | iTunes and Stitcher Reviews. Fantastic show by Amar V. from India. One can live a life that is
00:01:36.880 | not as bound by the rules, such as a steady location, a permanent home, and schooling of
00:01:42.720 | kids. This should not be a reason to stay in one location. In today's day and age, an internet
00:01:47.440 | nomad is a possibility, and this show proves that. The hosts are not the only ones doing it. Their
00:01:51.680 | guests are as well. Great Show by MadYali289 from the United States. This is an amazing show with
00:02:00.240 | tons of valuable content that has inspired me to make it work and travel more. And Can't Wait
00:02:05.040 | to Hear More by Brenda Lommely from the United States. My husband and I plan to start traveling
00:02:10.880 | together in a few months, and this podcast has given us some great ideas and insight. Thank you,
00:02:15.840 | Amar and MadYali and Brenda for your reviews. We appreciate it. Keep it coming, people.
00:02:23.680 | Each week, we read your five-star iTunes and Stitcher reviews here on the show. We'd love it
00:02:28.000 | if you said thank you by simply writing a review for us on iTunes or Stitcher. Head on over to
00:02:32.880 | nomadtogether.com/podcast to see how to give a review. We're the Cortmans. We are deep in the
00:02:40.000 | jungles of the Amazon. Just kidding. We're still in San Miguel de Allende. Every week, you're going
00:02:47.360 | to hear us say that for a while, so I thought I'd just shake it up a bit. Loving it here. Still
00:02:51.520 | seeing some good thunderstorms and working on some health issues, and then we'll see where we go from
00:02:56.320 | there. But San Miguel de Allende, it's only 10 miles from the Texas border, Laredo, Texas, right
00:03:01.920 | there. So, hey, you know, it's a really nice little trip down into Mexico and a really nice little
00:03:06.800 | place to stay. So, y'all are looking for like a weekend getaway? Come on down here and visit us.
00:03:11.920 | We're staying at an RV park that's connected to a hotel, and it's a great place to come visit. So,
00:03:17.680 | we're going to be here for a couple more months, probably. So, hey, stop on down.
00:03:20.880 | Okay, let's get down to business. Let's learn more about how you can save,
00:03:25.360 | spend less, and is home ownership really worth it?
00:03:35.440 | Welcome, Joshua Sheets. Thanks for being here on the Nomad Together podcast.
00:03:40.160 | And the little that I know, you have two kids, a wife, and you're Mr. Money Man, right?
00:03:45.360 | Something like that. Two dogs, too. But yes, I'm married. I have a two and a half year old son
00:03:50.800 | and a one year old daughter. And we live here in West Palm Beach, Florida, and I run a business
00:03:54.640 | called Radical Personal Finance. Radical Personal Finance. Not just
00:03:58.240 | personal finance, but to the nth degree that it's so radical or because it's different than
00:04:03.120 | everything else. I was looking for a descriptive title for my show and my platform. And when I
00:04:09.600 | came up with the idea of radical, I realized it fit just about everything that is important to me.
00:04:15.200 | To give you an idea, I talk about everything from the extremes of... I did a show one time,
00:04:20.400 | very popular, on the lessons that we can learn from dumpster divers and vagabonds and hobos.
00:04:25.840 | And I've done shows on how to do multimillion dollar estate planning. And so, I'd cover all
00:04:31.040 | of the extremes. And I also have some extreme and unusual political viewpoints. I have unusual
00:04:36.880 | religious viewpoints. I have unusual perspectives on many things. And so, what I try to do is I seek
00:04:42.400 | out all of the interesting extreme cases, and then I like to present that information to my audience
00:04:47.600 | so that they can look at their own situation, learn from what other people are doing, and then
00:04:51.200 | figure out what some of the tactics and tools are that they can apply to their own situation.
00:04:55.120 | So yes, radical in every sense. Well, welcome to being the extreme and the
00:05:00.080 | outcast and those weird people on the fringes, because our audience is definitely that. We've
00:05:05.360 | given up the American dream and set out to do something completely strange and different,
00:05:10.160 | although it's becoming more of the norm now that it's more acceptable to sell everything,
00:05:16.080 | quit your job and live as hobos. But what's really interesting, and I think my audience is going,
00:05:21.280 | "Wait a minute. So where's the catch? Is this guy location independent? Why do you have a personal
00:05:26.720 | finance coach on the podcast?" And so, I do want to run that through. I'm going to ask,
00:05:32.480 | are you location independent? I actually am. And for many years,
00:05:36.320 | even though I live in West Palm Beach and I live in a fairly traditional looking lifestyle,
00:05:40.800 | for many years, I've had a goal to build a location independent lifestyle. And I've been
00:05:44.960 | working towards it for many years, and I have achieved it with Radical Personal Finance.
00:05:49.200 | I started the business two years ago. In the beginning, I had a clear idea of what I was
00:05:52.960 | working towards. I didn't know if it were possible or not. But today, I am working from my third
00:05:57.920 | bedroom here in my house, and it doesn't really matter where in the world I'm working from.
00:06:02.400 | I can do my business anywhere in the world. And that's been a major part of my planning
00:06:06.160 | all along the way. - So do you sell the house
00:06:08.240 | and leave West Palm Beach or just stay there and enjoy?
00:06:11.600 | - I don't think so. Neither of those, actually. We did actually sell our house about a year ago.
00:06:16.240 | We sold our house, and that was a tremendous blessing and I've thoroughly enjoyed moving
00:06:21.280 | into a rental apartment. But although I could go and travel the world, it's not something that is
00:06:27.040 | on a full-time basis. It's not something that's a priority for me to pursue aggressively for a
00:06:32.320 | few reasons. I've been a lot of places and at this point in time, I don't really have a desire to go
00:06:37.600 | and be on the road full-time. I do enjoy traveling, but the full-time kind of going out for
00:06:42.720 | months or years at a time is not particularly important to me right now. My kids are very young.
00:06:47.440 | So at this stage, I'm working to build a business and build many things in my family and in my kids.
00:06:52.640 | And then the reason that I live in West Palm Beach is not necessarily because it's my favorite place
00:06:56.160 | in the world, although I am from here, but I feel like this is where God wants me to be at this
00:06:59.680 | point in time. And so I don't feel free to do anything else, even though I could do it
00:07:04.160 | financially. I don't feel that that's what I should be doing. So I'm here and I'm pretty
00:07:08.000 | content for now. I do think in the future at some point in time, we'll go and build the full-time
00:07:12.240 | on the road lifestyle. At the very least, I intend to take my kids to all 50 state capitals and do a
00:07:17.920 | tour of the US and show them around there. And we do enjoy traveling. I just bought a camper van.
00:07:22.240 | And one of the goals with what I do see appropriate to our lifestyle right now is I do a decent amount
00:07:27.920 | of traveling for my work. And whether that's going to industry conferences or things like that,
00:07:33.840 | I'd like to be able to take my family with me. And I don't particularly like the whole jet
00:07:38.960 | traveling. Let me get on an airplane, go away and stay at for five days in a hotel,
00:07:42.640 | leave my family at home. I enjoy taking them with me. And so I actually just bought a couple
00:07:46.240 | weeks ago, I bought a camper van, a small class B RV, a road trek camper van. I've been fixing a
00:07:51.280 | couple of things that need to be fixed on that. And I think in the future that will allow us to
00:07:55.520 | do much more of the integrated family travel. It kills two birds with one stone. If you study the
00:08:00.480 | IRS regulations on travel, it's fairly simple to be able to use some of the expenses that are
00:08:07.680 | associated with traveling to business conference, things like that, to deduct the business aspect of
00:08:12.000 | those expenses, which helps to defray some of the costs for my personal travel. We will be doing
00:08:16.560 | much more of that type of travel, just not planning to go out on the road for years at a time at this
00:08:20.480 | point. - Understood. So what's your background? Do you come at this from a registered investment
00:08:25.760 | advisor? Are you an accountant? Are you a lawyer? Or are you totally self-taught and don't have any
00:08:30.880 | credentials? - I began with a deep interest in personal finance when I was a kid. I always wanted
00:08:37.040 | to be rich. - Nice. - So I was always reading books on personal finance and money and investing and
00:08:42.240 | things like that. I went to college. After college, I was working for a marketing company, doing
00:08:46.480 | market research in the corporate environment. And I quickly learned that the corporate world was not
00:08:50.800 | for me. I wound up getting laid off from that job. And while I was deciding what to do next,
00:08:55.600 | I was having lunch with my former boss. And I was telling him the five different criteria that I had
00:09:00.800 | for a job or a business that I was interested in. One of those, as is appropriate to this
00:09:06.160 | conversation, was that I didn't want to be stuck in one place. I didn't like to be stuck in one
00:09:10.480 | office. And I was hoping that I would be able to build something that would go beyond even one
00:09:14.960 | geographic town. So that was one of my criteria from when I first got out of college. He wound
00:09:20.080 | up suggesting that I go into the financial planning business and did a lot of research and
00:09:23.440 | realized that the financial planning business would fit many of my goals. So in 2008, I joined
00:09:28.400 | the financial planning business, starting with a company called Northwestern Mutual. And I spent
00:09:32.160 | six years there with Northwestern Mutual until I wound up starting Radical Personal Finance and
00:09:37.440 | decided that Radical Personal Finance was much closer to my skill set and my personal goals.
00:09:42.560 | And so in July of 2014, I left Northwestern Mutual. What I was doing was mainstream
00:09:47.600 | practicing as a financial advisor. I sold life insurance, disability insurance, long-term care
00:09:52.400 | insurance. I sold investments. I became a certified financial planner. I actually, at this point,
00:09:56.560 | have a master's degree in financial planning, certified financial planner, chartered life
00:10:00.080 | underwriter, chartered financial consultant. I've done a lot of academic study in the areas of
00:10:04.560 | financial planning. The mission that I have with Radical Personal Finance is to connect the world
00:10:09.280 | of formal academic financial planning with the world of people who are actually trying to go out
00:10:14.160 | and achieve something unique and special. And it often seems like there's this great gap in the
00:10:19.440 | financial discussion where you have what I call mainstream personal finance advice. Hey, put money
00:10:24.720 | in your 401(k) so you can retire at 65. Open a 529 account for your kids' college, blah, blah, blah.
00:10:30.560 | And then there's this kind of fringe perspective of people who are interested in building more
00:10:35.360 | aggressive financial goals. And that can be everything from somebody saying, "I want to
00:10:39.360 | build a real estate portfolio and be a millionaire at a young age," or "I want to retire at 30," or
00:10:43.920 | "Hey, we don't have any money, but we want to go travel the world. How do we do that?"
00:10:47.520 | And I believe all those things are possible. And what I didn't see was anybody merging those
00:10:52.240 | two worlds. Because, for example, if somebody wants to go and figure out how to improve their
00:10:57.200 | lifestyle and improve their family life, doing good tax planning is going to make a tremendous
00:11:01.760 | difference in that. Depending on the situation, I would guess that 20 to 40% of your income is
00:11:06.880 | going to taxes. Well, you can make a substantial difference in that, but you can't do it by
00:11:11.440 | dreaming about something ethereal. You need to do it by sitting down and looking and figuring out
00:11:15.760 | where is our money going and what are some strategies to adjust it. So what I try to do
00:11:19.440 | is merge these worlds, this aggressive goal achievement dreams. You give me any goal,
00:11:24.400 | we can work out a plan to get there. But we also need some academic integrity from the world of
00:11:29.360 | financial planning. Because at the end of the day, you need a dollar to buy a plane ticket,
00:11:32.640 | you need a dollar to buy your meal at night. And that dollar is going to need to be earned in a way
00:11:37.680 | that is conducive to your lifestyle. And it's going to need to be managed in a way that allows
00:11:41.920 | you to achieve the ultimate end. A couple of things before we get into specifics for our audience.
00:11:46.960 | What makes your recommendations and such different from those of like, say,
00:11:51.840 | probably the most popular one our audience would know, Dave from Financial Peace University.
00:11:56.240 | Dave Ramsey.
00:11:56.880 | Dave Ramsey. What's the difference between what you're presenting and what the big Dave is?
00:12:00.960 | I wouldn't say there's so much difference of what I'm presenting. Listen, money advice is
00:12:05.520 | money advice. Dave Ramsey's slogan is we give you the same financial advice that your grandmother
00:12:09.680 | does, only we keep our teeth in. That's his joke that he does every day. You're not going to get
00:12:13.760 | some unique, different money advice. In fact, I came up with a framework that's a total of 10 words
00:12:19.120 | and five points under which I can explain every single aspect of personal financial advice.
00:12:25.440 | So financial advice is actually quite simple. Now, of course, we may disagree on a few steps,
00:12:30.160 | but that's just normal. Most of those things are talking points. Whether you have to pay off your
00:12:34.640 | debt, you only have a thousand dollar emergency fund for baby step one for Dave Ramsey's plan,
00:12:38.400 | and then pay off all your debt, or whether you should use debt, those things are workable.
00:12:42.400 | I would say the biggest thing that would differentiate me and my message from Dave
00:12:46.000 | would be two things that are important. Number one, I don't try to approach the subject of
00:12:50.240 | financial advice as telling people what they should do. This actually hurts me with regard
00:12:54.960 | to the idea that my message is not as clear as, for example, Dave's is. Dave's message is very
00:12:59.360 | clear, and that's helpful. I don't tell people what to do. I tell them how to think about what
00:13:03.360 | they're trying to do. And so I try to put myself in different situations and say, if this were your
00:13:08.320 | goal, here is what you would need to do. If this were your worldview, here is how you would approach
00:13:13.040 | that question. If this were your philosophy, here's how that philosophy would affect your life.
00:13:17.520 | Number two is I'm much less mainstream than Dave Ramsey is. In every business and every kind of
00:13:22.800 | thing, you have to deal with a specific situation. So Dave Ramsey's avatar is a median income,
00:13:27.280 | earning household, husband and wife, earning $45,000 each, or household income anywhere from
00:13:33.520 | $40,000 to $80,000, two kids, young kids, credit card debt, car payments, etc. And so his message
00:13:40.880 | is going to be tailored to that. Well, there are a lot of situations of people that doesn't serve.
00:13:44.640 | And so I try to serve all of those aspects by giving people ideas and information that's
00:13:49.120 | applicable in a broader context. We've got a lot of folks in our audience who are sitting there,
00:13:54.960 | working their nine to five and listening to us on the weekends or evenings or whatever, and
00:13:59.520 | trying to make ends meet to be able to, I don't know, sell their house or fly around the world.
00:14:05.600 | And they're like, how do they do this without burning through their savings account? What
00:14:10.320 | ideas would you have for them? Say they have a desk job, location dependent. I'd say they're
00:14:15.920 | a little bit above that median income. They're probably both bringing in 60, or if they only
00:14:20.320 | have a single working parent, they're bringing in 60, 70. What sort of suggestions do you have
00:14:26.240 | for them? What would you say? So let me start by giving you the framework, how I think about money,
00:14:31.760 | because I think it'll be really useful, especially in this context. There are five points to it. And
00:14:36.640 | the first three are the only things that you can actually do with money. So step one is
00:14:41.600 | increase income. When it comes to actually physical tactical steps, one of the things you
00:14:46.320 | always have to remember is you can always increase income and people often forget about that.
00:14:50.080 | That's actually one of the most powerful things that you can focus on, increasing income. Number
00:14:54.400 | two is decrease expenses. That's the other thing that you can do. You can't predict what Coca-Cola
00:14:59.680 | is going to do. You can't predict what the valuation is going to be between the dollar
00:15:03.760 | and the pound, such as when is the most advantageous time to travel to Europe, which
00:15:07.760 | can do is decrease expenses. Number three is invest wisely. Those are the three things that you do
00:15:13.360 | with money that will make the difference, the biggest difference. So I think of that as a
00:15:18.000 | triangle where you go continually around those three things, increasing income, decreasing
00:15:22.480 | expenses and investing wisely. Number four is avoid catastrophe. I'll minimize the discussion
00:15:27.280 | on that right now. But basically, I think of that as simply putting on my disaster glasses
00:15:31.520 | and looking around and saying, what's the worst thing that could happen to me? And that's where
00:15:34.880 | you cover everything from life insurance to having savings account to if you're traveling,
00:15:39.440 | you think about buying the trip insurance and you make a decision on whether or not you need that
00:15:43.520 | based upon what's the worst thing that could happen. And then number five is optimize lifestyle.
00:15:48.320 | And here's where I think the biggest wins will be for many listeners. There's an ideal way for each
00:15:55.360 | person to earn an income, to spend their money and to invest their money. There's an ideal way
00:16:00.000 | for them to do that. You can earn forty thousand dollars a year doing a job you hate or you can
00:16:04.960 | earn forty thousand dollars a year doing a job you love. The financial impact of that is going to be
00:16:09.280 | the same on your financial plan. But the experience is going to be very different in the same way you
00:16:14.320 | can earn forty thousand dollars a year doing a desk job in Chicago, Illinois, or you can earn
00:16:19.120 | forty thousand dollars a year working virtually with a business that you can run through your
00:16:23.600 | laptop sitting on a beach in Mexico. The money will be the same, but your experience of earning
00:16:28.400 | the money will be dramatically different. So under the scenario that you're presenting me with,
00:16:32.960 | I would advise somebody who's in a situation like that to start to take a comprehensive view
00:16:38.080 | of their life, a holistic view. First thing with money goals is to get very clear on what the
00:16:44.000 | actual goal is. If somebody's goal is to be able to set up a location independent lifestyle so that
00:16:50.720 | they can travel with their family, that is a great goal because it's specific and it's clear.
00:16:55.840 | Next step, on what budget? You need to know what that budget is because if you need a budget of
00:16:59.760 | ten thousand dollars a month or a budget of three thousand dollars a month, those will be a
00:17:03.280 | dramatically different set of options. The best thing that somebody can do in that situation is
00:17:08.640 | work to transition their income from a location dependent scenario to a location independent
00:17:15.280 | style of income. And this has never been easier in the history of the world. There are so many
00:17:20.320 | jobs and so many businesses that can be done on a location independent perspective, and the trend is
00:17:26.800 | only in that direction. The trend is increasing where more and more people are working from
00:17:31.760 | different locations. I have a number of people that work with me in my business. I don't care
00:17:35.200 | where they are. And in fact, I don't want to even go to the perspective of hiring people,
00:17:39.680 | especially not in the United States. When you get to the cost and the regulations that are involved,
00:17:44.320 | it is so tremendously expensive to hire people and to put office space and to handle the taxes
00:17:49.040 | and to cover the health insurance and all that stuff. It's much easier for me to work with people
00:17:52.880 | in other places. The way you get there is you look at your skills and you look around and you say,
00:17:56.640 | "Is there a way that I can imagine this type of work succeeding in a location independent way?"
00:18:02.800 | For some businesses, that's relatively simple. If you are programming software or you're involved
00:18:07.520 | in anything where you're staring at a computer for most of your workday, you can do that on
00:18:12.240 | a location independent basis. We could give tips and strategies for how to get into that. We'll
00:18:16.320 | save that for another time. If your workday consists of you primarily looking at a computer,
00:18:20.560 | you can do that on a location independent basis, and it might take you a year to transition to be
00:18:24.560 | able to do that. If your workday involves you doing something else that's not staring at a
00:18:30.320 | computer, then you might need to think a little bit more creatively. But even in these occupations,
00:18:35.440 | there are tons of ways that people can do it. If somebody is a plumber, there's no reason why you
00:18:40.160 | have to be a plumber 12 months a year. You could be a plumber six months a year, six months on,
00:18:44.240 | six months off. If you're a builder, there's no reason why you have to build houses in West Palm
00:18:49.360 | Beach, Florida. You can build houses anywhere you want to go. If you have the skills or are trying
00:18:54.320 | to learn the skills of a farmer and your long-term goal is to go and be a farmer, you can volunteer
00:18:59.040 | as a woofer on various organic farms all around the world. You can arrange many, many ways for
00:19:04.960 | you to travel. You can work along the way. Believe it or not, people earn their income in every
00:19:09.040 | country in the world. Now, some countries it's easier, but people earn a living in every country
00:19:13.600 | in the world. There's bartenders in every country in the world. So if you've got the skills of a
00:19:17.600 | bartender, you can certainly earn a living. And I think that's the simplest place to focus,
00:19:22.720 | is to recognize that I don't have to do this job here where I am. I can get a job and do a
00:19:29.040 | different job anywhere I want to be. Then from there, you can go back to some of the basics that
00:19:34.160 | might free you up. The next thing to do is once you get clear on a goal, recognize that first and
00:19:39.040 | foremost, you want to get the income thing figured out. Now, recognize that there are a couple ways
00:19:44.160 | to do that. You could get the income thing figured out by working along the way, or you can get the
00:19:50.960 | income thing figured out by saving money to be able to fund an adventure. And here's where you
00:19:55.840 | have a big difference between, do I want to travel into perpetuity or do I want to travel for a year?
00:20:02.400 | Traveling for a year is super, super easy. Here's all you need to do. Live on 50% of your current
00:20:08.240 | income, save 50% of your income, and go and you'll have a year on the road. For every year that you
00:20:13.520 | save 50% of your income, you buy yourself a year of freedom. It's as simple as that. And so where
00:20:18.480 | that should direct your attention is to your expenses. Many people could put themselves in
00:20:24.240 | a situation where they could become completely financially independent and be able to travel
00:20:28.480 | into perpetuity in anywhere from seven to 15 years, depending on the approach. If you want to do it
00:20:34.640 | faster, the simplest way to do it is to save a very high amount of your income. And so some of
00:20:39.600 | your listeners might have excellent jobs. You might be earning six-figure salaries. Maybe you have
00:20:44.320 | a dual-income household. Well, you give me a household with an income of $150,000,
00:20:48.480 | and we just put the monthly living budget on, say, $2,500, $3,000 a month by making some simple
00:20:55.520 | adjustments in lifestyle. And in under a decade, that person can be completely financially
00:20:59.920 | independent and be able to travel into perpetuity. I've interviewed a number of people who've pursued
00:21:04.320 | this plan on my show. There are a number of people who've done that. That's a very simple thing to do.
00:21:09.680 | Are you talking like retire in 10 years?
00:21:12.960 | Absolutely.
00:21:13.840 | Viable option for anybody to do that in 10 years?
00:21:17.040 | Anybody. I am profoundly convinced that anybody who wants to and who has some basic skill,
00:21:23.520 | I can't solve the problems of, say, somebody who's mentally handicapped, things like that.
00:21:27.280 | But normal people can retire in 10 years, and it's a very simple function.
00:21:31.920 | It's a function of your income and your expenses. See, what happens is most people
00:21:37.920 | think that, "Well, if I'm saving 10 or 15% of my income, then I'm in good shape." Well,
00:21:42.560 | you don't have to save 10 or 15% of your income. You can save 75% of your income.
00:21:46.480 | The reality is that if you save 75% of your income and you invest that money,
00:21:51.840 | you'll be financially independent in under a decade. But most people don't think of saving
00:21:55.280 | 75% of their income. A couple of resources people have interviewed on my show,
00:21:58.640 | and this is what Radical Personal Finance is all about. A super extreme one would be
00:22:02.720 | Jacob Lund Fisker at Early Retirement Extreme. If your audience is not familiar with that,
00:22:06.800 | they'll find that to be interesting and useful. He has a book which is called Early Retirement
00:22:11.360 | Extreme. It's one of my favorite personal finance books. Definitely a recommendation.
00:22:15.760 | There are two episodes of the show on Radical Personal Finance in the early days where I
00:22:20.080 | reviewed the book in detail. Also, I've done extensive interviews with Jacob Lund Fisker.
00:22:24.800 | Another very useful resource would be somebody like the most popular personal finance blogger
00:22:30.320 | that I'm aware of is Mr. Money Mustache, MrMoneyMustache.com. He is an excellent writer,
00:22:36.560 | and he's done a great job at talking about some of the ways to accomplish this.
00:22:41.680 | This is the way to financial independence. It's called extreme savings by saving a very high
00:22:46.160 | percentage of your income. But the way the math works, and I've got an episode and I'll look it
00:22:49.760 | up in a second here and give you the episode number, but the way the math works is that if
00:22:53.440 | you save a very high percentage of your income, you'll be able to maintain that income for a very
00:22:58.800 | long period of time without needing to earn more money. The reason it is, if you think about this,
00:23:03.760 | if you are earning $10,000 a month and you're living on $2,000 a month, I'm not promising that
00:23:09.920 | by saving 80% of your income, I'm not promising that you can cover $10,000 a month of expenses.
00:23:16.240 | What you're actually doing is you are covering $2,000 a month of expenses. And so that's why
00:23:22.880 | there's a very simple mathematical approach that high savings gives you freedom.
00:23:28.480 | Could we look at it this way that making huge sacrifices for 10 years will allow you to live
00:23:35.360 | a life of financial freedom, but you'll still have to make those same sacrifices because you'll still
00:23:40.560 | only be living off of $2,000 to $3,000 a month?
00:23:43.200 | I wouldn't necessarily call them sacrifices. I think that's a limiting way to look at it.
00:23:47.280 | The people who pursue this approach generally don't view themselves as sacrificing.
00:23:51.840 | Generally, the people who view this approach are looking at it and realizing,
00:23:55.520 | "Look, you're telling me I don't have to go to work and you're telling me that I have freedom
00:24:00.160 | to be able to do whatever I want to do." It's a really powerful concept.
00:24:04.880 | So for me, I live in a very inexpensive apartment, not because I can't afford to live in a more
00:24:10.960 | expensive apartment, but because I don't value what the more expensive apartment or the more
00:24:14.960 | expensive house gives me. And so the key is to adjust your mindset. If you go into it with a
00:24:20.000 | typical US-American idea that spending less money is deprivation, you'll never successfully retire
00:24:27.120 | early. You'll never be able to achieve it because you'll always be viewing it as deprivation.
00:24:31.680 | But if you go into it thinking about it from the perspective of abundance,
00:24:35.920 | in the sense that you gain an abundance of time and abundance of freedom,
00:24:39.680 | the reason I won't give up my $1,000 a month apartment or the reason I won't give up my $500
00:24:44.960 | car—I drive a $500 car, a $5,000 minivan for my family and a $500 car that I drive—the reason I
00:24:50.480 | won't give those things up is because what they get me is worth so much more than fancier stuff.
00:24:56.000 | What they give me is time. They give me the ability to say no to anybody I want to. They
00:25:00.400 | give me the ability to work at home and do something I care about, whether or not the
00:25:04.160 | money is—and not to make decisions for purely financial reasons. And so people who approach this
00:25:10.400 | are not looking at it from the perspective of deprivation. They're looking at it from
00:25:15.120 | the perspective of gaining something valuable. Now, you don't have to just do it on $2,000 a
00:25:19.920 | month. I try to use small numbers, relatively small numbers, to make these things accessible.
00:25:24.480 | But there's no reason why you can't earn half a million dollars a year. There's lots of people
00:25:28.160 | that earn a half a million dollars a year. But usually when I say things like that, I lose people
00:25:32.560 | and they just don't identify with that. So I like to use examples of somebody earning $80,000 a year.
00:25:37.680 | You don't own a house and you're renting. What's the financial decision there?
00:25:41.760 | I thought owning a house is a good investment and mortgages are great investments.
00:25:46.720 | - So go and listen to a couple episodes on the show. I hate to sound like I'm plugging my podcast,
00:25:52.960 | but a couple of entire episodes dedicated to this topic on radical personal finance,
00:25:56.960 | specifically analyzing the numbers. One of the most important calculations you should make is
00:26:02.480 | to actually look at what the expenses are of your house and what your house is actually costing you.
00:26:09.600 | Most people who approach their personal finances with the idea that owning a house is a good
00:26:14.640 | investment are getting bamboozled. Specific examples from my own situation of the simple
00:26:19.840 | math behind it. When I owned a house, I bought the house for about $225,000 and I put 20%
00:26:27.520 | down. So I basically put $50,000 down into the house and I had a mortgage and my mortgage payment
00:26:32.160 | was $1,250 a month. Now of that mortgage payment, the $1,250 a month, about $250 a month was
00:26:40.720 | actually going towards principal reduction. The rest of it was going to taxes, interest,
00:26:46.240 | and insurance. So from the simplest analysis that my rent is $1,000 a month now, I was able to
00:26:53.200 | transition from $1,000 of expenses on my house to $1,000 of expenses with my rental payment.
00:27:00.880 | And most importantly, I was able to free up and gain back the income and the interest that I could
00:27:07.440 | earn from that $50,000. Now I'm not saying that you shouldn't consider your primary residence and
00:27:13.360 | try to figure out how to make money off of it. You can do it. And I wound up, I sold the house,
00:27:17.120 | made a nice profit on it. That was part of the ideas. That profit was tax-free. I lived in the
00:27:21.440 | house for over two years. And anytime you've owned a personal residence for over two years,
00:27:26.400 | you can gain up to $500,000 for a couple married filing jointly on their taxes and paid no income
00:27:32.000 | taxes on the money. And so I was able to free up some money and take some tax-free income from the
00:27:36.480 | house. But I spend less here in the apartment financially than I did on the pure cost of owning
00:27:43.760 | the house. Now my apartment is smaller than the house was. Comparable rental rates on a house
00:27:49.280 | would have been something around $1,800 a month. So if I were moving in and renting a house,
00:27:53.920 | then I had to redo the math. But here was what made the biggest difference. For the lifestyle
00:27:58.480 | of our family, our lifestyle in this rental apartment is far better than my lifestyle was
00:28:03.360 | in the house. As I'm building this new business on the house was requiring a tremendous amount of
00:28:07.680 | time, constantly fixing things, constantly just dealing with the normal aspects of home ownership.
00:28:12.480 | Now in a rental apartment, I don't need to do that stuff. And so we actually like the floor plan.
00:28:16.560 | We like the amenities of the apartment better than the house. And it frees up the time. So
00:28:21.120 | tonight when I finish up this interview, I can just say, "Hey, let's go to the beach or take
00:28:24.400 | the paddle boards out. And I don't have to worry about fixing the water softener. It's somebody
00:28:28.000 | else's problem." And so there are ways you need to actually go through and calculate the actual
00:28:33.440 | cost. And there are a couple of episodes that will teach the audience how to do that in the
00:28:37.520 | archives of Radical Personal Finance. So by cost, you're saying total cost,
00:28:41.760 | time, emotional involvement, that sort of thing? Right. Total cost. And I'm being very specific
00:28:47.040 | on the financial aspect as well as other things. But I'm saying you can do a side-by-side financial
00:28:52.720 | calculation. And most people don't do that. See, the way most people imagine the rent versus own
00:28:58.160 | scenario is let me use those numbers from a comparable house. They look at it and say,
00:29:02.400 | "Well, if I rent for $1,800 a month, but I can have a mortgage payment of $1,250 a month,
00:29:08.720 | then I'm automatically going to be better off. Because if I rent, I'm losing $1,800 a month.
00:29:13.520 | But if I own the house, I'm building equity." So a couple of major mistakes that people make.
00:29:17.520 | Number one, they assume that they're building equity with their entire mortgage payment.
00:29:22.160 | It's factually incorrect. Of my $1,250 mortgage payment here in Florida, about $600 of that was
00:29:27.760 | for taxes and insurance. And those taxes and insurance are a pure cost. You never recoup any
00:29:34.720 | of that money. The balance of the $650 payment was a payment on a mortgage. However, that mortgage
00:29:41.520 | payment, due to the way that this was a traditionally amortizing 30-year fixed-rate
00:29:45.520 | mortgage, due to the way mortgages are amortized, of that, only about $250 in the beginning years
00:29:51.280 | of the mortgage payment are actually going to a reduction of principal. The rest of it is all
00:29:55.920 | interest, which is pure cost. So from a financial cost, it's actually the difference in that
00:30:01.920 | situation would be I'm spending $1,800 a month on rent, or I'm spending $1,000 a month on the
00:30:09.600 | cost of owning a house. The next calculation you have to do is what are the costs of ownership?
00:30:14.960 | When you own a house, there are constant costs of ownership. That's fine. It's the same with
00:30:19.040 | everything. I'm not saying people shouldn't buy houses, but you should calculate the cost.
00:30:22.560 | Whether it's a new $3,000 water softener system, or a new $10,000 roof, or a new $8,000 septic
00:30:28.640 | tank, or a new $3,000 air conditioner, there are always lots of costs. There are both costs for
00:30:33.840 | maintenance items and also for improvements and ways to make things better. You're calculating
00:30:38.720 | the cost of a fence. So you've got to calculate the cost of those maintenance items in terms of
00:30:43.040 | dollar figures and with actual time. And the other one, the big one that most people miss,
00:30:48.480 | is you need to calculate what the opportunity cost is that you're giving up on the foregone
00:30:54.240 | investment earnings of the money that you're putting down as a down payment. So I put $50,000
00:30:59.200 | down on the property, and let's say that I were earning 6% interest per year. That's $3,000 per
00:31:05.200 | year of cost that I'm giving up because I don't have the money invested, because I had to put the
00:31:10.560 | money down into my personal house. That's interest I'm not getting because I put the money into a
00:31:15.360 | down payment. Now, yes, I do own the house, and I have the potential to experience appreciation
00:31:21.440 | of the property or depreciation of the property, but that's interest that I'm not getting.
00:31:26.480 | And so when you actually line these things up, what you find is that the difference in cost
00:31:30.880 | between renting and owning for many people is much closer than they would otherwise say. And then when
00:31:36.640 | you add on the other lifestyle factors, like I mentioned, time freedom, location freedom,
00:31:41.600 | the ability to simply move to a different job, the ability to live closer to a job, the ability
00:31:46.320 | to move countries if you want to, to go get a better job, those things are compelling.
00:31:51.200 | And that's the big picture. To apply it, you have to do an analysis in a local market,
00:31:56.640 | because in some markets, rents are dramatically higher than our ownership costs, and in some
00:32:02.160 | markets, the other way. And so I'm not giving blanket advice, but I am saying,
00:32:06.000 | don't buy the lie that owning a house is a great investment.
00:32:09.840 | Even in your situation, just let's stick with West Palm Beach and all that.
00:32:14.560 | Sure.
00:32:15.120 | You're talking about right now in the early years of a mortgage, but if you stick it out for 30
00:32:21.440 | years, those numbers change. You don't have to pay the interest, you're paying more to principal,
00:32:27.920 | and you don't have to pay for the insurance. And so those numbers dramatically change,
00:32:32.800 | you know, 10, 15, 20 years into a 30-year mortgage. And if you compare apples to apples,
00:32:38.480 | even on your cheaper, smaller apartment, over 30 years, when you're done in the apartment,
00:32:44.480 | after 30 years, you have no asset. And when you're done in 30 years in the house, you have
00:32:49.760 | the house free and clear as an asset. But even still, what I'm guessing that you're going to say
00:32:56.240 | is the total cost of ownership, the financial side of the total cost of ownership,
00:33:01.120 | all of the upkeep and maintenance that you had to do on that house over the 30 years,
00:33:05.680 | it'll be closer to the same loss, if you will, of renting?
00:33:11.040 | I wouldn't necessarily say that, although I think it would be important to consider it.
00:33:15.040 | Because if, in a scenario like you described, if you had two identical houses, two brand new
00:33:21.280 | houses side by side, this person is in a very healthy financial situation, because we didn't
00:33:25.680 | even get to the risk factor. So many people buy houses and their houses wind up sinking them when
00:33:30.560 | they lose their job or run out of money and have an unexpected illness or something like that,
00:33:34.800 | because it's very risky to buy a house, because now you're on the hook for a tremendous amount
00:33:38.320 | of money. But if you were going to put them side by side, and you were going to give me a scenario
00:33:42.800 | where a family is going to live there for 30 years, I would say most likely buying the house
00:33:48.160 | would come out to be financially superior. But that's not the normal experience for most people,
00:33:54.320 | especially not in our modern world. Very few people live in a house for 30 years. Very few
00:33:59.520 | people stay in one property for a long time. And my example, in my case, would be a good example
00:34:04.560 | of that. When I bought the house that I bought, see, the decision you make with housing is one
00:34:09.120 | of the most important decisions that will drive your overall wealth. If a listener is interested
00:34:13.680 | in studying the academic research on that, start with the work of Dr. Thomas Stanley, who wrote
00:34:17.840 | the popular book, The Millionaire Next Door. The reason the housing decision drives everything else
00:34:22.560 | is because housing is often associated with lifestyle. If I buy a house in a middle class,
00:34:28.080 | blue collar type of neighborhood, it'll be perfectly acceptable for me to park a Toyota
00:34:32.880 | Camry and a Ford F-150 pickup truck in my front yard. It'll be perfectly acceptable for me to go
00:34:38.240 | over to my neighbor's house for an afternoon barbecue and barbecue some ribs and smoke some
00:34:42.560 | cigars in the back room. But if I buy a house in an upper middle class neighborhood, my F-150 and
00:34:48.400 | my five-year-old Camry are going to look out of place. And so I'm going to feel the pressure
00:34:52.080 | to increase the cars that are in the driveway. Now I need to park a Mercedes and a Lincoln in
00:34:57.440 | the driveway. And now all of a sudden, instead of going over for a backyard barbecue with a Budweiser
00:35:02.160 | and a cigar, now all of a sudden we're going to go down to the club. And my $10 evening turned
00:35:07.360 | into a $100 evening because these are the friends that we're associating with. And now my kids,
00:35:11.200 | instead of their friends in the neighborhood going to the local government school where we're not
00:35:14.560 | paying anything out of pocket, now my kids are going to be associating with people who are in
00:35:18.560 | private schools. So the actual housing decision that you make will drive many other areas of
00:35:22.800 | your spending. My example is when I chose the house, I chose a house that was half a mile from
00:35:27.840 | my office. My office and my job at the time I thought were very, very stable. I've been there
00:35:32.560 | for five years. We had a 15-year lease on the office. I chose a house that was half a mile from
00:35:37.680 | my office so I could walk to work. Diminishing commuting expenses is a tremendous place to save
00:35:42.880 | money. Most listeners, if you have a long commute, you should seriously look at adjusting that.
00:35:47.440 | For anybody, commuting expenses are non-deductible expenses. And driving is expensive. It's expensive
00:35:52.720 | in money and in time. So it's better to trade non-deductible high expenses of vehicle maintenance
00:35:58.720 | for deductible interest costs and buy a more expensive house that's closer to your office.
00:36:03.440 | For us, it allowed me to walk to work every day and we were able to get rid of a second car.
00:36:07.280 | So we chose that carefully. Bought a house that was big enough but not too big, big enough to
00:36:11.760 | handle kids and family, but not so big that we had a lot of wasted space. Bought a house that
00:36:16.080 | was nice enough but not too nice. It wasn't a starter house. I didn't think we were going to
00:36:20.000 | have to move up and out in three years because the friction. Buying and selling houses is very
00:36:25.120 | expensive for most people. So you want to minimize the frequency with which you buy and sell houses
00:36:30.160 | because of the friction cost, the sales expenses, fixing the thing up, repainting it, fixing the
00:36:34.960 | things needed to do it. You want to stay put. If you're going to own a house, your best bet is to
00:36:39.440 | generally stay put for a long period of time. So we bought a house that was nice enough. We'd be
00:36:43.280 | happy there for a long time, but not so nice that we needed to drive Mercedes and BMWs.
00:36:47.600 | And we bought a house that fit what we wanted. It was half an acre right in the middle of the city,
00:36:51.360 | walking distance to great stores and to the library. It was what we defined as perfect.
00:36:56.320 | I told my wife before we bought it, I said, "I think this will be a 40-year house for us."
00:36:59.760 | Well, two and a half years later, I quit my job, closed one business, started a new business,
00:37:04.320 | and our life was completely turned upside down. I never expected that. But those things happened.
00:37:09.440 | And so I moved into the house thinking it was going to be a 40-year house, and I sold it with
00:37:13.360 | less than three years of ownership. I think that's the normal case for most people. A lengthy story,
00:37:18.240 | just to point out that who's the person that you know who actually lives in a house for 30 years?
00:37:23.920 | They exist. Not saying it's a bad idea, but for most people, it's not going to happen.
00:37:29.520 | They're going to move after a few years. I want to be very clear on the point, Paul.
00:37:33.040 | I'm not saying that renting is financially superior to owning. I am saying that you need
00:37:38.960 | to approach the calculation much more carefully than most people approach it. And I'm saying that
00:37:45.760 | owning a house is not necessarily a good investment. The reason it seems to be a good investment for
00:37:51.200 | most people is because most people don't invest or save any money other than what they're forced
00:37:56.960 | to invest or save in their house. But that's their choice. They're choosing not to save other money.
00:38:02.320 | They're choosing not to invest other money. I think that's their choice, and they can do that.
00:38:07.920 | But recognize that it wasn't buying the house that made the difference and made them wealthy.
00:38:12.720 | It was the fact that they actually bought an asset and they paid it off over time. Well,
00:38:17.600 | you can do that living in an apartment and buying rental houses. I'd much rather live in an apartment
00:38:22.080 | and buy rental houses and see somebody. If I were giving financial advice to a young,
00:38:26.400 | enthusiastic, highly motivated person who wants to build wealth, I'd tell them,
00:38:30.240 | "Don't buy a house unless you're doing it with what we call house hacking, where you're filling
00:38:33.840 | up all the spare bedrooms with renting them out and things like that. That can work really well
00:38:37.600 | because you get great financing rates on residential mortgages. So that can work."
00:38:41.680 | But in general, I'd tell somebody, "Rent a cheap apartment and buy rental houses. And then when
00:38:46.000 | you own 10 rental houses and you've got $10,000 a month rolling in, then go and buy yourself a
00:38:50.560 | fancy house." Your primary house is not best viewed as an asset. It's best viewed as a
00:38:56.080 | consumption item. Nothing wrong with consuming money. Just don't confuse your consumption items
00:39:00.880 | with your investments. Fast forward a little bit. We've got folks who have made these decisions.
00:39:05.920 | They're now out on the road. They're living a life of location independence. They have whatever
00:39:11.440 | assets floating around in different places. But this whole concept of retirement is elusive.
00:39:18.720 | A lot of people I've met are living within their means. So they're not going into debt.
00:39:24.000 | They're not living a typical Western mindset of where they're spending more than they can
00:39:28.480 | or more than they should. But when it comes to actually investing and saving and that sort of
00:39:33.760 | thing, it's meager. And they really don't know what vehicles to put their investment in.
00:39:39.600 | Now, we have lots of other people who are making plenty of money and they're looking for rental
00:39:45.520 | properties and that sort of thing to actually make serious business investments into. And also
00:39:50.640 | Amazon FBA and that sort of thing, where you can tie your money into an appreciating asset. But
00:39:58.400 | what would you recommend for somebody who's location independent, living a lifestyle and
00:40:03.040 | thinking about retirement, assuming, you know, those of us from the States that Social Security
00:40:08.720 | isn't going to be there, it's kind of social insecurity. What would you recommend?
00:40:12.880 | Before answering the question, I'd like to just step back one point and then I'll answer the
00:40:17.360 | question to the person who is considering embracing that type of lifestyle first,
00:40:23.760 | because I find that's where the biggest problem is. It's been my observation and experience
00:40:28.080 | working with people who have embraced an unusual lifestyle, lifestyle of perpetual travel,
00:40:32.160 | things like that. It's been my experience that they don't have that question as much as the
00:40:36.960 | person who hasn't yet started on it. And I think retirement, the question of retirement and college
00:40:42.320 | is often something that keeps people mentally trapped. And so the first thing to do is to adjust
00:40:48.480 | your mindset and to realize that most people who are wealthy and can afford to retire don't actually
00:40:55.280 | ever retire. And I say that partly from academic study and partly from just observation. And I
00:41:01.280 | challenge any listener of this show to look around at the wealthiest people that they know and ask
00:41:06.720 | themselves, are they retired? Now, you'll find some people that are retired, but my experience
00:41:11.840 | has been generally the people who can afford to retire usually don't because they're too busy
00:41:18.240 | doing something that they care about. And so they're too busy making an impact in their business.
00:41:23.760 | They're too busy, you know, running for president of the United States. They're too busy working
00:41:28.400 | with a local charity and building houses. They're too busy with the affairs of their life to retire,
00:41:34.080 | and they don't want to retire. The whole idea that we've been sold of retirement being a positive
00:41:39.520 | goal is pretty much bunk. When retirement was first invented, people looked at it and said,
00:41:45.600 | why would anybody want to retire? Retirement was a penalty, not a reward. If somebody's interested
00:41:50.320 | in an in-depth discussion of that, there's a show in the archives of Radical Personal Finance,
00:41:53.840 | something called the Untold History of Retirement, What They Never Told You. Retirement was invented
00:41:58.160 | as a penalty, as a way to lower the unemployment rate, and it was marketed to be this award.
00:42:03.120 | And when you actually look at the satisfaction, life satisfaction of people who retire,
00:42:07.920 | it varies. And that's why I've got to be careful not painting with too broad of a stroke.
00:42:12.480 | It varies. Some people are very happy with it, but there are also a lot of people who find that
00:42:16.720 | their sense of meaning and their sense of purpose is removed from them, and it's not particularly
00:42:20.720 | joyful. So to free yourself up, I just say, first, before you say, how do I save to retire?
00:42:27.280 | I recommend you say, what would I do if I knew I could never retire? I find that a powerful
00:42:32.560 | question to ask yourself, and I recommend it as a journaling exercise. What would I do if I knew
00:42:37.200 | I could never retire? Because what you might find is if you knew you could never retire,
00:42:41.360 | you'd go ahead and leave the corporate job that doesn't particularly meet your needs or meet your
00:42:46.880 | goals, and you might start the travel company specializing in exotic adventure travel to
00:42:50.800 | Patagonia. You might figure out a way to do it, because that'd be a job you wouldn't want to
00:42:53.920 | retire from. Now, for those who have figured out their work and have transitioned into something
00:43:00.160 | that they wouldn't want to retire from, say, the person you described, a traveler who's living on
00:43:05.040 | the road, earning an income, they're enjoying exactly what they're doing, I recommend not
00:43:09.600 | starting with an account or things like that, but starting with impact. What are you trying to
00:43:13.920 | invest for? Major mistake that people make is they don't figure out what they're trying to invest for
00:43:19.440 | before they start investing. They toss money in a 401(k) without figuring out, "Do I actually want
00:43:24.640 | to retire at 65 or after 59 and a half when I can access the money without a penalty? Do I actually
00:43:29.440 | want to invest in public-traded securities, or do I want to go and start a grass-fed beef farm
00:43:33.920 | by renting some land from a guy in Missouri and starting to run cows on it, because that's the
00:43:37.920 | lifestyle that I'd like to have?" When you look at accounts and look at things like that, if you
00:43:42.000 | know what you're investing for, it'll be much simpler. In essence, you have a few options.
00:43:47.520 | You have the ability to invest in paper assets. Paper assets are assets that are reflecting the
00:43:52.960 | underlying value of something else, like stocks, bonds, certificates of deposit, things like this.
00:43:58.240 | These are paper assets. You have the ability to invest in real assets, things like real estate,
00:44:02.960 | physical property, or you have the ability to invest in businesses, privately-run businesses,
00:44:07.840 | which are almost a reflection of paper assets. Those are your basic options. I think that for
00:44:12.960 | somebody in a traveling lifestyle, you should, while you're considering buying an S&P 500 index
00:44:18.400 | fund over here, you should also be looking at the beautiful little beach spot on the beach in Panama
00:44:23.760 | and say, "You know what? A bed and breakfast, a high-end bed and breakfast would go really well
00:44:27.600 | here," or, "Hey, I could start an eco-farm here, and that would be really perfect, and I see the
00:44:33.280 | market where I could sell my products into. Let me go ahead and do that." I think these are all
00:44:37.680 | valid investments. Back to my framework, optimize lifestyle. You want to optimize the way that you
00:44:42.160 | invest. I think many people make a mistake by jumping straight to mutual funds or straight to
00:44:46.960 | index funds or anything like that without first considering, "Do I want to start a surfing
00:44:51.440 | company? Do I want to start this insert option here?" That's how I'd approach it. I do think
00:44:56.480 | from there, I can't get any more specific without knowing more specific scenarios, but you should
00:45:00.000 | definitely consider for a traveler. You should definitely consider expatriating from the United
00:45:03.920 | States. You should definitely consider renouncing citizenship. There are some really compelling,
00:45:08.240 | depending on how your income is earned, if you can escape the clutches of the US government,
00:45:12.320 | that can be really, really powerful. There are some great ways to do it. The perpetual travel
00:45:16.320 | market has done a great job on this with the five flags theory, things like that. You can move to
00:45:20.720 | another country, gain citizenship in another country, renounce US citizenship. That may save
00:45:24.800 | you a tremendous amount of income taxes. You should also pay attention and thoroughly understand the
00:45:29.360 | foreign earned income exclusions and how that works. You should look seriously at the technical
00:45:34.720 | details of that, but that's beyond what I can just jump into off the cuff like this.
00:45:38.720 | Totally understood. I appreciate the setup for that because folks who are listening,
00:45:43.200 | we do have an expert in sovereignty, permanent traveling, and flag theory coming onto the
00:45:48.880 | podcast in a couple of weeks. This is a great introduction to that of like, "Wait, wait, what?
00:45:53.920 | Renouncing? What? How do I do this?" There is so much to learn there about how you can actually
00:46:01.440 | save more of your money by not letting the US government have it. Just by doing that alone,
00:46:06.480 | you'd "decrease your expense" by not impacting your income at all, but just spending less. That's
00:46:13.840 | going out the door. There's fun hacks around doing that. So stay tuned for more information on that.
00:46:19.680 | Joshua, we've just been blown away by all of this information. Obviously, we can go find you
00:46:25.600 | at Radical Personal Finance on all the social channels and iTunes and dot com. But what are
00:46:32.000 | some things you want to leave us with? What's one thing either that we didn't cover or a major tip
00:46:37.440 | that would be really beneficial for our audience? We have two practical tips. One is related to the
00:46:43.120 | question of perpetual travel, but it's expandable beyond that. The very first action step that if a
00:46:49.200 | listener is listening and they say, "I want to achieve something I'm not achieving. What do I
00:46:52.960 | do?" The very first action step you should do is you should start to build for yourself first a
00:46:58.320 | balance sheet, a statement of financial position, what are my assets, what are my expenses,
00:47:02.560 | to show in the archives of Radical Personal Finance if you'd like details on that. Also,
00:47:06.400 | a cash flow statement. The most important thing with a cash flow statement is that it should be
00:47:10.480 | comprehensive of all of your expenses. What I mean is most people are aware that they should
00:47:15.840 | somehow set up a budget. But what they mean by that is, "I should take my income and figure
00:47:19.840 | out how to expend it." When I say a cash flow statement, you should have all of your income,
00:47:23.680 | the gross income before anything is deducted. Then you should itemize what every one of your
00:47:29.440 | expenses is, including things like employment taxes, including things like income taxes,
00:47:35.600 | including things like health insurance, including things like real estate taxes,
00:47:40.080 | including things like any expense that you have. Because you need to know those things so that you
00:47:46.160 | can evaluate different courses of action. My understanding is you're down in Mexico right now.
00:47:50.400 | So if I'm looking at the options and saying, "Well, maybe I should move to Mexico, maybe I
00:47:55.440 | shouldn't." If I look and say, "Well, I need to spend $3,000 a month here in the United States,
00:48:00.960 | how am I going to do that in Mexico?" If I miss the fact that I can adjust my health insurance,
00:48:05.040 | if I miss the fact that I can adjust my income taxes, if I miss that, I might not be able to
00:48:09.760 | figure out how to actually get there. But if I recognize that by moving from West Palm Beach,
00:48:15.360 | Florida to Mexico, I'm going to be able to save here, here, here, here, but this expense over
00:48:20.080 | here is going to go up, up, then I can figure out the budget. So get actual data. And that's
00:48:24.720 | one of the things, if you are earning $40,000 a year, there's no reason for you to go and renounce
00:48:30.320 | your citizenship and go be a perpetual traveler. You're not going to save enough, in my opinion.
00:48:34.400 | You're not going to save enough in that situation to make a big difference. If you're making $400,000
00:48:39.200 | a year, or if you're going to build significant assets in the future, now all of a sudden,
00:48:43.360 | you need to seriously consider it and you want to do it in advance. But you only know that if you
00:48:48.480 | actually have the data. So you need to have data. That's tip number one. Tip number two is once you
00:48:54.000 | have that data, look at your expenses and ask yourself a question. I think it's okay to start
00:48:59.440 | with little expenses like, "Hey, what am I spending on coffee?" Fine, but most people are not spending
00:49:04.880 | a latte every day. Most people are not spending that much money on coffee. I think it's great to
00:49:09.520 | look at the big expenses first and to say, "How could I cut... What's the biggest line item in my
00:49:14.080 | budget?" For many people, it'll be tax. For many people, it'll be housing. For many people, it'll
00:49:18.560 | be transportation. Those big three are simple. I would say, "How can I look at this line item and
00:49:23.840 | how can I cut this by 50% and get a better standard of living?" Not just how can I get it a
00:49:29.680 | little bit cheaper. Think in big numbers. Sometimes when you have a compelling goal, all of a sudden,
00:49:34.240 | you realize, "Well, I'm going to move out of this house and my goal is to go and buy an RV and
00:49:38.000 | travel the world, but as an interim step, what I can do is I can move out of this house. We can
00:49:42.320 | move into a smaller apartment. I can cut my monthly expenses by 50% and we can have a better lifestyle.
00:49:47.760 | That'll free me up to work more so we can save more money." The most accessible way for most
00:49:52.960 | people to fund a goal like travel is going to be to save. You can save aggressively for a period
00:49:59.120 | of time. When you save, that'll allow you to have money behind you. It'll allow you to cut your
00:50:05.120 | expenses and it'll open up many more opportunities for you to figure out how to earn income on the
00:50:10.880 | road and stretch the amount of time that you can spend on the road. Look at your big expenses and
00:50:15.680 | start with your big expenses. Fix your housing, fix your transportation, fix your taxes, fix your
00:50:21.760 | food. If you fix those things, some people need to fix your insurance. If you fix those four or
00:50:26.560 | five things, that'll all of a sudden free up thousands of dollars a month and you can reallocate
00:50:31.840 | that money in a direction that's more suited with your long-term goals. Love it. Man, I wish I had
00:50:37.360 | talked to you three years ago when we started planning all of this. Really appreciate you being
00:50:43.280 | here today and we will have lots of links shared in today's show notes. Joshua, just thanks for
00:50:49.760 | being here and look forward to hearing more from you over at Radical Personal Finance.
00:50:54.480 | Absolutely. And if anyone wants to listen to the show, the best way to get there is not at
00:50:57.040 | radicalpersonalfinance.com, but there's a free app in every app store on your mobile phone. So if
00:51:01.120 | you want to listen to the show, just search the app store on your phone for Radical Personal Finance.
00:51:04.560 | Wow, that's really inspiring. In just 10 years, you can live a location independent and financially
00:51:16.560 | free lifestyle. That's something that we would have signed up for 10 years ago if we had known
00:51:22.000 | that this information was available. And to think in just two years, he became location
00:51:25.920 | independent in his business. It's awesome. Joshua mentioned a lot of episodes in that podcast and
00:51:31.440 | we have all those episodes linked up from today's show notes at nomadtogether.com/financial.
00:51:37.760 | If you have any other questions, please email us at podcast@nomadtogether.com. We're here to help
00:51:42.800 | you live your dream lifestyle. Do you like to read? Do you like the content of this podcast?
00:51:48.320 | We have a book. It's not a storybook or a how we did it book. It's a guidebook for the top seven
00:51:53.920 | questions asked by families looking to be location independent. You can get your copy today at
00:51:58.960 | nomadtogether.com. That's it for episode number 35 of the Nomad Together podcast. Get out there
00:52:04.800 | and write a review on iTunes or Stitcher or clean out your fingernails or do something useful and
00:52:11.360 | fun. Stay tuned next week when we discuss money again on the second part of our two part series.
00:52:18.320 | Until next week, let's nomad together.
00:52:24.240 | See you later. Later.
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