PTM037_Joshua

00:00:00.000 | - Big Boyz Comedy Kings is coming to Yamaha Resort and Casino

00:00:03.200 | Saturday, December 9th with D.L. Hughley.

00:00:05.840 | - That sweater so tight, it look like a snap between the legs.

00:00:08.240 | - Cedric the Entertainer.

00:00:09.540 | - Once we stop running, I'll find out what it was we was running about.

00:00:13.080 | - And Paul Rodriguez.

00:00:14.340 | - What is it about old Mexican men?

00:00:15.980 | They could be missing a leg, they still want to get into a fight.

00:00:18.480 | - Hosted by my man Eric Blake and a special performance by Mario.

00:00:21.880 | Big Boyz Comedy Kings, December 9th at Yamaha Resort and Casino.

00:00:25.320 | Tickets can be purchased at AXS.com.

00:00:27.920 | This is a 21 and over event.

00:00:30.260 | ♪ [music] ♪

00:00:33.260 | - Live from Frisco, Texas, this is Masters of Money.

00:00:37.700 | Episode 37, Radical Personal Finance with Joshua Sheets.

00:00:41.940 | ♪ [music] ♪

00:00:43.940 | - Saving $15,000 into a Roth IRA, what do I get?

00:00:47.280 | I get a little bit of a tax deduction now and I get whatever growth those mutual

00:00:50.520 | funds give me.

00:00:51.520 | But now let's say I can take that same $15,000 and I can use that to buy four

00:00:55.580 | months of labor from somebody.

00:00:57.860 | Now, that four months of labor is completely tax deductible.

00:01:01.860 | And the benefits of labor, if I can hire a full-time staff person for four months

00:01:06.200 | who can go out and help me manage my marketing campaign, who can help me do

00:01:10.060 | less $15 an hour work and help me do more $1,000 an hour work,

00:01:14.240 | the benefit in my pocket could be multiple six figures at the end of the year.

00:01:17.380 | ♪ [music] ♪

00:01:20.380 | - Joshua Sheets is the creator of the Radical Personal Finance podcast.

00:01:24.620 | He's the world's leading authority on integrating lifestyle goals and money

00:01:27.780 | goals without conflict.

00:01:29.820 | He teaches normal people how to seamlessly connect the science of financial

00:01:33.260 | planning with the joy of goal achievement.

00:01:36.020 | Joshua is dedicated to helping normal people achieve financial freedom by

00:01:39.500 | merging the creative and crazy ideas from the world of personal finance with the

00:01:43.460 | academic integrity of formal financial planning.

00:01:46.800 | In this episode, Joshua and I have a long discussion about his truly radical journey

00:01:50.840 | with money.

00:01:51.940 | We get into his past successes and failures and spend some time going over his

00:01:55.980 | interesting goals for the future.

00:01:57.180 | So let's dig in.

00:01:58.480 | Let's meet today's master of money.

00:02:00.620 | ♪ [music] ♪

00:02:03.620 | Joshua, welcome to the show.

00:02:06.520 | - Awesome to be here, dude.

00:02:07.860 | I'm so excited you're doing this again.

00:02:09.160 | - Oh, yeah, man.

00:02:10.320 | I am too.

00:02:11.000 | And I'm anxious to hear more about your story.

00:02:12.860 | Obviously, we've known each other for a few years now, but it'll be good to kind of

00:02:17.300 | dig into the dirty details of your finances and take some lessons out for others to

00:02:22.500 | explore.

00:02:23.040 | - You didn't tell me to have my balance sheet ready if we're getting into dirty

00:02:28.080 | details.

00:02:28.580 | - Well, we can go off memory.

00:02:31.380 | That's fine.

00:02:31.920 | Big round numbers.

00:02:33.140 | So the first question is this, what's the one thing that you do that maybe others

00:02:37.380 | may not do that you feel has been the number one contributor to your financial

00:02:41.020 | success so far?

00:02:42.020 | - I think I'm probably willing to learn.

00:02:44.800 | That's one of my strengths is I've always been a good student.

00:02:48.100 | I was a good student when I was younger.

00:02:49.760 | I was a good student through school.

00:02:51.560 | I've always sought to be a good student.

00:02:53.540 | And when it comes to finances, it's exactly the same thing.

00:02:57.200 | People often, I think, get this impression that you somehow have to go out and

00:03:01.040 | recreate the wheel and find some new great idea.

00:03:03.940 | You don't.

00:03:04.340 | It's absurd.

00:03:05.520 | The principles haven't changed.

00:03:07.180 | The principles are exactly the same.

00:03:08.580 | The exact application might be a little different, but the principles haven't

00:03:11.780 | changed.

00:03:12.360 | One of my favorite personal finance books is George Clayton's "Richest Man in

00:03:16.760 | Babylon."

00:03:17.660 | And it's classic because he sets this financial allegory into the context of

00:03:23.500 | Babylon 3,000 years ago, 4,000 years ago, something like that.

00:03:27.240 | And he demonstrates how the principles are exactly the same.

00:03:30.440 | And so one of the things that I've learned is simply that you can learn the skills

00:03:35.480 | of success and you can learn the principles of success.

00:03:38.480 | In reality, they're very, very simple.

00:03:40.920 | And the principles, the actions can be applied in any culture, in any context,

00:03:47.520 | in any currency, under any technology.

00:03:50.200 | And once you see and understand that, you see the consistent themes throughout

00:03:53.560 | society and how to build financial success under any circumstances.

00:03:57.040 | >> Yeah, so if there is a framework or a setup like that where you sort of can

00:04:02.200 | learn it once, then what kind of keeps you motivated to continue learning?

00:04:06.280 | >> Yeah, there are always interesting variations on how to apply things.

00:04:10.360 | So you can always adjust and optimize.

00:04:12.960 | I built this framework for radical personal finance that was my attempt to

00:04:16.720 | try to encapsulate all of the learning of finances.

00:04:20.440 | And I brought it down to a 5.10 word framework.

00:04:23.080 | And number four, excuse me, number five is optimize lifestyle or

00:04:27.240 | optimize everything.

00:04:28.640 | So I think the reality is most of us can consistently focus on

00:04:32.400 | optimizing many aspects of finances.

00:04:35.200 | We can optimize how we earn our income.

00:04:36.880 | We can optimize how we spend our money, how we invest our money,

00:04:40.360 | how we do each thing.

00:04:41.280 | And so there's always an optimization.

00:04:43.320 | And then the other thing that keeps me interested is that you have to

00:04:46.320 | recognize that money, when properly viewed,

00:04:49.480 | is going to transcend the specific dollars and cents and finances.

00:04:53.960 | One of the biggest mistakes I think people make is they start off thinking that

00:04:57.520 | acquiring wealth or building assets or saving,

00:05:02.160 | they have the mistake that money in and of itself is a useful goal.

00:05:06.440 | Money is not a valuable goal.

00:05:08.960 | When I die, I'm gonna leave exactly the same amount of money behind as Bill Gates,

00:05:12.720 | all of it.

00:05:13.760 | That's the reality that each of us face.

00:05:16.040 | So if money is your primary goal, your goal's not really gonna work.

00:05:20.520 | You're gonna find out and

00:05:22.480 | wind up in the place that so many have wound up when asked how much is enough?

00:05:25.840 | Well, just a little bit more.

00:05:27.280 | So money is a very bad goal, but

00:05:29.320 | it's a great tool to help you to accomplish other goals.

00:05:33.320 | And when viewed in that context, the optimization and

00:05:35.880 | the improvement has real meaning and value.

00:05:38.920 | >> I love that.

00:05:40.240 | For someone who may not be as you said early on,

00:05:43.200 | learning was something you always just always sort of be learning.

00:05:46.760 | For someone who's maybe not naturally bent that way, is there kind of an easy

00:05:50.560 | on road to learning about personal finance that you would suggest people take?

00:05:54.880 | >> Yeah, find somebody around you who's rich and ask them how they did it.

00:05:58.120 | [LAUGH] I mean, there are lots of books and things that could be accessed, but

00:06:02.840 | the process is very, very simple.

00:06:05.880 | Let me give an example.

00:06:06.920 | I have a family member.

00:06:08.120 | This family member in my extended family,

00:06:10.280 | this family member arrived in the middle years of their life,

00:06:14.080 | the middle decades of their life.

00:06:15.240 | They were from a very blue collar background, very, very humble origins.

00:06:20.640 | And they had made a series of financial mistakes,

00:06:23.640 | primarily compounded by multiple divorces,

00:06:26.040 | which had completely wiped them out financially.

00:06:28.680 | The man was a truck driver.

00:06:30.440 | In order to build financial independence, he worked like crazy for

00:06:34.680 | about a year, two years, he and his newly married wife saved like crazy,

00:06:40.600 | spent almost nothing, lived as frugally as they could, and

00:06:43.600 | used the difference in order to buy a fixer upper house to start again.

00:06:48.680 | Now this is middle age, blue collar background, truck driver.

00:06:52.440 | And within about, I would say, eight to ten years,

00:06:56.480 | they are now basically financially independent, have a paid for real estate,

00:07:00.920 | haven't borrowed a dollar the whole way through,

00:07:03.120 | have a paid for real estate portfolio of rental houses that support them, and

00:07:07.200 | live a very comfortable, flexible lifestyle.

00:07:09.720 | And they've done it in under a decade.

00:07:11.800 | Not a reader, they don't read books, they don't listen to podcasts,

00:07:14.640 | they don't watch YouTube videos, they just understand the principles.

00:07:18.240 | And so you can start simple.

00:07:19.920 | If somebody's not a study, I'm a reader, I'm a study, I'm a listener.

00:07:23.120 | That's what I do.

00:07:24.080 | That is good and bad.

00:07:25.840 | The good of that is that I expose myself to a lot of information,

00:07:28.720 | a lot of inspiration.

00:07:30.080 | The potential danger, or the potential bad, is that leads to less activity.

00:07:34.760 | A good plan well executed is better than a great plan poorly executed.

00:07:39.120 | And so I always have to be careful that yes, one of my strengths is I'm a learner,

00:07:42.440 | but where one of my weaknesses is I'm less of a doer than other people.

00:07:47.280 | Frankly, people who get one idea and follow it through generally achieve

00:07:52.240 | more success than people like me who have 100 ideas and never capitalize on them.

00:07:56.760 | >> That's interesting.

00:07:58.280 | Let's go back a bit.

00:07:59.400 | Was there a moment in your life where you decided to become a master of your money

00:08:03.840 | and improve your financial life?

00:08:05.000 | >> Probably a couple aspects to that.

00:08:08.760 | One, I'm the youngest of seven children, and

00:08:11.600 | my parents were from humble middle class background.

00:08:14.880 | My dad's an electrical engineer, so not a particularly low paying job,

00:08:19.880 | not a particularly high paying job.

00:08:21.880 | But I think because my parents were generally modest, we were not poor, but

00:08:26.120 | neither were we rich.

00:08:27.600 | Because of my parents particularly modest,

00:08:29.440 | I think I had some insecurity that built up,

00:08:32.560 | especially given the fact that I went to a private Christian high school.

00:08:38.160 | And one of these types of schools where the tuition is very expensive.

00:08:42.760 | In order for my family to be able to afford to send me there,

00:08:46.200 | my mom worked at the school in order to get the tuition discount.

00:08:49.280 | And all of us who were children attending that school contributed

00:08:52.440 | some amount financially to our high school education in order for

00:08:54.800 | my parents to be able to foot the bill for that.

00:08:56.520 | >> You worked.

00:08:58.000 | >> Yeah, so I worked.

00:08:58.760 | And from the time I was seventh grade through the time I graduated high school,

00:09:02.240 | I paid, it was a token amount of my memory, it was about $100 a month.

00:09:05.600 | But I paid my dad $100 a month to support my school, which was great.

00:09:08.880 | I really, really value the experience of that, and it did a lot of good in me.

00:09:13.520 | That was the deal all the way through.

00:09:15.400 | So it did a lot of good in me.

00:09:16.720 | But going to this rich school where majority of your friends come from,

00:09:21.920 | wealthy backgrounds.

00:09:22.640 | I mean, there were people in my class whose parents were Major League Baseball

00:09:25.800 | players and retired NFL players and business people, etc.

00:09:30.120 | You're surrounded by a lot of wealth.

00:09:31.520 | And so when you're in that type of circumstance,

00:09:33.640 | when your family is not the wealthy family, it's easy to have some insecurity.

00:09:38.440 | And because my parents were very modest, I was frustrated with that.

00:09:43.240 | And so I wanted to develop my own, I wanted to be rich.

00:09:47.560 | I wanted to be rich like all my friends and not have that insecurity,

00:09:50.640 | not have those inferiority complexes.

00:09:53.400 | And so that drove me a lot even through college,

00:09:57.080 | where when I entered into college, my goal was to be a Fortune 500 businessman.

00:10:01.160 | And I wanted to be a corner office CEO.

00:10:03.000 | I loved reading business books.

00:10:04.280 | I loved reading business magazines, and I identified with that.

00:10:07.600 | And I really wanted to be rich.

00:10:08.680 | And it wasn't until God started working on my heart through college that I was able

00:10:12.480 | to start to give a lot of that up through a pretty intense process,

00:10:17.120 | where the intense motivation to be rich came away.

00:10:21.720 | So answering your question in two parts.

00:10:23.560 | Number one was I really wanted to be rich, but I didn't know how to do that.

00:10:26.800 | And so my parents didn't teach me a lot about money in terms of,

00:10:31.320 | my dad didn't buy me stocks and go over the business pages.

00:10:33.960 | My dad was always very practical, very, very careful.

00:10:36.680 | My mom was a great shopper, very frugal.

00:10:38.400 | I mean, you have to be when you're raising a family of seven kids

00:10:41.240 | on a single income.

00:10:42.360 | You have to be a great deal finder.

00:10:44.080 | And so they taught me some good basics, and I learned a lot of good lessons.

00:10:47.400 | But I always felt like they didn't know how to be rich,

00:10:49.720 | because my dad was not a big investor.

00:10:51.320 | He wasn't a real estate tycoon or a business tycoon.

00:10:54.320 | He was just a simple electrical engineer.

00:10:57.280 | So when I was looking for that information,

00:11:00.040 | I fell prey to the world of get rich quick, especially

00:11:03.280 | even to the world of real estate.

00:11:04.960 | I remember distinctly when I was a freshman in college

00:11:07.680 | how I had gotten involved-- and this would have been graduate high school

00:11:10.840 | 2003, so this would have been 2004, 2005.

00:11:14.200 | So we're right in the middle of the 2000s, the real estate boom.

00:11:17.520 | And I had started reading books on real estate.

00:11:20.840 | I had gone to a success seminar with a friend of mine.

00:11:23.560 | And while I was there, the real estate speaker,

00:11:26.360 | the way these success seminars work, they bring you in.

00:11:28.560 | Everybody gives a hoorah motivational speech, and then that follows up,

00:11:31.760 | and you sign up for the following seminars.

00:11:33.800 | So the real estate speaker piqued my interest,

00:11:36.120 | because he taught me that I could be a multimillionaire with no money down,

00:11:40.000 | starting with nothing, in about three or four years.

00:11:42.880 | So I signed up for that three-day seminar.

00:11:46.160 | And I remember distinctly, a buddy of mine,

00:11:48.040 | we went down to Miami for the three-day seminar.

00:11:50.000 | I live in West Palm Beach, now we're north of Miami.

00:11:52.000 | And we went down to Miami for the three-day seminar.

00:11:54.160 | And as we're there at the seminar, I was so completely sold, so sold,

00:11:59.480 | that I was ready to sign up for the $30,000 real estate coaching package.

00:12:04.600 | I was looking around, trying to find where can I get the money.

00:12:08.440 | I had a few thousand dollars.

00:12:09.640 | I was going to borrow the money.

00:12:11.400 | And I vividly remember, I went to lunch with my dad and my brother.

00:12:15.040 | And I vividly remember my dad basically just putting his foot down.

00:12:18.640 | I was 19 years old, but I'm basically saying, Joshua, do not do it.

00:12:24.720 | And thank God I listened to him.

00:12:28.000 | I didn't sign up for the super awesome guru coaching package.

00:12:31.600 | I didn't put down my $30,000.

00:12:33.920 | But through a variety of circumstances, I was paying for my college education.

00:12:38.440 | And I had received some scholarships, but fewer than I had anticipated.

00:12:42.120 | So I worked my way through my freshman year.

00:12:44.120 | My sophomore year, I started borrowing money

00:12:45.840 | to make up the difference, because I felt like I was working too hard.

00:12:48.960 | And I wasn't committed to going through without borrowing money.

00:12:53.560 | And so I wound up starting to borrow money.

00:12:55.280 | And during my junior year, my brother had gotten a hold of--

00:12:59.200 | had started listening to Dave Ramsey's program on the radio.

00:13:01.960 | And he had bought the book My Total Money Makeover.

00:13:04.160 | And he gave me a copy of it, because he knew I liked money and finance.

00:13:07.680 | I read the book.

00:13:08.360 | And the first time I read it, I was like, this guy,

00:13:10.320 | doesn't he know that you're supposed to use other people's money to get rich?

00:13:14.040 | Hasn't he attended these real estate seminars that I have,

00:13:16.360 | and known how the power of leveraging and compound interest works?

00:13:20.160 | So I read it again.

00:13:20.960 | And I still thought he was dumb.

00:13:22.280 | But the third time I read it, it really struck me.

00:13:24.920 | And I realized.

00:13:26.320 | I said, if you had no payments, how much money would you have?

00:13:29.640 | And that just stuck with me.

00:13:31.080 | And so I decided that I was going to get out of debt.

00:13:33.280 | And this was my junior year.

00:13:34.560 | I decided I was going to get out of debt.

00:13:36.220 | So I was working hard.

00:13:38.280 | I had dropped out of school.

00:13:39.920 | I'd taken a semester off.

00:13:41.080 | I say dropped out of school.

00:13:42.280 | My wife corrects me and says, you took a semester off.

00:13:44.520 | But I had studied abroad.

00:13:45.680 | And I came back.

00:13:46.280 | And I quit college.

00:13:46.960 | Because I didn't know what I was doing and why I was doing it.

00:13:49.120 | And then I started working on paying off my debt.

00:13:51.520 | I worked very, very hard.

00:13:52.520 | And my senior year, I took a full course load, 19 hours of class per semester.

00:13:56.960 | I worked like crazy.

00:13:58.200 | I lived on nothing.

00:13:59.160 | I cash flowed my senior year of college.

00:14:01.840 | And two weeks before I graduated, wrote a check

00:14:04.520 | to Sally Mae for all of my student loans.

00:14:06.960 | And I graduated from college completely debt free.

00:14:09.680 | My goodness.

00:14:11.400 | It was a remarkable thing.

00:14:12.680 | I worked a lot.

00:14:14.080 | But it taught me something.

00:14:15.400 | Because I had the best year of my life.

00:14:18.200 | And the skills that I had to use to get there

00:14:21.920 | are skills that to this day have been very important for me

00:14:26.240 | and have also been really crucial in my own self-confidence.

00:14:29.560 | In order to get there, as an example, I had to make a proposal to my bosses

00:14:33.240 | to allow me to go from working traditional 40-hour office

00:14:37.640 | hours to working flexible hours.

00:14:39.040 | So I could work them around my classes.

00:14:40.760 | And so I was in working at night, working in the morning,

00:14:42.640 | scheduling everything around--

00:14:43.960 | I dropped my pen--

00:14:44.800 | scheduling everything around my classes.

00:14:47.680 | And same thing, I had to schedule every single hour of my week

00:14:51.920 | in order to figure out when I was going to work, when I was going to do this,

00:14:54.560 | when I was going to do my homework.

00:14:56.000 | And I just had about six hours a week of free time

00:14:58.440 | scheduled, a couple hours on Saturday night, Sunday morning till 2 PM,

00:15:01.720 | and then I was back to work.

00:15:02.960 | But the results of it were really, really powerful.

00:15:06.120 | And so those experiences were, for me, very, very transformative

00:15:11.480 | and really laid the foundation to some of the good things

00:15:15.040 | that I've experienced since then.

00:15:16.440 | Amazing.

00:15:16.920 | Most people have a financial awakening post-college.

00:15:19.640 | You had it sort of during your college years.

00:15:21.720 | Where were you working during the time?

00:15:23.360 | What kind of jobs did you have?

00:15:25.040 | So I studied abroad.

00:15:25.880 | When I came back, I didn't have a job.

00:15:27.680 | But I got into a conflict with the dean of the business school.

00:15:31.560 | And I wanted to pursue a certain course of action.

00:15:33.640 | He denied me.

00:15:34.680 | And so in a huff of spite, I dropped out of school.

00:15:37.840 | I called a former boss of mine that I'd worked a couple years for in high school

00:15:41.480 | who managed a sod farm and a tree nursery.

00:15:44.440 | And so I started working with him.

00:15:45.800 | And so he put me in charge of his tree nursery.

00:15:48.160 | So I was working in agriculture.

00:15:50.040 | And agriculture is tough, because you've got to start the guys at 6 AM.

00:15:54.200 | Most of them are minimum wage workers.

00:15:55.960 | And if they don't get 60, 70 hours a week,

00:15:57.960 | they don't make enough to make it worth them.

00:15:59.800 | So you've got to start at about 6 AM.

00:16:01.280 | And I was kind of the foreman there to open up the gates

00:16:03.520 | and get everything started.

00:16:04.660 | So I got to be out there early.

00:16:05.960 | And you work late.

00:16:07.000 | So after about three or four months of that, I had switched.

00:16:10.000 | And I had gotten a job at a large company doing graphic design,

00:16:14.400 | minimum graphic design.

00:16:15.920 | And so I was working for the company.

00:16:17.520 | And that was who I worked my way through college,

00:16:20.240 | doing graphic development on our organization's presentations

00:16:24.600 | to clients.

00:16:25.640 | Man, so that must have felt incredible to be leaving school

00:16:27.840 | without debt like that.

00:16:28.800 | Did you call up Dave Ramsey and say I'm debt free?

00:16:31.640 | I did.

00:16:32.140 | I think I did.

00:16:33.400 | Yes, I did.

00:16:34.240 | I'd forgotten that.

00:16:35.020 | But I did call him.

00:16:36.080 | And I did do a debt free scream at some point.

00:16:38.280 | And more to the point, what it allowed me--

00:16:40.440 | here's an interesting part of the story.

00:16:42.720 | At that time, I organized--

00:16:44.360 | he has this product called Financial Peace University

00:16:46.920 | that he organized himself.

00:16:48.640 | And I was such a Dave Ramsey fan boy

00:16:50.320 | that I bought the whole course.

00:16:51.880 | And I organized all of my friends

00:16:53.640 | to go through the course.

00:16:54.800 | And we were doing it in our living room type of thing.

00:16:57.680 | And in that course, in one of the previous versions

00:17:00.600 | that I had bought to show to all my friends,

00:17:03.320 | he talked about how if you have an emergency fund,

00:17:06.680 | that when you get laid off, you can laugh.

00:17:09.480 | And you can say, ha, ha, ha, how big is the severance?

00:17:12.520 | So after I graduated from college,

00:17:15.400 | the job that I was doing during college I knew

00:17:17.360 | was not something I wanted to continue after college.

00:17:20.000 | And one of the agreements that I had negotiated with my employer

00:17:24.240 | was that they had agreed to give me an extra scholarship

00:17:27.040 | stipend, basically, free money to go back to school in exchange

00:17:30.720 | for my considering staying with them full time when

00:17:34.320 | I graduated from college.

00:17:36.240 | I think they saw the natural skill and hard work and work

00:17:39.880 | ethic and ability that I had.

00:17:41.360 | But they recognized that I would need some training

00:17:44.080 | and some molding.

00:17:45.360 | Well, when I called my bosses after graduation

00:17:48.760 | and I said to them, OK, I'm ready to talk,

00:17:50.680 | they said, oh, sorry, we don't really have anything.

00:17:52.800 | Maybe you can continue as you're doing.

00:17:54.520 | And I just said, no, I don't want to.

00:17:56.160 | So I quit my job.

00:17:57.120 | And I left.

00:17:57.640 | And I took this great 13,000 mile road

00:17:59.760 | trip all around the United States.

00:18:01.560 | And as I was leaving by myself in my $2,000 car

00:18:05.040 | with 193,000 miles on it when I left,

00:18:07.400 | it was a great, great experience.

00:18:09.080 | But when I was leaving on my last day of my going away

00:18:11.720 | party, my boss says, hey, we've been working on something.

00:18:14.600 | Come see me when you get back.

00:18:16.280 | So I got back from my about two month road trip

00:18:18.320 | all around the United States.

00:18:19.560 | And I went to see him.

00:18:21.040 | And he offered me a job with a substantial raise

00:18:23.320 | and a change in position from this graphics development

00:18:26.400 | role into basically an entry level analyst position.

00:18:30.520 | I did that for a year.

00:18:31.960 | And then I got laid off.

00:18:33.280 | And the point of the Dave Ramsey scenario

00:18:35.320 | is when I got laid off, it was out of the blue.

00:18:38.440 | I had just gotten a substantial pay raise, like an 8% pay

00:18:41.320 | raise.

00:18:41.880 | I had glowing reports of all the things.

00:18:44.480 | I was involved in all these products.

00:18:46.120 | And I remember when I'm sitting there,

00:18:47.800 | had a meeting with my bosses, and I was clueless.

00:18:50.160 | And I remember them talking to me.

00:18:52.240 | And all of a sudden, I figured out I was getting laid off.

00:18:55.000 | And it was such a shock to me.

00:18:56.760 | Because I thought, in order to get laid off,

00:18:59.320 | like I thought anybody who gets laid off

00:19:02.200 | deserves it in the sense of if you've gotten laid off,

00:19:04.840 | it's obviously because you're bad.

00:19:06.360 | Like you're just not an asset to the company.

00:19:08.520 | I had this idea that laying off and getting fired

00:19:10.840 | were synonymous.

00:19:12.120 | And here I was getting laid off.

00:19:13.760 | And it deeply hurt my pride.

00:19:15.320 | Because I knew I was a hot shot, right?

00:19:18.040 | And so I remember just kind of nervously laughing

00:19:22.960 | when I finally figured it out and saying,

00:19:25.640 | how big is the severance?

00:19:26.960 | And then seeing this shocked expression on their faces,

00:19:30.880 | like, huh?

00:19:31.960 | And then I went on and explained.

00:19:33.520 | And I said, well, sorry.

00:19:34.680 | I didn't mean to be disrespectful.

00:19:36.600 | But I've been preparing for this.

00:19:38.800 | I got out of debt.

00:19:39.560 | I saved my six months emergency fund.

00:19:41.680 | So I'm really just happy that I did all those things so

00:19:44.400 | that I can make it through this new experience of being

00:19:47.040 | laid off for the first time.

00:19:49.040 | So you quickly had to put into practice

00:19:51.640 | the laughing about the situation.

00:19:55.360 | So what was next for you?

00:19:56.880 | So from there, I didn't know what I wanted to do.

00:19:59.200 | And let me rephrase that.

00:20:01.640 | I didn't know exactly what I wanted to do.

00:20:03.640 | But I knew that the job I was doing as an analyst

00:20:06.880 | was not a good fit for me.

00:20:08.480 | In hindsight, I think I was there a little bit more

00:20:11.240 | than a year.

00:20:12.040 | And during that year, I was in the corporate world.

00:20:15.440 | And I had always thought that the corporate world would

00:20:17.640 | be great.

00:20:18.360 | I had, in many ways, a job that if I spun it the right way,

00:20:21.440 | I could make it sound very fancy.

00:20:22.920 | I had the company credit card.

00:20:24.200 | I'd gone on the corporate trips and fly here and get

00:20:26.720 | the black car to the hotel.

00:20:28.200 | And I just realized, this is not for me.

00:20:32.400 | I don't want to do this.

00:20:33.360 | And I was giving myself to it.

00:20:34.600 | I was there an hour before everyone else.

00:20:36.120 | I was there late.

00:20:36.800 | I was just doing everything.

00:20:37.720 | And I realized, this isn't a perfect fit for me.

00:20:39.960 | So along the way, one thing that I did well

00:20:42.600 | that really helped me a lot is I always

00:20:44.520 | kept good notes to try to understand myself

00:20:46.720 | and understand what I liked and what I didn't like.

00:20:49.000 | And so I kept notes of jobs that I thought would be fun,

00:20:52.320 | companies that I thought would be fun to work in,

00:20:54.480 | industries that I thought would be cool.

00:20:56.160 | And that would be as simple as Panera Bread.

00:20:57.960 | I always liked Panera Bread.

00:20:59.160 | I thought it had a cool atmosphere.

00:21:00.120 | I thought it would be fun to work in a Panera Bread.

00:21:02.240 | Or if I were in a hotel, I always liked to travel.

00:21:04.320 | And I thought, if I worked in the hotel business,

00:21:06.760 | I could travel.

00:21:07.560 | And that would be a cool industry I would like.

00:21:10.360 | And I would also keep note of attributes of certain jobs

00:21:13.080 | that I liked.

00:21:13.680 | I learned that I didn't like sitting in an office.

00:21:15.800 | I like to be out and about.

00:21:17.160 | So when I was laid off, I had this list of a couple hundred

00:21:20.720 | jobs-- I still have it-- jobs, business ideas,

00:21:23.560 | everything from as simple as starting a lawn maintenance

00:21:25.920 | company, just all these ideas.

00:21:27.920 | But I didn't know exactly what I wanted to do.

00:21:30.400 | In searching it through, and I pursued

00:21:32.480 | a lot of introspection and good note-taking,

00:21:35.120 | I had come up with five criteria for a job that I wanted.

00:21:39.520 | For example, I realized I didn't like being paid for time.

00:21:42.960 | I don't want to be paid for the hours that I put in.

00:21:45.160 | I want to be paid for what I produce.

00:21:46.820 | I want to be paid for performance, not for time.

00:21:49.240 | I realized that I didn't like working for one-time rewards.

00:21:52.560 | So I sat down.

00:21:53.400 | I don't want to be paid for do this job, be done.

00:21:56.720 | I want to be paid, do this job, and have

00:21:58.920 | a revenue stream, an investment that could continue.

00:22:01.280 | And there were three more.

00:22:02.840 | But I was sitting down when I was leaving.

00:22:05.120 | I had been a good employee.

00:22:06.240 | And after I was laid off, my boss

00:22:08.560 | said, hey, listen, give us a couple weeks and give us a call.

00:22:11.640 | We'll do anything we can to help you.

00:22:13.240 | So I went out to lunch with one of the presidents

00:22:15.400 | of my company who had laid me off a couple weeks later.

00:22:18.560 | And there were no animosity, no ill feelings.

00:22:20.480 | They were just eliminating my job position.

00:22:22.240 | And I was fine with it.

00:22:23.240 | They saved me needing to go.

00:22:25.040 | And in hindsight, it turned out to be a good thing.

00:22:27.560 | And I laid out these five criteria that I had for a job.

00:22:30.960 | So he told me, he said, have you ever considered

00:22:32.880 | the world of financial services?

00:22:34.600 | I said no.

00:22:35.520 | And primarily, I was heavily, at that time,

00:22:38.960 | heavily influenced by the world of personal finance.

00:22:42.000 | So my theory was that brokers are out to make you broker,

00:22:45.120 | insurance is a total scam, I can do better on my own.

00:22:48.600 | I was an index fund guy.

00:22:49.960 | I was a do-it-yourselfer.

00:22:51.280 | I was like, I'm a do-it-yourselfer.

00:22:53.240 | But his son had interned at a company

00:22:55.480 | called Northwestern Mutual.

00:22:56.760 | And he said, listen, my son did this internship.

00:22:58.880 | He had a great experience.

00:22:59.920 | You should go and look at it.

00:23:01.200 | So I went and had an interview.

00:23:02.560 | And when I interviewed with the Northwestern Mutual rep

00:23:05.320 | that his son had worked with, I was extremely impressed.

00:23:07.760 | Because the man who was interviewing me

00:23:09.380 | was a Navy nuclear submarine.

00:23:10.880 | He was a CFP, CLU, CHFC, like a very credentialed,

00:23:15.200 | just a really relaxed, really knowledgeable guy.

00:23:18.160 | And it opened my eyes.

00:23:19.280 | Their recruiting literature and information

00:23:21.360 | opened my eyes to the possibilities,

00:23:23.520 | the financial possibilities, the business possibilities,

00:23:26.000 | the way the business worked.

00:23:27.360 | And that opened my eyes to the world of financial services.

00:23:29.920 | So then I spent a couple of months basically

00:23:31.800 | researching as many people and companies

00:23:33.720 | in the financial services business that I could find.

00:23:36.120 | I interviewed with a bunch of different people.

00:23:38.360 | And then ultimately, I went back and joined

00:23:40.520 | Northwestern Mutual in the fall of 2008,

00:23:43.800 | starting as a 23-year-old life insurance salesman.

00:23:47.200 | And so in the fall of 2008, I started my financial services

00:23:50.760 | practice and did that until July of 2014

00:23:53.520 | when I left to build Radical Personal Finance.

00:23:55.680 | Cool.

00:23:56.440 | Very good.

00:23:57.640 | Let's get into a little more detail in terms of the--

00:24:01.400 | obviously, you weren't getting into any more debt

00:24:03.640 | post-college, it sounds like.

00:24:06.280 | No, I did.

00:24:07.280 | No, you did.

00:24:08.280 | Yeah.

00:24:09.120 | What debt did you take on?

00:24:11.400 | On multiple occasions.

00:24:12.400 | I'll tell you the worst of it.

00:24:14.000 | Probably the most humbling experience,

00:24:16.480 | the most difficult experience for me,

00:24:18.960 | was when I was building my business initially.

00:24:21.880 | And financial services is an interesting business

00:24:24.760 | because it's a profession.

00:24:26.120 | And like many professions, it requires some degree

00:24:29.040 | of knowledge and experience.

00:24:31.040 | But it doesn't pay like most professions.

00:24:32.960 | And some companies, depending on the different structure,

00:24:35.440 | have different salary structures, et cetera.

00:24:38.280 | But in the financial services business,

00:24:40.320 | the beginning years are extremely, extremely low-paying

00:24:45.880 | years.

00:24:46.640 | And they're low income because it takes a while

00:24:49.400 | to build momentum in the sales process

00:24:52.040 | where you have a large base.

00:24:54.160 | And it takes a while to build personal skills in terms

00:24:57.360 | of knowledge where you can help larger clients, where

00:24:59.920 | you can make more money.

00:25:01.320 | And it's a very expense-intensive business.

00:25:04.080 | So all of your compensation in the financial services

00:25:06.240 | business comes on the back end.

00:25:07.760 | So first 10 years of your career,

00:25:09.440 | you're dramatically overworked and underpaid.

00:25:12.240 | Maybe second 10 years of your career,

00:25:14.320 | you're probably about properly compensated for the amount

00:25:16.720 | of work that you do.

00:25:17.800 | And then from then on, if you continue,

00:25:19.120 | it can just be a cash cow where you're just

00:25:20.920 | dramatically overpaid for very little work in many ways.

00:25:24.360 | And so that was what I was working towards.

00:25:26.120 | Well, along the way, I was quickly

00:25:27.920 | limited based upon my ability for my business to expand.

00:25:31.520 | And I was overworked, was working a ton.

00:25:33.680 | And so the path in that process is that you hire help.

00:25:38.080 | You go ahead and hire staff.

00:25:39.560 | And you hire staff to come and help you

00:25:41.200 | with some of the simpler things.

00:25:43.160 | And so I began that process.

00:25:44.640 | But as a new business owner, it was the first time

00:25:46.760 | that I had ever done that.

00:25:47.960 | So I hired a couple of people, had great employees.

00:25:50.200 | But I didn't make up in production

00:25:53.360 | what my staff was costing me and my staff

00:25:56.280 | and all of the associated expenses--

00:25:57.780 | their computer, their office space, all that stuff.

00:26:00.200 | Rather, what I did was instead of working so much,

00:26:02.400 | I worked less.

00:26:03.720 | And so my income stayed about the same.

00:26:06.200 | And my expenses went up during that crunch time.

00:26:09.280 | Because the way hiring works, when a company hires,

00:26:12.120 | usually they're at overcapacity.

00:26:13.600 | They don't need somebody full time.

00:26:15.040 | They need 10 hours a week.

00:26:16.320 | And so they're overcapacity until, for a while,

00:26:19.400 | they can bring the work up to the capacity

00:26:21.140 | that the employee has.

00:26:22.640 | And then they'll be undercapacity.

00:26:24.120 | And they go and hire.

00:26:25.120 | But the business owner, when they hire,

00:26:27.280 | is always the one who's on the hook and who's overpaying.

00:26:29.920 | And so in that stage of my business,

00:26:31.400 | I didn't need somebody full time.

00:26:33.160 | But I hired for the future.

00:26:35.120 | And I started borrowing money.

00:26:37.520 | Well, it took a while until finally one day I woke up.

00:26:40.600 | And I just sat down.

00:26:41.440 | And I was looking at my numbers.

00:26:43.520 | And I realized that I'd put myself thousands and thousands

00:26:46.420 | of dollars into debt, money that I didn't have anything

00:26:49.500 | to show for except the work that my staff had done.

00:26:53.760 | That was very, very humbling.

00:26:55.220 | Because I would never, never give the advice to somebody

00:26:58.440 | else, hey, listen, what you should do

00:27:00.080 | is you should go and borrow money to pay

00:27:02.040 | for somebody else's salary.

00:27:03.320 | That is stupid.

00:27:04.520 | You shouldn't do that.

00:27:05.840 | And yet I had done it myself.

00:27:08.320 | And so I laid off my staff.

00:27:09.560 | I collapsed my office.

00:27:10.640 | And I worked like crazy to pay that back.

00:27:13.880 | And talk about eating humble pie.

00:27:16.280 | Here I am, a financial advisor.

00:27:17.640 | I'm supposed to have a clue.

00:27:19.100 | And I made a stupid business decision

00:27:22.020 | that I should never have made.

00:27:24.120 | In hindsight now, I'm very thankful for it

00:27:26.360 | for a number of reasons.

00:27:27.400 | But the primary reason that I'm thankful for

00:27:29.800 | is it allowed me to eat a good dose of humble pie

00:27:33.720 | and learn a little bit more empathy

00:27:35.600 | with people who make mistakes.

00:27:37.360 | Because I've always been such a good learner,

00:27:40.600 | the challenge of that is that I've often

00:27:43.560 | thought that I knew what to do.

00:27:45.760 | I learned by making some very expensive mistakes

00:27:49.080 | that just because you know something

00:27:50.960 | doesn't mean you can do it.

00:27:52.400 | And it gave me a great deal more empathy

00:27:54.480 | of working with other people who've

00:27:55.920 | made financial mistakes that I wouldn't have had

00:27:57.480 | if I hadn't had that experience.

00:27:58.600 | - Yeah, what kind of loan was it?

00:28:00.760 | - Credit cards, I just put it on credit cards,

00:28:02.480 | 0% credit cards.

00:28:03.440 | - Gotcha, can you disclose how much it was?

00:28:05.800 | - I think it was like $15,000, I don't remember exactly.

00:28:09.160 | - Gotcha. - Something like that.

00:28:10.000 | - So essentially using a credit card to float the payroll.

00:28:13.000 | - Yeah, yeah, exactly, exactly.

00:28:14.800 | - Gotcha.

00:28:15.640 | - Okay. - I mean the world,

00:28:16.460 | when you have good credit, that's the most common form.

00:28:18.840 | Number one, most new businesses are financed

00:28:20.700 | with some form of debt.

00:28:21.760 | Should be or not, that's a discussion to have,

00:28:23.740 | but they are.

00:28:24.580 | And the simplest form of debt that most people use

00:28:26.380 | is 0% credits.

00:28:27.640 | And it's a very simple process to do it.

00:28:29.360 | And because it happens incrementally,

00:28:30.720 | because the way that you do that, if you have revenue,

00:28:33.040 | what you do is you use the revenue to pay your hard costs,

00:28:36.260 | to pay your rent, to pay your staff,

00:28:38.080 | to pay your taxes, all of that,

00:28:39.600 | and then you use 0% credit cards

00:28:41.600 | in order to pay those expenses.

00:28:43.160 | And so when you don't manage that,

00:28:45.200 | it causes the problem to where you wind up

00:28:47.360 | spending too much money.

00:28:48.760 | And no question, it is an inefficient thing.

00:28:51.240 | And because it's easy, I spent way more,

00:28:53.680 | I didn't need to do it, it was stupid of me.

00:28:55.240 | I should have just stuck to my guns

00:28:57.720 | and not borrowed money and things like that.

00:28:59.840 | - Yeah, yeah.

00:29:01.280 | One question, you mentioned index funds.

00:29:03.200 | And so I know coming out of the Dave Ramsey world,

00:29:05.240 | you weren't necessarily taught about index funds.

00:29:07.280 | How'd you pick up that knowledge?

00:29:09.320 | - Well, that was just reading personal finance.

00:29:11.040 | And I was in the, I remember,

00:29:13.000 | I think I'm at Lazy Man's Retirement Portfolio

00:29:15.560 | or something like that,

00:29:16.400 | was the first book I read years ago

00:29:17.640 | that introduced me to index funds.

00:29:20.040 | I am not an advocate of index funds.

00:29:22.160 | Neither am I an opponent of index funds.

00:29:24.160 | And so when I was a financial advisor, I didn't use,

00:29:27.720 | so in the financial planning business that I built,

00:29:30.160 | first few years, I focused primarily on life insurance,

00:29:32.880 | disability insurance, long-term care insurance,

00:29:34.520 | and health insurance.

00:29:35.640 | Because when you're new and when you're young,

00:29:38.040 | you can learn enough about insurance

00:29:39.880 | in a couple of months of hard study

00:29:41.800 | to be really useful to people

00:29:43.640 | and give good insurance advice.

00:29:44.840 | It takes years to learn about investing.

00:29:46.760 | But over the years, I went through

00:29:48.240 | and I built up my knowledge in financial planning.

00:29:51.120 | I got my charted life underwriter,

00:29:53.280 | wound up becoming a certified financial planner.

00:29:55.080 | I later got a master's degree in financial planning.

00:29:57.320 | Along the way, I changed my business.

00:29:59.320 | And I changed from insurance primarily

00:30:02.240 | to investment primarily, to working with retirees.

00:30:05.240 | And in those portfolios, I used both actively managed funds

00:30:09.280 | and passively managed funds for different clients.

00:30:11.880 | So that's always been, I'm not an index-only guy,

00:30:16.880 | nor am I an opponent of the indexing.

00:30:19.520 | I think in general, many people,

00:30:22.000 | most people will be better off with an index approach.

00:30:25.080 | But even though most of the academic literature

00:30:28.200 | is against me, and I have to admit that,

00:30:29.940 | I still have a soft spot for several active managed funds

00:30:33.320 | and the approach of active management.

00:30:34.960 | And I think it's a little bit more nuanced.

00:30:36.940 | So I'm not a, anyway, those are my thoughts on indexing.

00:30:39.320 | - Yeah, I got it, I got it.

00:30:40.960 | I'm always interested in someone who's working

00:30:43.360 | in financial services like that,

00:30:44.800 | how working for your own company like that

00:30:47.880 | affects your personal finances.

00:30:49.480 | So how are you saving for your own retirement

00:30:52.120 | during that time?

00:30:53.920 | - Well, I think it's important to recognize,

00:30:56.680 | and this is what I don't like

00:30:57.560 | about the financial services business,

00:30:59.320 | and I've taught people, is that as a financial advisor,

00:31:02.680 | you need to recognize why it is

00:31:04.680 | that you're actually getting rich

00:31:06.160 | and how other people get rich.

00:31:08.200 | And here's the truth as I see it.

00:31:10.920 | You don't get rich by investing in mutual funds

00:31:14.040 | inside your IRA or 401(k).

00:31:16.680 | That's a great sales pitch in a book.

00:31:19.000 | There's no reason why that can't work.

00:31:21.680 | It's just that most people who are rich

00:31:23.520 | did not get rich that way.

00:31:24.920 | And again, hear me clearly.

00:31:26.000 | It's not that it can't work.

00:31:27.960 | But in my years of working with wealthy clients,

00:31:31.320 | I didn't have hundreds,

00:31:32.780 | but I had a couple of dozen very wealthy clients,

00:31:34.800 | and I met with hundreds of millionaires

00:31:36.400 | and multimillionaires.

00:31:37.920 | I only had one client who had actually built their wealth

00:31:42.920 | through that path, through the path of saving

00:31:45.680 | and putting money in their 401(k).

00:31:47.080 | In this case, he was an educator at college.

00:31:50.000 | He wound up becoming a higher ranking university official.

00:31:53.320 | And he just earned a multi-six figure income over time,

00:31:56.720 | was a pretty frugal, relaxed guy,

00:31:58.680 | just chucked it aside in a 403(b) and it worked.

00:32:01.540 | But that's not the norm.

00:32:03.160 | Most people in the United States who become wealthy,

00:32:06.660 | become wealthy because number one,

00:32:08.360 | they have a high income, i.e. professionals,

00:32:12.320 | or number two, they build a business.

00:32:14.960 | Those are the two things.

00:32:16.440 | And so it's exactly the same thing

00:32:17.920 | for somebody like a financial advisor.

00:32:19.760 | The reason a financial advisor,

00:32:21.200 | and this is a nebulous term,

00:32:22.200 | but let's just think someone like me,

00:32:23.640 | someone who was working in financial services.

00:32:26.240 | The reason a financial advisor becomes wealthy

00:32:28.660 | is not because they make great investment decisions.

00:32:31.920 | It's just simply because they earn a lot of money

00:32:33.560 | because it's a lucrative, very difficult business.

00:32:35.960 | And if they save some of that money consistently,

00:32:38.700 | then they'll be able to grow.

00:32:40.380 | So that's kind of the big picture.

00:32:41.960 | Don't be misunderstood.

00:32:43.720 | The reason most financial advisors are wealthy

00:32:46.180 | is not because they're great at giving investment advice.

00:32:48.360 | It's because they're good at building a business,

00:32:50.840 | selling a lot of product, and saving some amount of that.

00:32:54.560 | Now, with regard to your specific practice,

00:32:56.360 | here was how I approached it.

00:32:57.920 | Number one, my company offered,

00:33:00.040 | and this is an important diversification tool.

00:33:02.020 | As a financial advisor,

00:33:03.060 | I didn't place a heavy emphasis on stocks.

00:33:05.680 | I own stocks, and I invested a small amount of money there

00:33:09.360 | to make sure that I would understand what it was.

00:33:11.700 | But it was largely my IRAs and Roth IRAs

00:33:14.160 | that I had established since I was 18 years old.

00:33:16.740 | But as a financial advisor,

00:33:18.020 | and I would not give the advice to a financial advisor

00:33:20.620 | to invest heavily in stocks.

00:33:22.320 | First, I had two traditional pensions

00:33:24.360 | as far as defined benefit pension programs

00:33:26.180 | that I was involved in,

00:33:27.340 | which didn't require contributions from me with my company.

00:33:30.340 | In addition to that, as I grew,

00:33:32.260 | I was investing primarily into my business,

00:33:34.860 | copying what my rich clients did,

00:33:36.500 | which means instead of putting money into an IRA,

00:33:38.780 | I would hire staff or expand my office space

00:33:41.400 | or buy more marketing, et cetera.

00:33:43.020 | That's the way that you do it.

00:33:44.620 | That's the way that you really build wealth, not IRAs.

00:33:47.100 | And concurrent with that,

00:33:49.120 | I was looking and focusing on diversifying my income

00:33:52.020 | out of stocks.

00:33:53.060 | Because as a financial advisor,

00:33:54.220 | especially one who manages money,

00:33:55.820 | your compensation, if you're doing fee-based planning,

00:33:58.420 | where you're receiving, let's say 1% of the assets

00:34:00.980 | that are under your management,

00:34:02.180 | your compensation is based upon the amount of the accounts

00:34:07.100 | that are under your stewardship.

00:34:08.740 | And so the goal is grow those accounts.

00:34:11.240 | But the problem is, what do you do when things go wrong?

00:34:14.820 | So remember, every three years,

00:34:16.060 | you should expect about a 33% decline

00:34:18.100 | in the value of the stock market.

00:34:19.440 | So that can bring tremendous volatility to your income.

00:34:22.020 | If your investments are experiencing a 33% decline

00:34:25.980 | at the same time that your income is receiving a 33% decline,

00:34:29.780 | that's a bad plan.

00:34:31.140 | So as a financial advisor,

00:34:32.460 | I was intentionally focused primarily

00:34:35.140 | on diversifying my income

00:34:36.500 | and my plan was to diversify out of stocks

00:34:38.380 | so that my income and my investments

00:34:39.820 | would not be connected.

00:34:40.900 | And this is the same problem that people face

00:34:42.940 | when they invest in their company stock.

00:34:44.800 | Generally a bad idea, because if the stock,

00:34:47.920 | if your income is affected, you're getting laid off,

00:34:50.200 | it's also gonna affect your investments.

00:34:51.840 | So right when you can least afford to handle it,

00:34:54.480 | you're facing a double whammy.

00:34:55.720 | Same thing for financial advisors.

00:34:57.240 | - Gotcha.

00:34:58.080 | So were you investing in the business

00:34:59.600 | forsaking things like maxing out your Roth IRAs?

00:35:03.000 | - Yeah, absolutely.

00:35:04.040 | - Okay.

00:35:05.120 | Dave Ramsey wouldn't have said to do that.

00:35:07.640 | - But that's exactly what Dave Ramsey's done.

00:35:10.280 | Dave Ramsey is rich,

00:35:11.520 | not because he put money in a Roth IRA into mutual funds,

00:35:14.340 | he's rich because he built a huge business

00:35:16.580 | that was completely leverageable and completely scalable.

00:35:19.000 | And this is the problem with financial advice.

00:35:21.040 | It's great financial advice to say to somebody,

00:35:23.500 | someone like you, okay,

00:35:24.380 | when you were working as an accountant,

00:35:26.100 | if somebody's an accountant

00:35:27.540 | and they're an established career accountant,

00:35:30.160 | putting money into an IRA is a perfectly reasonable thing.

00:35:33.540 | But you will never be as rich putting money into an IRA

00:35:37.440 | as you will be if you make partner

00:35:40.060 | or start your own accounting firm, if that works.

00:35:42.860 | So the thing to recognize is,

00:35:44.900 | it's not that the plan can't work.

00:35:47.220 | It's just simply that it doesn't work.

00:35:48.860 | And the data proves that it doesn't work

00:35:51.260 | for the majority of people.

00:35:52.220 | Majority of people in the United States of America

00:35:53.660 | have no retirement savings, they don't save money.

00:35:56.060 | And the majority of the wealthy didn't get there

00:35:57.840 | because of putting money in the 401k.

00:35:59.680 | So the reason that people have a million dollars

00:36:01.560 | in the 401k is not because they made great,

00:36:04.680 | you know, financial decisions.

00:36:05.820 | The reason they usually, most people get there

00:36:07.720 | is because they make a multi six figure

00:36:09.500 | or a multi six figure income.

00:36:11.060 | And so they can easily afford to put the max in it.

00:36:13.340 | And you do that over the course of a decade

00:36:15.180 | or a couple decades and it grows.

00:36:16.940 | So that's one of my major messages is to recognize,

00:36:20.820 | do what works, not just what you're told.

00:36:22.980 | And putting money into, you know,

00:36:24.760 | just simply working a job,

00:36:26.460 | putting money into a 401k or an IRA,

00:36:29.460 | nothing wrong with it,

00:36:30.660 | but it's really good for the financial services industry.

00:36:33.240 | And I'm convinced it's not the best thing

00:36:34.820 | that most people should be starting with.

00:36:36.220 | - Yeah, could you do a hybrid approach though?

00:36:38.280 | - Sure, absolutely, and that's a great idea.

00:36:40.480 | So all good financial advice

00:36:42.220 | is gonna be intensely personal.

00:36:43.900 | - Right. - Okay?

00:36:44.740 | That's a big deal for me.

00:36:45.780 | If you wanna make a mistake,

00:36:47.860 | if you wanna demonstrate how little you know about finance,

00:36:50.420 | just give broad sweeping advice.

00:36:52.260 | Now we all do it, I do it,

00:36:53.500 | but what I mean is you can't give good financial advice

00:36:56.460 | until you get the details of it.

00:36:58.020 | So let's say for example, as a financial advisor,

00:37:01.500 | if I was going to put money and the scope,

00:37:05.020 | $5,000 is different than $15,000.

00:37:07.620 | Let's say I had the choice between saving $15,000

00:37:10.860 | into a Roth IRA or into an IRA or defined contribution plan

00:37:15.240 | that would allow me to contribute to it,

00:37:16.580 | that it would grow, okay?

00:37:18.060 | Well, what do I get?

00:37:18.900 | I get a little bit of a tax deduction now

00:37:20.820 | and I get whatever growth those mutual funds give me.

00:37:23.420 | But now let's say I can take that same $15,000

00:37:25.860 | and I can use that to buy four months of labor from somebody.

00:37:29.940 | Now that four months of labor is completely tax deductible.

00:37:33.540 | And the benefit of that four months of labor,

00:37:35.860 | if I can hire a full-time staff person for four months

00:37:38.780 | who can go out and help me manage my marketing campaign,

00:37:41.580 | who can help me do less $15 an hour work,

00:37:44.380 | 'cause I can hire $15 an hour work,

00:37:46.220 | and help me do more $1,000 an hour work,

00:37:48.620 | the benefit in my pocket could be multiple six figures

00:37:51.060 | at the end of the year.

00:37:52.300 | So it would be really foolish in the beginning

00:37:54.780 | to focus on putting $15,000 aside when I should invest.

00:37:59.340 | And so this is what is important.

00:38:02.220 | In business, you should focus primarily on the business

00:38:06.220 | in the early years.

00:38:08.000 | Now there does come a point in time

00:38:10.500 | at which you need to diversify out of the business.

00:38:14.060 | In the beginning years,

00:38:14.900 | the best investment that you have

00:38:16.060 | is gonna be the business.

00:38:17.100 | And so it's foolish to pursue other things.

00:38:19.160 | Why would you let Coca-Cola manage your money

00:38:21.260 | when you can put it in and you can get 1,000% return?

00:38:23.960 | It's silly in the beginning for people

00:38:26.980 | who have these options, a business owner

00:38:29.100 | whose income is not tied to their hourly work,

00:38:31.420 | who's not limited based upon 168 hours that they have total

00:38:34.580 | and the 60 to 80 that they can work consistently.

00:38:37.180 | A business owner has huge exponential opportunities.

00:38:40.820 | So it's silly in the beginning to put that money into an IRA.

00:38:43.340 | But down the road,

00:38:44.340 | you have to diversify out of your business.

00:38:46.660 | And that's where you have excess money.

00:38:48.060 | That's when you tuck it aside and you say,

00:38:49.780 | listen, Coca-Cola is probably not gonna do well

00:38:51.820 | as FinCon Enterprises will,

00:38:53.660 | but FinCon Enterprises could blow up

00:38:55.420 | and go away two years from now

00:38:56.760 | because I have a competitor that comes in

00:38:58.340 | and all my people like him better than me.

00:39:00.980 | And so there's a transition stage.

00:39:03.180 | It's not that one is right or one is wrong.

00:39:04.900 | It's a matter of when do you focus on which

00:39:07.140 | one of those options. - I like that.

00:39:08.180 | Yep, yep.

00:39:09.260 | Managing your cashflow, managing your money on a daily basis

00:39:13.540 | during this time period of your life,

00:39:15.300 | do you use actual budget sheets?

00:39:17.420 | Do you use credit cards and pay them off every month?

00:39:21.260 | Like what's the more strategic or tactical

00:39:24.340 | money management systems you had set up?

00:39:27.140 | - Yeah, this was the most difficult thing for me.

00:39:29.740 | All during the time that I was a financial advisor,

00:39:32.420 | I haven't had a steady income since I was 23 years old.

00:39:35.220 | So I'm 31, so it's eight years now.

00:39:37.660 | I haven't had a steady, consistent paycheck.

00:39:39.940 | And so managing a variable income

00:39:42.940 | with a high degree of variability

00:39:44.780 | is very, very challenging.

00:39:46.180 | Most money I ever made in a month was,

00:39:47.780 | I think it was like $31,000 a month.

00:39:50.100 | I went multiple months when I made nothing.

00:39:51.980 | And I went and made months where during this,

00:39:53.580 | the weird thing of financial services

00:39:55.340 | where I owed my boss money for the privilege of working.

00:39:57.460 | It was a remarkable thing.

00:39:59.300 | But managing that degree of instability

00:40:02.780 | is very, very challenging.

00:40:04.300 | So over those years, all during the time

00:40:06.620 | that I was a financial advisor,

00:40:08.020 | I'd simply used some custom spreadsheets

00:40:09.940 | that I built myself.

00:40:11.020 | And I used my custom spreadsheets

00:40:12.500 | to manage and to track everything.

00:40:14.300 | And that worked for me.

00:40:15.840 | It was after I started Radical Personal Finance

00:40:18.980 | that I started using the YNAB software,

00:40:21.100 | radicalpersonalfinance.com/ynab.

00:40:23.740 | That was when I started using the YNAB software.

00:40:25.820 | And the YNAB software, the You Need a Budget software,

00:40:28.380 | is awesome.

00:40:29.940 | If I had used You Need a Budget,

00:40:31.900 | if I had used their software all during the time,

00:40:34.540 | and the problem was, I told Jesse Mecham this

00:40:36.380 | when I interviewed him on the show.

00:40:37.700 | I said the problem was I had the first version of YNAB

00:40:39.860 | when I was interested in software.

00:40:41.580 | And I thought it was a spreadsheet,

00:40:42.420 | and it was a spreadsheet at that time.

00:40:44.220 | Well, I made a better spreadsheet myself.

00:40:46.740 | But I didn't keep track of what YNAB was doing

00:40:48.820 | when they were iterating through

00:40:50.080 | and they got out of the spreadsheet world

00:40:51.780 | and they made an awesome app, application.

00:40:55.140 | If I had used YNAB during that time,

00:40:56.640 | I'd be a lot richer today

00:40:57.700 | just because it's so, so good.

00:40:59.560 | - If you've been listening to the podcast for some time now,

00:41:06.740 | you've no doubt heard me mention MediShare.

00:41:08.860 | MediShare is the medical sharing program for Christians

00:41:11.940 | that I use to cover me and my family of five

00:41:14.700 | instead of regular old health insurance

00:41:16.320 | purchased through the Obamacare exchange.

00:41:18.360 | I've been on MediShare for over three years now

00:41:20.340 | without any issues.

00:41:21.740 | We still use the same doctors we always have.

00:41:24.740 | Here's the thing, I used to pay over $1,000 a month

00:41:27.060 | to insure my family.

00:41:28.500 | Now with MediShare, I pay just $235.

00:41:31.460 | There are a few more out of pocket expenses on this plan,

00:41:34.260 | but overall, the program saves me thousands each year.

00:41:37.700 | I've been able to save more and enjoy more

00:41:39.460 | of my hard earned money thanks to this program.

00:41:42.100 | Look, there's a ton on the line when it comes to you

00:41:44.580 | and your family's medical needs.

00:41:46.260 | So visit PTMoney.com/MedishareReview

00:41:50.540 | to see all the pros and cons of this program.

00:41:53.340 | I hope you discover if it's right for you.

00:41:55.480 | (upbeat music)

00:41:57.400 | - What is one area of personal finances,

00:41:59.520 | obviously you've become a master of your money

00:42:01.200 | at this point, but what's one area

00:42:02.320 | of your personal finances that you're still

00:42:03.880 | just not good at?

00:42:05.360 | (laughing)

00:42:07.760 | - This pause here is gonna sound really arrogant.

00:42:10.320 | There's no way to answer a question like that properly.

00:42:13.800 | - Yeah, we can be specific or theoretical.

00:42:16.920 | - Probably the biggest challenge for me,

00:42:20.120 | the biggest thing that hurts me, financially speaking,

00:42:24.200 | is that at this point in time,

00:42:27.160 | I don't think I'm a very good businessman.

00:42:29.880 | As far as the day-to-day management of checking accounts

00:42:32.480 | and things like that, that at this point

00:42:34.640 | is a learned and practiced skill.

00:42:36.920 | I've done enough crisis financial counseling

00:42:38.680 | with people who are in that.

00:42:40.640 | That's the blocking and tackling of personal finance.

00:42:42.840 | It's the basics that you have to do well.

00:42:45.300 | If you don't do that well, it's gonna be very difficult

00:42:47.840 | to do well, but it doesn't take that long to learn.

00:42:50.360 | And so the basics of handling personal checking, et cetera,

00:42:53.880 | is pretty simple.

00:42:55.320 | Now, you may not know this, but I actually have

00:42:57.720 | a pretty unique financial situation

00:42:59.720 | in terms of a couple of things.

00:43:02.240 | Number one, for both business reasons

00:43:04.920 | and personal ethical reasons, I no longer own any stocks.

00:43:09.440 | And the primary reason that I did that,

00:43:11.440 | including retirement accounts, things like that,

00:43:13.280 | all of my tax-deferred accounts

00:43:15.200 | are simply sitting in cash at the moment.

00:43:17.120 | And the primary reason was because I closed

00:43:19.520 | my financial planning business after six years

00:43:21.800 | to start Radical Personal Finance.

00:43:23.680 | And during that period of transition,

00:43:25.280 | it would be foolish for me to have my money

00:43:29.280 | exposed to stock market volatility risk

00:43:33.000 | when I have use for it, potentially,

00:43:35.820 | in building this business.

00:43:37.360 | Because once again, the opportunities that I face

00:43:40.480 | with building Radical Personal Finance

00:43:42.100 | and trying to create the empire that I wanna create,

00:43:44.860 | the opportunities are so much bigger

00:43:47.400 | than what the VTS whatever can get me

00:43:50.560 | from the whatever index fund

00:43:52.120 | or whatever American funds mutual fund that I wanna have.

00:43:55.080 | It's incomparable, it's night and day.

00:43:57.960 | But the financial risk of starting a business is tremendous.

00:44:01.200 | And so first of all, there's important

00:44:03.120 | when you're making major transitions,

00:44:04.960 | don't be scared to move your money to cash.

00:44:07.080 | I think this is something many people are scared to do.

00:44:09.800 | Don't be scared to move your money to cash.

00:44:11.040 | Now, if you've got millions of dollars in cash,

00:44:12.440 | you don't need to move your other millions over.

00:44:14.840 | But when you're somebody like me who's still building,

00:44:16.860 | I don't have millions of dollars yet,

00:44:18.080 | I'm working hard on it, but--

00:44:18.920 | - Do you share publicly how much that cash is?

00:44:21.200 | - No, I won't.

00:44:22.240 | I don't and I won't.

00:44:23.080 | I don't see any benefit.

00:44:24.240 | When people share numbers,

00:44:25.240 | I don't know if you do or not, maybe you do,

00:44:27.160 | but I have never seen somebody who has shared details

00:44:29.600 | on their personal finances,

00:44:31.240 | who wasn't doing so with the intention

00:44:33.620 | of selling more product because of it.

00:44:35.680 | I am deeply suspicious of somebody who publishes

00:44:38.780 | things like income reports, net worth reports,

00:44:41.080 | unless they're doing so as a component

00:44:42.720 | of like a debt payoff plan.

00:44:44.160 | But beyond that, it's very,

00:44:45.600 | it merges into the world of pyramid marketing.

00:44:50.040 | And all of the rich, in the sense of look at me,

00:44:52.600 | look how rich I am, so come and do what I do.

00:44:55.020 | And I see no benefit of it.

00:44:56.920 | I teach, one of the things that's very important to me,

00:45:00.260 | and that I see wealthy people do,

00:45:02.040 | is in general, I think you want to practice a lifestyle of,

00:45:06.800 | I mean, the best term for it is stealth wealth.

00:45:09.140 | People should never be able to look at your lifestyle

00:45:11.900 | and understand how much money you have

00:45:14.320 | or don't have because of it.

00:45:16.400 | Because if you look at the wealthy,

00:45:17.520 | the people who are truly wealthy,

00:45:19.140 | you'll often won't have any sense of how wealthy they are

00:45:22.600 | based upon looking at their lifestyle.

00:45:24.400 | So, long-winded explanation to say,

00:45:27.280 | I don't do it because I don't want anyone,

00:45:29.240 | number one, it's my business and there's no benefit to me.

00:45:32.320 | There's only negatives to me.

00:45:33.640 | Unless I'm selling something that's gonna try to show you

00:45:36.840 | how you can make money like I make money,

00:45:38.920 | there are no positive benefit to me

00:45:40.800 | to talk about how much wealth I have or don't have.

00:45:43.520 | There's only negative consequences.

00:45:45.080 | - Yeah, just looking for context for the conversation of,

00:45:48.360 | is this a significant retirement stash

00:45:51.040 | that we're talking about?

00:45:51.920 | Because that's a significant move

00:45:53.320 | to move that all into cash.

00:45:54.440 | Or is it 10 or $15,000?

00:45:56.920 | - I'll just say this.

00:45:57.760 | I've been saving diligently since I was about 18 years old.

00:46:00.000 | I've made financial mistakes.

00:46:01.280 | I've made financial mistakes.

00:46:03.140 | I consider myself to be a wealthy person,

00:46:05.360 | but I'm not a millionaire.

00:46:06.400 | - Gotcha, that's all I needed.

00:46:07.800 | - Yeah, so my assets, and let me home in on that

00:46:11.680 | because obviously some of the statements

00:46:14.440 | can be misunderstood.

00:46:15.800 | One of the things that I don't like actually

00:46:18.040 | about our modern world, and I have a real beef

00:46:20.160 | with the modern financial advice,

00:46:22.280 | is sending people into primarily things

00:46:25.980 | like retirement accounts before they have the opportunity

00:46:29.040 | to get their hands on money.

00:46:30.800 | If you look at most people's financial situations,

00:46:33.760 | when you're beginning off life,

00:46:35.600 | a few thousand dollars, perhaps $10,000,

00:46:38.960 | can buy somebody a tremendous degree of flexibility.

00:46:42.400 | I can't quote this stat off the top of my head,

00:46:44.360 | but I would guess, and I don't think

00:46:46.120 | this is directionally wrong.

00:46:47.080 | I don't have the stats at my fingertips,

00:46:48.840 | but probably if you have a few thousand dollars

00:46:52.240 | of liquid cash, you have more cash available to you

00:46:55.360 | than perhaps 50% of the country,

00:46:57.920 | in terms of 50% of the population.

00:46:59.840 | That might not be exactly right,

00:47:01.420 | but it's directionally right.

00:47:03.560 | If you've got $100,000 cash, I'm convinced

00:47:06.680 | you've got one of the major stages

00:47:09.140 | of what I define as financial independence in this sense.

00:47:13.440 | If you've got $100,000 cash, you have the ability

00:47:17.400 | to go anywhere in the country you wanna go,

00:47:20.160 | to take any job that you wanna take,

00:47:22.280 | or to start almost any business that you wanna start.

00:47:24.920 | And one of my biggest beefs with the financial industry

00:47:28.960 | is the first thing that we wanna do

00:47:30.760 | is put that $100,000 into 401ks and IRAs,

00:47:34.160 | instead of putting that first $100,000

00:47:35.920 | into savings accounts.

00:47:37.320 | Now, there are good reasons why we advocate for that.

00:47:39.940 | Most people spend all the money that they have.

00:47:42.000 | And so if you can put a little distance

00:47:43.480 | between people and their money,

00:47:45.040 | it's probably gonna be in their own best self-interest.

00:47:48.240 | But if somebody doesn't have the connection

00:47:51.080 | between the amount of cash that they have

00:47:52.520 | and the amount of money they spend,

00:47:53.980 | I'm convinced it's far better to put that $100,000

00:47:56.800 | into a savings account and have it available to them,

00:47:59.460 | not in a retirement account.

00:48:01.540 | For you, when you were leaving your CPA job,

00:48:03.880 | I don't know how much money you had saved,

00:48:05.560 | but if you've got $100,000 sitting in the bank,

00:48:08.000 | then that buys you, you know that you've got

00:48:10.200 | a couple of years worth of runway.

00:48:12.200 | But if that $100,000 is sitting in a 401k,

00:48:14.800 | you're much more nervous about it.

00:48:16.420 | So I guess the question you asked me,

00:48:18.240 | which I got away from was, I've lost the question.

00:48:21.880 | I was preaching at you.

00:48:23.760 | What did you want me to answer

00:48:24.760 | about investment diversification?

00:48:26.840 | Was that where we were?

00:48:28.720 | - I think I've forgotten as well, Joshua.

00:48:31.400 | - Okay, so I was answering the question about investment.

00:48:33.440 | So I moved it to cash for the reason of stability

00:48:37.000 | when starting my new business,

00:48:38.640 | in order that if I needed to access the money,

00:48:41.360 | it would be available to me.

00:48:42.680 | And number two, I moved it for ethical reasons.

00:48:44.940 | I became comfortable with the conduct

00:48:47.160 | of many of the large companies that represent companies,

00:48:49.920 | such as those that are listed

00:48:51.280 | on the New York Stock Exchange.

00:48:53.660 | I've realized that there are many, many more options

00:48:56.400 | available to me to invest money.

00:48:58.720 | So I have bootstrapped Radical Personal Finance,

00:49:00.800 | working on the side while building up the business

00:49:03.760 | so as to not have to touch invested assets.

00:49:08.760 | But it's been an important safety net for me along the way.

00:49:12.240 | And in terms of my own personal financial planning,

00:49:15.600 | a couple of things.

00:49:16.440 | Number one, my business has tremendous potential.

00:49:19.160 | 2016 has not been the year that I hoped it was,

00:49:22.020 | but 2017, I'm very excited for the prospects

00:49:24.760 | and I've got some solid plans

00:49:26.380 | because of the hard work that I put in

00:49:27.780 | over the last couple of years.

00:49:29.280 | I also have looked at the economy

00:49:31.200 | and I have become convinced myself that there will be,

00:49:36.200 | I've said for a year or so, I expect,

00:49:39.160 | I don't know whether it's this year

00:49:40.440 | or sometime in the next year, couple of years, who knows?

00:49:43.360 | I expect us to be back again in recession.

00:49:46.280 | And I have become deeply appreciative

00:49:49.840 | of how the business cycle can be a tremendous value

00:49:53.780 | to somebody in their quest

00:49:56.960 | to acquire deeply discounted strong assets.

00:50:00.600 | I think there's a mistake.

00:50:02.000 | Most people associate the efficient market hypothesis

00:50:05.880 | with all markets.

00:50:07.020 | The idea is that the efficient market hypothesis,

00:50:09.320 | there are three forms of it,

00:50:10.840 | but the strongest form says,

00:50:12.400 | well, you just can't make any choices in the stock market,

00:50:15.880 | buying and choosing what stocks to buy or choose

00:50:18.440 | and expect to profit

00:50:19.440 | because you know when to buy and when to sell.

00:50:21.160 | - The future gain is already built in.

00:50:22.800 | - Right, exactly.

00:50:23.640 | Now, let's pretend that we grant that to be the fact.

00:50:26.800 | That doesn't apply to every market.

00:50:30.900 | Just because the stock market might be efficient

00:50:32.780 | doesn't mean that every market is efficient.

00:50:34.340 | - Sure, okay.

00:50:35.180 | - And so one of my big focuses

00:50:37.100 | is to seek to move from markets that are efficient

00:50:40.500 | where I have no competitive advantage,

00:50:42.080 | such as the broad-based stock market,

00:50:44.700 | to markets that are inefficient

00:50:46.020 | where I can find a competitive advantage with my investing.

00:50:49.300 | So for example, I've been preparing,

00:50:51.440 | if we go into recession,

00:50:52.480 | I expect the simple example of real estate

00:50:54.500 | to be substantially devalued

00:50:56.340 | through the course of that recession.

00:50:57.860 | And so if you wait till the back end of a recession,

00:51:00.020 | real estate is the deep discount.

00:51:01.640 | You can walk in, you can negotiate excellent deals,

00:51:03.820 | and you can buy things at good assets at good prices,

00:51:05.980 | simple things like that.

00:51:07.140 | And there are many alternatives for that as well.

00:51:09.100 | When I was a financial advisor,

00:51:11.020 | I had a number of business owners, clients,

00:51:13.060 | and I learned this through watching that, for example,

00:51:16.180 | one of my clients created fencing products.

00:51:18.860 | During the 2008 to 2012 economic turmoil,

00:51:23.860 | systematically, one by one,

00:51:25.540 | all of his competitors went out of business,

00:51:28.220 | and he bought them out for pennies on the dollar,

00:51:30.060 | and he now owns a huge, massive business.

00:51:32.720 | But it came because he had cash sitting ready

00:51:35.140 | to buy up his competitors when they were desperate to sell.

00:51:38.260 | - Interesting.

00:51:39.080 | So let's talk about the future for you.

00:51:41.220 | Do you have any future personal finance goals

00:51:44.340 | that you've set for yourself,

00:51:45.420 | and what's your plan to achieve them,

00:51:46.920 | maybe outside of the business, if you have them?

00:51:49.220 | - Yeah, I've got tons of them.

00:51:50.260 | I mean, I've got goals of,

00:51:53.420 | I wanna be careful with the things that I share,

00:51:55.100 | 'cause not all of my goals

00:51:56.060 | am I willing to talk about publicly.

00:51:58.300 | But I am working towards building financial independence,

00:52:01.440 | as defined by my ability to live and support my family

00:52:05.620 | without the need to be engaged in active employment.

00:52:09.100 | I am working on that,

00:52:11.700 | but it is not a primary motivator in this sense.

00:52:15.100 | There's nothing that I'm doing now.

00:52:17.980 | There are very, if I were today financially independent,

00:52:22.780 | I would continue doing the majority

00:52:24.580 | of the things that I'm doing.

00:52:26.060 | I have achieved a significant degree

00:52:29.940 | of financial independence,

00:52:32.020 | in the sense that I'm not beholden to anybody.

00:52:34.700 | Nobody has control over what I do or don't do,

00:52:37.540 | what I say or don't say.

00:52:39.260 | For me, one of the major definitions

00:52:41.340 | of financial independence is that 168 hours of your week

00:52:43.800 | are yours to say, do what you want to.

00:52:45.580 | And I've intentionally built a business

00:52:48.100 | that doesn't require me to account for those,

00:52:51.180 | to be accountable to anybody for those hours.

00:52:54.060 | So I've achieved most of the financial independence goals

00:52:57.220 | in terms of lifestyle goals that I want to do.

00:52:59.620 | But I don't have any interest in quitting working.

00:53:01.220 | I don't have any interest in retiring.

00:53:02.820 | I think it's a very bad idea.

00:53:04.140 | And so I'll continue to build in the business

00:53:06.100 | and the businesses.

00:53:07.380 | And I have very significant long range cultural goals,

00:53:11.860 | family goals, changes that I wish to see worked in the world

00:53:15.700 | that I will be pouring every dollar and ounce of energy

00:53:19.080 | and sweat into over the next decades of my life,

00:53:21.900 | if God gives me those decades,

00:53:23.480 | in order to see happen.

00:53:24.940 | - Give people a quick snapshot of what the business does

00:53:27.340 | and how you make money.

00:53:28.740 | - Yeah, it's a, come back in a year

00:53:30.620 | and I'll probably be prouder of the answer.

00:53:33.500 | So when I began it, I didn't begin radical personal finance

00:53:38.500 | with a solid business plan.

00:53:39.940 | And the reason that I didn't was because I had a hunch

00:53:44.140 | that there was a desire for significant types of information

00:53:49.140 | financial information in the marketplace,

00:53:51.780 | and that I could meet that need,

00:53:54.220 | but I wasn't sure about it.

00:53:55.620 | And so I had a goal to build a media business,

00:53:58.680 | but building a media business is about a solid

00:54:00.780 | of financial plan of saying,

00:54:01.900 | I'm gonna become a multimillionaire

00:54:03.840 | by becoming a bestselling author.

00:54:05.800 | Well, it can work.

00:54:07.640 | JK Rowling has become an incredibly wealthy woman

00:54:10.520 | because of her Harry Potter series.

00:54:12.960 | But just because it can work doesn't mean

00:54:14.840 | that there's a high probability of it working.

00:54:17.480 | And so when I started radical personal finance,

00:54:20.240 | I did so in this understanding.

00:54:22.080 | If I could build an audience

00:54:23.360 | and if I could build a platform,

00:54:24.720 | there were dozens and dozens of ways

00:54:26.180 | that I could earn a living from that.

00:54:28.400 | If I couldn't build an audience,

00:54:29.780 | I couldn't build a platform,

00:54:30.880 | and there was almost no way to earn a living from that.

00:54:33.720 | So when I closed my financial planning practice,

00:54:36.000 | I got a part-time job,

00:54:37.400 | which was sufficient to pay for my income.

00:54:39.280 | And I started creating the podcast.

00:54:40.640 | And you can go back and listen in the archives of the show,

00:54:43.000 | episodes 11 through the first couple hundred

00:54:45.320 | are all during that first year, and I made no money.

00:54:48.080 | After that point in time,

00:54:49.040 | the audience started to become substantial enough

00:54:51.280 | that I have started to work

00:54:53.340 | on a variety of different things.

00:54:55.000 | I tried to start a membership site.

00:54:56.880 | I had a bunch of people sign up for that,

00:54:58.880 | but then it didn't work for various reasons.

00:55:01.440 | I took on advertisers on the show.

00:55:03.560 | I had a bunch of people sign up for that.

00:55:05.680 | Some things were great, some things were not.

00:55:07.280 | I've done a bunch of things.

00:55:08.860 | The primary basis of the business is the podcast

00:55:11.160 | at this point in time.

00:55:12.360 | And so as a component of the podcast,

00:55:13.760 | I'll just tell you what we're doing going forward.

00:55:15.560 | My audience supports me through a tip model

00:55:17.440 | using a website called Patreon.

00:55:19.480 | It's basically, they say, "Hey, Joshua,

00:55:20.640 | we appreciate what you're doing,

00:55:21.560 | the hard work you do for us.

00:55:22.880 | We wanna send you some money for it."

00:55:24.480 | I am building a number of self-help financial products,

00:55:28.000 | trying to give people good, solid, practical answers

00:55:30.680 | to their questions that they will be willing to pay for.

00:55:33.360 | I'll be bringing on more advertisers

00:55:34.880 | and sponsors to the business,

00:55:36.500 | and then building it out with, you know, systematically,

00:55:39.680 | whether it's live events, other products and services.

00:55:42.760 | Once you have the audience, once you have a platform,

00:55:45.320 | there are dozens of ways to earn a living from it.

00:55:47.880 | And it's all based upon actually having the platform

00:55:49.880 | and having the audience.

00:55:51.640 | - Well, cool, man.

00:55:52.960 | Good explanation about the business.

00:55:54.900 | Congrats on all the success with that.

00:55:57.080 | Always ask entrepreneurs these questions of,

00:56:00.200 | what are you doing?

00:56:01.240 | Do you have any specific retirement accounts

00:56:03.800 | for entrepreneurs now that you've started on your own world?

00:56:07.440 | Well, I guess you sort of were before

00:56:08.560 | with your own practice,

00:56:09.400 | but have you done anything different there?

00:56:11.440 | And what do you do about health insurance?

00:56:14.020 | - Yeah, so with those two things,

00:56:16.200 | there's kind of two ways to that.

00:56:17.460 | There's number one, there's advice to entrepreneurs.

00:56:20.480 | The SEP IRA is powerful.

00:56:22.000 | The Solo 401(k) is incredibly powerful.

00:56:24.800 | If an entrepreneur wants to participate in a 401(k),

00:56:28.400 | you can set up a Solo 401(k)

00:56:30.640 | and you do the right paperwork in the right way.

00:56:32.640 | I mean, we can set that thing up.

00:56:34.320 | You can put 50 grand a year in there, and it's fantastic.

00:56:36.760 | And you can do all kinds of interesting things within that.

00:56:40.080 | You can do a self-directed Solo 401(k),

00:56:42.560 | and you can invest in all kinds of interesting investments.

00:56:46.020 | So that's some of the stuff we talk about

00:56:48.020 | in Radical Personal Finance for entrepreneurs.

00:56:50.740 | For me, however, at this point in time,

00:56:52.860 | I'm not making any contributions to retirement accounts,

00:56:55.540 | and I'm not particularly keen on doing so.

00:56:57.720 | I haven't decided that I am not ever going to participate

00:57:02.720 | in retirement accounts,

00:57:05.620 | but neither is it a priority for me.

00:57:09.460 | After spending, I would say,

00:57:11.600 | from the time I was 18

00:57:13.640 | through probably the last couple of years,

00:57:16.660 | which is called 2006,

00:57:18.060 | when I was starting to really gain an appreciation

00:57:21.180 | for alternative forms of investing,

00:57:24.660 | having come from the world of IRAs and 401(k)s,

00:57:28.340 | and now being in the world that I'm in now,

00:57:31.280 | I am far less keen on the use of tax-qualified accounts

00:57:34.540 | as a valuable tool on the way to financial independence.

00:57:39.780 | And I'm far more keen on the flexibility

00:57:42.880 | that one can have when not participating in those schemes

00:57:47.040 | and the diverse types of investments

00:57:50.080 | that people can make of all manner of things.

00:57:53.040 | So at this point in time,

00:57:54.380 | I'm not participating in any 401, any retirement accounts,

00:57:57.640 | and I'm not particularly keen on returning to that.

00:58:00.320 | And just one comment

00:58:01.640 | that your listeners might find interesting,

00:58:04.100 | I have often felt like the black sheep.

00:58:06.400 | I'm the pariah of the, you know,

00:58:07.880 | here I am, you know, financial planner, blah, blah, blah.

00:58:11.080 | And I hold this opinion,

00:58:12.240 | and this very low opinion of retirement accounts.

00:58:16.120 | I was speaking with a prominent public financial planner,

00:58:21.120 | active financial planner,

00:58:22.500 | also active financial planning guru

00:58:24.680 | in the world of professional financial advice.

00:58:26.760 | And I was sharing with him my opinion.

00:58:29.360 | And he said to me this, he said,

00:58:30.360 | "Joshua, I haven't put money

00:58:31.880 | in my retirement accounts in 10 years."

00:58:33.920 | He said, "I have got so many other business opportunities

00:58:36.680 | that are so far more exciting to me."

00:58:38.880 | He said, "I haven't funded my accounts in 10 years."

00:58:40.920 | And I realized that, okay, I'm not the only one.

00:58:45.040 | Retirement accounts have their place,

00:58:47.660 | but I think people have made it

00:58:49.940 | more of an unfounded ideological

00:58:52.760 | or just an unfounded kind of emotional commitment

00:58:56.600 | rather than truly assessing them

00:58:58.680 | and their benefits and drawbacks objectively.

00:59:01.760 | - So with your particular business,

00:59:03.560 | have you invested funds to this point already?

00:59:07.840 | - Yeah, I mean, I got a microphone here.

00:59:10.800 | (laughing)

00:59:12.320 | I got a computer.

00:59:13.520 | - I guess what are the significant investments, I guess?

00:59:16.640 | - Well, I would say the most significant investment

00:59:18.280 | is the opportunity cost.

00:59:19.580 | That's always what it is with business.

00:59:20.840 | I walked away from an extremely lucrative business.

00:59:23.480 | I walked away from a very established business.

00:59:26.400 | I walked away from hundreds of thousands of dollars

00:59:29.480 | in my pension plans.

00:59:30.980 | I walked away from thousands of dollars per month

00:59:33.840 | of renewal and residual income.

00:59:35.520 | I walked away from a huge amount of money to do it.

00:59:38.660 | So the biggest cost to me was that,

00:59:42.400 | was what I gave up by closing my financial planning firm

00:59:44.880 | in order to start this business.

00:59:46.520 | I'd do it over again in an instant,

00:59:48.160 | but that was a tremendous financial cost.

00:59:51.540 | I chose a business that did not require tremendous capital,

00:59:55.440 | financial capital to work in.

00:59:58.120 | And I think this is one of the most important things

01:00:00.520 | with giving good advice.

01:00:02.020 | You should always seek to play in a market

01:00:05.000 | where you can be dominant based upon your assets,

01:00:08.020 | your attributes, and your skills.

01:00:09.400 | Here'd be two examples.

01:00:11.200 | I don't have millions of dollars,

01:00:12.680 | so I'm not gonna go out and try to develop strip malls

01:00:16.120 | or do new real estate development work.

01:00:19.580 | But I do have years and years and years of study

01:00:23.640 | and of experience in financial planning.

01:00:25.840 | And so I chose to go into this world,

01:00:27.680 | the world of financial media,

01:00:29.320 | because I have a high competitive advantage

01:00:31.320 | that gives me a significant advantage

01:00:33.420 | over many of my competitors.

01:00:35.040 | And I didn't need a lot of money to play in this space.

01:00:39.360 | I needed a microphone and internet connection, et cetera.

01:00:41.920 | The expenses of my business are very low.

01:00:44.080 | So this was, as I have analyzed my own situation,

01:00:47.440 | the ideal form of investment for me.

01:00:49.640 | Now, as my assets grow and my time becomes more valuable,

01:00:52.720 | I'll move into other areas

01:00:54.680 | where my assets give me a competitive advantage.

01:00:58.420 | If you have millions of dollars,

01:01:00.160 | don't go and play in the same sandbox

01:01:02.480 | where people with $5,000 can compete with you.

01:01:05.960 | Go and compete in a market

01:01:07.320 | where you have many fewer competitors

01:01:09.400 | and where you do have a competitive advantage.

01:01:11.800 | Important investment principle.

01:01:13.040 | And so I'm putting my money where my mouth is

01:01:15.040 | and following my own teaching

01:01:17.120 | with regard to how I invest at this point in time.

01:01:19.000 | - Gotcha.

01:01:19.840 | Does your wife work?

01:01:20.680 | - Yeah.

01:01:21.500 | (laughing)

01:01:22.600 | We've got two kids, man.

01:01:24.120 | (laughing)

01:01:24.960 | - Ah, okay.

01:01:25.800 | - I've got two kids and a third on the way.

01:01:27.160 | - Fair enough, fair enough.

01:01:28.280 | - Does she create an income?

01:01:29.700 | - So I'm intentionally calling you out on it

01:01:31.560 | because you have hit a very sore point for me.

01:01:34.520 | I have a deep ax to grind with society

01:01:38.400 | and how we have trained an entire generation of people,

01:01:42.200 | especially a generation of women,

01:01:44.120 | to measure themselves based upon their financial earnings.

01:01:48.760 | And I'm sorry, but you and I are more than a paycheck.

01:01:51.320 | My value and my worth is not dictated

01:01:55.140 | by how much money I earn.

01:01:56.680 | And my wife's value and her worth

01:01:58.720 | is not dictated by how much money she earns.

01:02:01.200 | So I have a deep ax to grind

01:02:02.680 | because we despise the roles of mothers and fathers

01:02:06.100 | in our society.

01:02:07.200 | And we try to teach people that somehow you should play

01:02:09.000 | on this economic playing field,

01:02:10.720 | that somehow the work that she does in our home

01:02:13.120 | with our two children is less valuable

01:02:16.280 | than her going and earning some random paycheck

01:02:18.900 | by helping make a corporation richer.

01:02:21.520 | So I intentionally caused you an awkward moment there.

01:02:24.840 | - No, I appreciate it.

01:02:25.680 | And I'm old and bored fully.

01:02:28.320 | - So the answer is my wife does not bring in

01:02:31.080 | active earned income to our household.

01:02:33.400 | - Okay, so back to the health insurance then thing.

01:02:35.960 | So how do you guys do the health insurance?

01:02:38.000 | - I participate in a healthcare sharing program

01:02:40.940 | called Samaritan Ministries, which is fantastic.

01:02:43.840 | I used to sell health insurance.

01:02:44.960 | And I'm actually, when we hang up this interview,

01:02:47.120 | I'm about to do the fifth in a series

01:02:49.620 | that I've done on my show for health insurance.

01:02:51.440 | And I'll be talking about healthcare sharing ministries.

01:02:53.880 | But I used to sell health insurance.

01:02:55.560 | And after the passage of the Affordable Care Act,

01:02:57.840 | the health insurance marketplace

01:02:59.400 | was just absolutely destroyed by the Affordable Care Act.

01:03:03.000 | Now, some people were happy, some people were unhappy.

01:03:05.880 | It opened up insurance at cheap costs,

01:03:08.360 | much cheaper costs to many millions of people,

01:03:10.880 | but it also changed the pricing of the market.

01:03:13.700 | And so when that happened,

01:03:16.060 | I got out of the health insurance marketplace.

01:03:18.200 | And we participate in healthcare sharing ministry.

01:03:21.560 | So it works, we don't have health insurance.

01:03:23.460 | It's a voluntary organization

01:03:25.100 | that is exclusively available to Christians.

01:03:27.760 | You basically have to affirm to a statement of faith

01:03:29.800 | and certain lifestyle practices.

01:03:31.540 | But then the people who are involved in this organization

01:03:34.480 | choose voluntarily to share in one another's health costs.

01:03:38.160 | So if my wife and I incur doctor bills, we submit that.

01:03:41.320 | It's published to other members,

01:03:42.640 | and the other members send us checks to pay for that.

01:03:44.920 | So right now, we're expecting another baby.

01:03:47.480 | And the midwife bill is basically five grand,

01:03:51.280 | or $5,500.

01:03:53.700 | So I have right here on my desk the notice of publishing.

01:03:57.440 | So that's been published into the network.

01:04:00.080 | And starting next month, we'll start getting checks

01:04:02.900 | from all of our fellow members,

01:04:04.380 | totaling up to the cost of the midwife bills

01:04:07.500 | for our forthcoming baby.

01:04:09.580 | - Very cool, very cool.

01:04:10.660 | Familiar with it, but we'll link to it in the show notes

01:04:13.640 | for people to find out more about that program.

01:04:15.780 | We use MediShare ourselves.

01:04:17.060 | So we've talked about it a few times as well.

01:04:19.820 | Well, very cool, man.

01:04:20.660 | Last question for you.

01:04:21.960 | Since that moment in your life

01:04:23.120 | when you decided to become a master of your money,

01:04:25.480 | the ups and downs, the positives, the negatives,

01:04:28.360 | how do you feel about it all now?

01:04:30.800 | - Here's what I've learned.

01:04:32.440 | I used to think that if I just had money figured out,

01:04:37.440 | all of my problems would be figured out.

01:04:39.960 | Now, for those listeners who are younger,

01:04:42.200 | they'll probably relate to that.

01:04:43.560 | For those listeners who are older,

01:04:44.800 | they'll probably think, well, that was naive.

01:04:47.080 | And I wholeheartedly admit that that was naive.

01:04:49.960 | But I always thought, well,

01:04:51.260 | if I just reach the next financial goal,

01:04:53.160 | then everything will be better.

01:04:54.480 | I remember so deeply when I was working crazy

01:04:57.140 | to get out of debt.

01:04:58.080 | I was so committed to get out of debt goal.

01:05:00.280 | And then I got out of debt and I was lost.

01:05:02.840 | And I was like, well, what now?

01:05:04.520 | I've since learned that's a common experience.

01:05:06.520 | It's a common experience,

01:05:07.360 | not only for people achieving financial goals,

01:05:09.540 | but it's also a common experience

01:05:11.440 | for people achieving any kind of goal.

01:05:13.520 | Well, okay, what now?

01:05:14.520 | I've lost that sense of purpose that I was working towards.

01:05:17.800 | So I used to think that if I just figured out my money,

01:05:21.240 | to use your nomenclature,

01:05:22.360 | if I just became a master of my money,

01:05:23.920 | my life would be great.

01:05:25.560 | I've since realized that that is a total bogus.

01:05:27.840 | It's totally false concept.

01:05:29.920 | You can have a great life with very little money.

01:05:34.200 | Money will exaggerate some problems

01:05:36.520 | and don't minimize other problems.

01:05:38.600 | I don't believe that,

01:05:40.040 | although I'm thoroughly in favor

01:05:41.840 | of excellent money management,

01:05:43.600 | I'm thoroughly in favor of building wealth,

01:05:45.800 | I'm thoroughly in favor of these things.

01:05:47.720 | You can't look to them to do something

01:05:49.240 | that they're not gonna do.

01:05:50.640 | And so I remember reading that Ross Perot,

01:05:53.320 | he was asked one time if he was happy,

01:05:55.400 | as a multi-billionaire.

01:05:57.000 | And he said, yeah, I'm happy.

01:05:58.560 | He said, but I'm no happier than I was

01:06:01.640 | when my wife and I were,

01:06:03.320 | when I was in the army,

01:06:04.160 | my wife and I were living in this little tiny

01:06:05.800 | officer's quarters on the army base.

01:06:08.640 | And I think back to that.

01:06:09.920 | And my wife and I, we sold it a year ago,

01:06:12.920 | but we had a big fancy house,

01:06:14.560 | three bedroom, two bath house,

01:06:15.920 | fancy neighborhood, et cetera.

01:06:17.800 | That's a goal that many people wanna have.

01:06:19.640 | Now, was I happy when I had that big house?

01:06:21.720 | Sure, it was nice.

01:06:23.320 | But you know what?

01:06:24.160 | For the first year of our marriage,

01:06:25.000 | we lived in a 234 square foot studio apartment

01:06:28.400 | that we paid $500 a month for

01:06:30.400 | in downtown West Palm Beach.

01:06:31.960 | And we loved it.

01:06:33.520 | I have since disconnected any expectation

01:06:37.760 | of things like happiness or satisfaction

01:06:40.360 | or fulfillment from finances

01:06:43.360 | and from financial management.

01:06:45.560 | There are many reasons,

01:06:46.680 | important reasons to focus on your money.

01:06:49.840 | And it's important to lower stress to achieve security.

01:06:52.640 | Financial security does bring an additional level

01:06:55.280 | of happiness to a family.

01:06:57.200 | My wife, if we have lots of money and savings

01:06:59.480 | and we're not overspending our income,

01:07:01.320 | my wife's stress level is significantly reduced.

01:07:04.200 | It brings her a sense of financial security.

01:07:05.840 | That has an overwhelming positive effect in our family.

01:07:09.280 | So I don't wanna minimize it too much.

01:07:11.040 | But I do just wanna recognize that don't look to money

01:07:14.080 | and think that if I only have, I'm gonna be better.

01:07:18.880 | The reality is you're gonna be the same person,

01:07:20.480 | whether you're rich or whether you're poor.

01:07:21.800 | You're gonna be the same person

01:07:22.640 | whether you're experiencing great success or not.

01:07:24.760 | You're gonna be the same person.

01:07:26.160 | - I like it.

01:07:27.040 | Good advice, good way to end the show, man.

01:07:28.840 | Thanks so much for being on.

01:07:30.320 | Where can folks find out more about you

01:07:32.120 | and all that you have happening?

01:07:34.360 | - Best way, if you wanna listen to the show,

01:07:35.640 | just search the App Store on your phone

01:07:36.960 | or any podcast app directly that you have.

01:07:39.800 | Search for Radical Personal Finance.

01:07:41.200 | Of course, the website is at radicalpersonalfinance.com.

01:07:43.680 | But the tagline of my show is living a rich life now

01:07:46.800 | while building a plan for financial freedom

01:07:48.680 | in 10 years or less.

01:07:49.880 | Both of those things are important.

01:07:51.320 | Living a rich life now in every sense of the word

01:07:54.680 | while also building a plan for financial freedom.

01:07:57.480 | And so we'd pursue those things.

01:07:59.120 | My show comes out probably four times a week

01:08:01.280 | at this point in time.

01:08:02.120 | It's kinda quasi daily, but four times a week.

01:08:05.160 | And I try to keep the content extremely diverse.

01:08:07.360 | So one day we talk about

01:08:08.680 | some simple personal finance thing.

01:08:11.020 | The next day we talk about some complex discussion

01:08:13.780 | of financial planning.

01:08:15.560 | The next day we talk about some aspect of lifestyle.

01:08:18.360 | We do various interviews.

01:08:19.440 | I try to keep the show extremely diverse.

01:08:20.940 | So that would be the best way to check me out.

01:08:22.820 | - I love it and I highly recommend it.

01:08:24.200 | Your show is one of my favorites.

01:08:25.800 | And I'm a listener, and so I'm so thankful

01:08:28.560 | to be able to chat with you in this regard as well.

01:08:30.600 | So good luck, man, and thanks again for being on the show.

01:08:33.840 | - Thank you, PT.

01:08:35.520 | (upbeat music)

01:08:36.360 | - Hope you enjoyed that.

01:08:37.200 | A big thank you to Joshua for giving us the gold today.

01:08:39.840 | Show notes including links to everything we talked about

01:08:42.400 | can be found at PTMoney.com/radical.

01:08:46.240 | Thanks for listening.

01:08:47.240 | Enjoying the podcast so far?

01:08:48.680 | If you'd like to support the show,

01:08:49.560 | the number one thing you can do is to subscribe in iTunes

01:08:52.280 | or your favorite podcast app.

01:08:54.280 | I wanna improve the show, so please leave a rating.

01:08:56.720 | Tell me what you like and how I can improve.

01:08:58.920 | Have a question?

01:08:59.960 | I'm available by email at PT@ptmoney.com

01:09:03.440 | or on Twitter @ptmoney.

01:09:05.680 | I'll be back next week.

01:09:07.000 | This show is part of the FinCon Podcast Network

01:09:09.280 | and was produced by Steve Stewart.

01:09:10.920 | (upbeat music)

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