RPF-0011

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00:00:32.000 | Radical Personal Finance, Episode 11.

00:00:37.000 | [Music]

00:00:53.000 | Welcome to the Radical Personal Finance Podcast, your daily finance adventure. I'm your host,

00:01:00.000 | Joshua Fiennes. Today is July 1, 2014, and today's show, even though it's Episode 11,

00:01:07.000 | today's show is actually going to be the new first episode of the show. So stick with us

00:01:12.000 | to find out what is the Radical Personal Finance Podcast and how can we serve you today.

00:01:17.000 | [Music]

00:01:30.000 | Thank you for being with us again. I am thrilled to have you here with us, and I am excited

00:01:36.000 | to be back in front of a microphone. Well, excuse me. That's not true. I'm not back in

00:01:42.000 | front of a microphone. I'm in front of an actual microphone for the first time. If you

00:01:46.500 | go back and you listen to the first 10 episodes that I recorded of the Radical Personal Finance

00:01:52.000 | Podcast, you will quickly realize, at least I hope, if everything is working correctly

00:01:56.000 | and all this equipment is working correctly, you'll quickly realize that the audio is a

00:02:00.000 | little bit better now because I actually have a microphone. For the first 10 shows, which

00:02:05.000 | were pretty much kind of a trial run to see if I could do this whole podcast thing, I

00:02:12.000 | was using a $10 MP3 recorder held in my hand, and I was trying to lay down a comforter on

00:02:21.000 | the table in front of me to kind of minimize the amount of echo in the room to try to make

00:02:28.500 | the audio a little bit better. And then with the Skype recordings, I was recording Skype

00:02:32.500 | with just the built-in microphone of my laptop on the desk. So I think there's some really

00:02:38.500 | great information there. I hope you go listen. But please make allowance for the poor audio

00:02:48.000 | quality. You have to look past the audio and listen to the content. And this show, I'm

00:02:55.000 | sure the audio is not perfect, but I'm excited. And I will improve it in the future, but hopefully

00:02:59.000 | it's, in my opinion, it's a world better. So we'll see if you agree.

00:03:03.000 | Today's show, the new Radical Personal Finance podcast, "What is it? Why should you care?

00:03:09.500 | Why are we here?" So today, we're going to explain all the details of the show. I'm going

00:03:14.500 | to explain who I am, what I'm doing, and I hope that you will follow along for the ride.

00:03:22.000 | It's been a year since I recorded those first 10 episodes. The first episode was recorded

00:03:27.500 | in July of 2013. I didn't actually intend for it to be a year. I intended it to be -- well,

00:03:33.500 | I intended to be plugging along in July of 2013, August of 2013, et cetera. But here

00:03:41.000 | we are a year later. And today, all will be clear. And as far as the difference between

00:03:46.500 | them and the difference between then and now. So first, let me introduce myself to you.

00:03:51.000 | In case you don't know, my name is Joshua Sheets. I live here in Palm Beach Gardens,

00:03:56.000 | Florida, which is right next to West Palm Beach, Florida. And I am actually a former

00:04:00.000 | financial advisor. And the former financial advisor is the key bit of data that you need

00:04:04.000 | to understand the year of -- the year without shows. Now, those shows weren't really released

00:04:13.000 | publicly, but I did share them with a few of you guys in the past. And so that's the

00:04:18.000 | reason for the year of no shows. A little bit about my background. Then I'm going to

00:04:22.000 | talk about the show and what is going to make this show different. So the design of the

00:04:27.000 | Radical Personal Finance podcast is going to be important. And I think my background

00:04:32.000 | is going to be important. I won't start with the "I was born at such and such a date at

00:04:36.000 | such and such a place." Although I was born 29 and some years ago here in West Palm Beach,

00:04:40.000 | Florida, in case you care. But the key aspect for the show, obviously, is the connection

00:04:46.000 | to finance. So I am a finance -- personal finance junkie and have been for a very long

00:04:54.000 | time. When I was in high school, all the way back to the time when I was 13 years old probably

00:04:59.000 | and I should have been out playing football with my friends and getting some exercise,

00:05:03.000 | I was sitting in the house reading books on investments and finance because I had always

00:05:07.000 | been fascinated by it and always wanted to be rich, always thought that was just cool

00:05:12.000 | and always thought that money and economics was really interesting. And thankfully I didn't

00:05:17.000 | lose that love of money and economics in the school system and I just have always enjoyed

00:05:21.000 | that. My favorite section in the bookstore at Barnes & Noble was always the personal

00:05:25.000 | finance section and my favorite section of the library was always the personal finance

00:05:29.000 | section of the library. So I was the nerd that was sitting around reading, I don't know,

00:05:35.000 | Ben Graham's securities analysis when I should have been out playing. That was over my head.

00:05:40.000 | But I did get it because I said, well, good enough for Warren Buffett is good enough for

00:05:43.000 | me. And I tried to read it. Never applied enough of it to my life as much as I could

00:05:48.000 | have and should have. But I did enjoy that stuff. And so over the years I read every

00:05:53.000 | bit of finance literature that I could get my hands on. I would subscribe to personal

00:05:57.000 | finance magazines, would listen to personal finance or the finance radio shows, would

00:06:02.000 | read every book I could get, subscribe to various newsletters, spent way too much money

00:06:06.000 | on personal finance programs, audio programs and how to get rich plans and had business

00:06:14.000 | ideas and all kinds of things that I was pursuing. And all of these things, in my opinion, were

00:06:19.000 | really good and really helped shape who I am.

00:06:23.000 | After college, probably the important parts for at least this show without going through

00:06:27.000 | a whole biography of my life, the important parts of this show were after college I was

00:06:35.000 | in college. I spent some time working for a corporate company. And I worked in the marketing

00:06:41.000 | and brand management consulting business for a company here in Palm Beach Gardens, Florida.

00:06:44.000 | And really enjoyed it to some extent. And this was kind of the cushy -- my degree in

00:06:50.000 | college was in international business. And this was kind of the cushy corporate job that

00:06:55.000 | I had always dreamed of. When I started college I wanted to be a Fortune 500 CEO and work

00:07:00.000 | in the corporate world. And this was a good start for me.

00:07:02.000 | But I learned over the course of a year or so that I wasn't a big fan of the corporate

00:07:07.000 | world and the cubicle and the 9 to 5 and kind of all of that stuff. But I was working at

00:07:12.000 | it. And this was -- let's see. So this would go back to 2008 that I was at that point in

00:07:17.000 | time. But I knew quickly that it wasn't going to be the long-term fit for me. I knew quickly

00:07:22.000 | that it wasn't going to be my career dreams and my career goals.

00:07:27.000 | So I was making plans to somewhere around to work at the company I was working at through

00:07:32.000 | the end of 2008 and then in 2009 to leave and to go on to something else. And so I was

00:07:40.000 | working on kind of what that something else was. But I got surprised in June of 2008.

00:07:45.000 | And I got surprised by being laid off. And at that point I was young and brash. And I'm

00:07:51.000 | still pretty young and probably still too brash. But I had the opinion that getting

00:07:56.000 | laid off was something that you did if you were bad at your job. And I didn't think I

00:08:00.000 | was bad at my job. I thought it was good at my job. I had just gotten a very nice pay

00:08:04.000 | raise a couple months earlier. And I had just gotten -- I was involved in some projects.

00:08:10.000 | And I was getting good feedback. And my performance reviews and all that were good. But the company

00:08:15.000 | that I worked with made a management decision to adjust their, I guess, employee structure.

00:08:21.000 | And they eliminated my job position, laid me off and everyone else who was in my job

00:08:25.000 | group. And was pretty surprised by that. Caught me pretty flat-footed. And I learned something

00:08:34.000 | through that. I definitely learned that you don't only get laid off. And I kind of corrected

00:08:38.000 | that theory. You don't only get laid off if you're bad at your job. There are lots of

00:08:41.000 | reasons for layoffs. Which is a good reason for a plan B.

00:08:44.000 | So thankfully I had done a pretty good job with my own financial planning through circumstances

00:08:47.000 | that I'm sure I'll share in the future. But at that time I was completely debt-free. I

00:08:53.000 | had paid off -- I had worked really hard. I had saved money. I had paid off all of my

00:08:56.000 | credit cards. Paid off all of my student loans. And I had saved my emergency fund. And again,

00:09:01.000 | I always paid attention to the books that I read. I was the nerd who on my 18th birthday

00:09:05.000 | I remember sitting at my parents' kitchen table. And I applied for my first two credit

00:09:10.000 | cards to start building my credit score. And I opened my Roth IRA. And at that point in

00:09:14.000 | time, I think -- yeah, it was USAA that I was banking with. And USAA was offering a

00:09:20.000 | new program for young adults that they could waive the minimum amount requirements for

00:09:26.000 | a mutual fund. And so I started buying shares of a mutual fund. And I should have done it

00:09:30.000 | before that. But whatever. I waited until I was 18. But I just have that distinct memory.

00:09:35.000 | So by the time I got laid off, I had done good financial planning. I had my emergency

00:09:39.000 | fund. So I was in pretty good shape. I was probably a little bit ungrateful at the interview.

00:09:48.000 | I guess I was nervous and taken aback by the whole thing. And I just said, "Oh, great.

00:09:53.000 | I'm laid off. Awesome. How big is the severance?" I made a really crass joke that I probably

00:09:59.000 | shouldn't have. But anyway, it all worked out. So at that point in time, here I was

00:10:04.000 | fresh out of college and ready to try to figure out what on earth do I want to do. And I had

00:10:10.000 | a whole long list of business ideas and different aspects of a business that I thought would

00:10:15.000 | be neat. And I had different things that I wanted to do, different things that I had

00:10:18.000 | thought about doing. But I wasn't exactly sure what the winning idea was going to be.

00:10:23.000 | So a couple weeks after being laid off, I was having lunch with my former boss. And

00:10:27.000 | he was very kind and was helping me out. And said, "If I can give you any career advice

00:10:32.000 | or information about what you'd like to do and help you out with any connections." Again,

00:10:39.000 | just kind of helping me out any way that he could. So I laid out for him kind of what

00:10:44.000 | I wanted in a business. I didn't want to be paid for my time. I wanted to be paid for

00:10:48.000 | my results. I didn't want to work for a corporate world where I had to put in a certain number

00:10:52.000 | of hours. I wanted to run my own business. I wanted to build ongoing equity over time

00:10:55.000 | instead of just receiving a straight paycheck. And there are a couple of things. I wanted

00:10:58.000 | to be able to work from anywhere. So at the end of my list, he said, "It sounds a lot

00:11:04.000 | like a career in financial services. Have you ever considered about working in financial

00:11:09.000 | services?" At that point in time, I was very opinionated. Again, brash young man saying,

00:11:15.000 | "Nah." And my opinion was, after all of the reading that I had done, financial advisors

00:11:21.000 | are out to -- brokers are out to make you a broker. And insurance is a scam and a waste

00:11:25.000 | of money. It just makes the insurance agent rich. And I could do better on my own. I was

00:11:29.000 | always a do-it-yourself investor. And I can figure it out on my own. And so he said, "Listen,

00:11:33.000 | that may be true, but you ought to at least consider it." His son had actually interned

00:11:37.000 | in the financial services business and had a good experience. And so he said, "I'm a

00:11:42.000 | client" -- he was a client actually at that time of a company called Northwestern Mutual,

00:11:46.000 | which is an old, traditionally life insurance company out of Milwaukee, Wisconsin. And he

00:11:51.000 | said, "Go look at Northwestern Mutual." And he was a client of theirs. And so he gave

00:11:55.000 | me a referral to his financial advisor. And his financial advisor was a person who his

00:12:00.000 | son had actually interned with in years past. So I went and said, "Fine." I didn't expect

00:12:06.000 | anything to come of it. But went and interviewed with the financial advisor. And probably one

00:12:12.000 | of the more difficult interviews that -- recruiting interviews that the advisor had ever conducted.

00:12:21.000 | But I had tons of questions and very strongly unsure about my opinions and beliefs. But

00:12:29.000 | I liked him. And I liked the aspect. I liked the financial planning atmosphere that he

00:12:34.000 | created. And I just really liked it. And so it kind of opened my eyes. And I said, "I

00:12:38.000 | wonder if I could achieve my goals in working in the financial services business." So I

00:12:44.000 | started interviewing, started researching, interviewed at a couple different companies,

00:12:47.000 | researched various compensation programs, looked at the wire houses, looked at local

00:12:51.000 | small advisors, looked at insurance companies kind of across the basis, and kind of laid

00:12:56.000 | out my goals as far as what I wanted in a financial planning practice. After all of

00:13:01.000 | that, I wound up back at Northwestern Mutual and opened a practice there. And this would

00:13:06.000 | have been 2008. About fall of 2008. And started my practice. And I started primarily working

00:13:16.000 | with insurance products. That's the simplest way to get started in financial services.

00:13:23.000 | And I'll explain. At some point in time, I'll share some thoughts that I have as far as

00:13:29.000 | different models for succeeding as a financial services professional for anybody else that's

00:13:33.000 | interested. And I hope that it will help people who are researching the business. I would

00:13:37.000 | have liked to have had more information at that time when I was researching the business.

00:13:40.000 | I'll share the thoughts and the ideas that I have on that at some point in the future.

00:13:45.000 | But for now, I started with insurance. Life insurance, disability income insurance, long-term

00:13:49.000 | insurance, and health insurance. And then as I was able to get my licenses squared away

00:13:54.000 | and grow in ability, I started working with the investment business and became primarily

00:14:00.000 | really built into having a goal with being an investment advisor. And I enjoyed the technical

00:14:08.000 | aspects of financial planning. So I tried to focus my practice on working a lot with

00:14:13.000 | business owners and with retirees because I enjoyed all of the complex technical aspects

00:14:17.000 | of financial planning that those types of clients can present.

00:14:21.000 | And over the years as I've watched it, I learned a lot. I learned a lot about financial

00:14:29.000 | planning. And I learned a lot that there are many aspects to the advice that's needed.

00:14:34.000 | And there's good technical advice that's needed. And then there's good behavioral

00:14:38.000 | advice that's needed. And many times, one of the problems that financial advisors face

00:14:45.000 | and that clients face is that sometimes they're looking for a technical solution when in reality

00:14:49.000 | what's needed is not a technical solution but a -- what's the term for it? Maybe an

00:14:56.000 | imaginative solution or a psychological solution.

00:14:59.000 | I always compare financial planning to dieting. Dieters don't fail for lack of adequate diet

00:15:05.000 | plan. And people don't fail with their finances for lack of an adequate financial suggestions.

00:15:11.000 | They fail for other reasons that go beyond whether or not the diet works or whether the

00:15:15.000 | financial planner works. And I've always been a consumer of financial media. I always have

00:15:21.000 | enjoyed financial blogs. I always have enjoyed financial radio shows and books. And I always

00:15:27.000 | enjoyed reading as many personal finance books as possible.

00:15:31.000 | And I just -- over the years I've noticed a disconnect. And there's a disconnect between

00:15:36.000 | the personal finance side and then the professional finance side. And I don't -- I never understood

00:15:43.000 | why there should be a disconnect. But the experiences that I had was that a lot of times

00:15:47.000 | many of the personal finance pundits were not coming from the professional side of having

00:15:52.000 | worked with clients. And many of the professional side just had this air of superiority in some

00:15:59.000 | ways that is almost like the technical solution is going to solve everything.

00:16:04.000 | And I've seen them both as incredibly important. So I thought, well, with my background, why

00:16:10.000 | don't I start a show? And I thought -- I tried writing various articles and things. But writing

00:16:16.000 | has always come -- it's been difficult for me. And I can talk for a long time, as you'll

00:16:21.000 | find out. Hopefully it's interesting talk. But I can talk much more easily than writing.

00:16:26.000 | So I said I'll create a podcast. So I started creating a podcast. And I recorded the ten

00:16:32.000 | episodes, which I'm now releasing publicly, recorded those ten episodes with a goal of

00:16:38.000 | using it as a -- using it as a test bed to be able to release them publicly. And really

00:16:46.000 | enjoyed it. And was -- was not -- was not able to publish them. And market them extensively

00:16:55.000 | because I was in the business. But using it as kind of a test platform. So then I started

00:17:00.000 | working through the ropes of getting them approved by my company and all of that.

00:17:07.000 | Basically, long story short, we weren't able -- wasn't able to get it done. The problem,

00:17:12.000 | one of the reasons -- and you may not be aware of it. But one of the reasons why you won't

00:17:18.000 | hear many professional financial advisors publicly in the media is that any time a financial

00:17:24.000 | advisor makes a public appearance -- and there are exceptions to this. But generally, the

00:17:28.000 | general rule is that if you see an article written by someone who is a practicing advisor,

00:17:33.000 | that this person has a team of attorneys that have probably read through it to make sure

00:17:37.000 | that it's okay. And different companies will allow different things. But it ranges from

00:17:43.000 | companies. And especially if you work at a broker-dealer, you have a lot of challenges.

00:17:48.000 | Because the laws are fairly stringent. And there's a lot of liability for the broker-dealer.

00:17:53.000 | And rightly so. The broker-dealer generally is slow to approve outward-facing media content.

00:18:01.000 | And this is right. If I were running a broker-dealer, you have a responsibility to your owners,

00:18:07.000 | whether it's your stockholders or your shareholders or whoever owns the company. You have a responsibility.

00:18:13.000 | And that is right and that is proper. But it's challenging for the individual advisor.

00:18:17.000 | So I always just had these frustrations about I see the good that the financial blogger

00:18:22.000 | world or the financial pundit world brings. And I also see the good of where the financial

00:18:27.000 | advisor world brings in. And I think that they should be working together. And I really

00:18:32.000 | want to bridge that gap. Because it's a win-win-win. The best educated customer -- excuse me.

00:18:41.000 | My best clients when I was a financial advisor were always the clients that had the most

00:18:46.000 | financial knowledge and were the most financially literate. That was who I felt was my best

00:18:54.000 | client. And it was a lot easier to work with someone who was extremely financially literate

00:18:58.000 | than to work with somebody who didn't have a high degree of financial literacy.

00:19:03.000 | And so I want to create. I want to help bridge that gap.

00:19:07.000 | So my show -- a little bit of my philosophy. As I've watched for the last six years of

00:19:15.000 | working as a professional advisor and still consuming financial media, I have learned

00:19:20.000 | from a lot of my mistakes years ago. And I hope I continue to learn from my mistakes.

00:19:24.000 | But one of the things that I have learned is that there is actually very little that

00:19:30.000 | is right or wrong in financial planning. And what's right or wrong has much more to do

00:19:36.000 | with an individual situation with one's perspective than some kind of existential,

00:19:41.000 | eternal, perfect financial planning truth.

00:19:46.000 | I think of the maxim of the blind men trying to describe an elephant.

00:19:55.000 | I'm sure you're familiar with it. But there's three blind men that are all standing by an

00:20:00.000 | elephant trying to describe it. And one of them says, "It's like a snake. Thick and like

00:20:05.000 | a snake." And the next person says, "It's like a trunk of a tree. It's tall and thick

00:20:11.000 | and strong. And it feels like a tree trunk." And the third says, "No, it's like a rope.

00:20:16.000 | A rope that's fraying." And you look back and you say, "Well, there are three standing

00:20:21.000 | at different places on the elephant. The one is at the front touching the trunk. The other

00:20:26.000 | is at the leg touching the leg. And the last is pulling on the tail."

00:20:29.000 | They're not right or wrong. The person who can actually see and more accurately describe

00:20:34.000 | the elephant is the seeing person who's 30 yards away. And that person can describe what

00:20:39.000 | the elephant actually is and can integrate those close-up descriptions.

00:20:47.000 | And so this is what I've learned with financial planning. There is fact in financial planning.

00:20:56.000 | And fact is usually found in the area of law. If I can give you a fact about tax law, and

00:21:04.000 | that is fact. There is right and there is wrong. Although even that's on shaky ground

00:21:09.000 | because tax law changes frequently. So the tax law that you would have relied upon as

00:21:13.000 | fact in 1983 is very different in 2013. And tax law can be challenged. So you may have

00:21:20.000 | tax law and the tax law is interpreted differently. And that's why one taxpayer interprets it

00:21:25.000 | in one way and makes certain planning decisions based upon that interpretation. The other

00:21:31.000 | interprets it differently. And the IRS gets involved and then we go to tax court. And

00:21:35.000 | then the judge in tax court says this is what is correct. Or the IRS issues a private letter

00:21:41.000 | ruling or something, an opinion on the application of that.

00:21:46.000 | So even though the law is fact, it's not always clear cut. But when you get beyond law, there

00:21:52.000 | is very little that is right or very little that is wrong in financial planning. It has

00:22:00.000 | much more to do with the application. That's a good example. So an example that comes to

00:22:06.000 | mind is I'll pick on the number one kind of financial pundit in the industry is Dave Ramsey.

00:22:12.000 | So Dave Ramsey says you should always pay off your debts in the order of a debt snowball.

00:22:16.000 | And a debt snowball is the idea of list your debts smallest to largest and pay the littlest

00:22:21.000 | balance first. And ignore the interest rates and just put everything on the littlest balance.

00:22:26.000 | And to the opponent of that would say, well, that doesn't work because the interest rate

00:22:31.000 | is real money that you're paying. So the cheapest way is to pay it with the highest interest

00:22:35.000 | rate first. And to Dave's credit, he's very clear that it's not about interest rates.

00:22:40.000 | It's about behavior. Well, you have these two things. You then are getting into behavioral

00:22:45.000 | advice versus technical advice. And they need to be integrated because behavior modification

00:22:51.000 | is unquestionably valid in my opinion. It's unquestionably valid. It's unquestionably

00:22:55.000 | a very important part of financial planning. But so are interest rates. Don't tell me that

00:23:02.000 | if you have one interest rate at 1% and that's a deductible interest rate on an unsecured

00:23:08.000 | asset and you've got another interest rate of 20% of non-deductible interest on a secured

00:23:13.000 | asset, making these dramatic examples to prove my point, kind of creating a straw man argument

00:23:17.000 | here. But I'm aware of that. But don't tell me that doesn't matter. That matters.

00:23:21.000 | So when you get in the real world, you need to understand this background and integrate

00:23:26.000 | the two and look at it in an actual situation. Do you have somebody who is very highly motivated

00:23:31.000 | independently of the interest rates? Or do you have somebody who has kind of bumbled

00:23:35.000 | their way through life and never paid attention to their debts? And now they've woken up and

00:23:39.000 | said, hey, I'm deeply in credit card debt. I'm going to pay off my credit card debt.

00:23:44.000 | So it's not right or it's not wrong. It has to do with the individual situation.

00:23:49.000 | Consider another example. Should I go to college or not? Or how should I save for college?

00:23:53.000 | Should I go to college or should I open an IRA and invest that money instead? Should

00:23:57.000 | I go to college or start my own business? After all, there's lots of billionaires that

00:24:00.000 | dropped out of college and started a business. Is one right? Is the other wrong? No. It has

00:24:05.000 | to do with the situation. Without knowing the individual situation, you can't give

00:24:11.000 | good advice. And so I'm sick and tired of the dogma that exists in the financial planning

00:24:17.000 | world of saying this is right and that's wrong. I used to be subject to the dogma. And I used

00:24:22.000 | to -- I used to repeat the dogma. I used to say this is right and this is wrong. And then

00:24:27.000 | I've learned through screwing a lot of things up over the years that the dogma is not really

00:24:33.000 | true. Let me just -- if we Google -- if we look at dogma, here is Wikipedia entry on

00:24:42.000 | dogma. First sentence of Wikipedia entry on dogma. Dogma is a principle or set of principles

00:24:51.000 | laid down by an authority as incontrovertibly true. It serves as part of the primary basis

00:24:59.000 | of an ideology or belief system. And it cannot be changed or discarded without affecting

00:25:05.000 | the very system's paradigm or the ideology itself. That's good enough for me. Whoever

00:25:10.000 | this Wikipedia contributor was, they were pretty good. That's good enough for me. That's

00:25:14.000 | my issue with dogma. Okay? It's laid down by an authority as incontrovertibly true.

00:25:21.000 | And so we're going to talk about a lot of dogma. And we're going to try to show the

00:25:25.000 | areas at which it -- we're going to show the areas at which it's useful and the areas at

00:25:31.000 | which it's not. I think principles, a belief system and principles, these are useful. It's

00:25:37.000 | useful to have philosophies and belief systems and principles. And they're useful. But it

00:25:44.000 | doesn't help just to have them as dogma. So we're going to talk about that. There are

00:25:50.000 | so many examples. And I'm sure you can tell from my voice, I get a little passionate about

00:25:55.000 | this, just because I've had to learn the hard way to unlearn dogma. I've had a lot of strongly

00:26:01.000 | held ideas. And this is right and this is wrong. And working as a financial advisor

00:26:06.000 | has given me unique insight into working with hundreds of people. This works in this situation,

00:26:12.000 | but doesn't work in another situation. And you'll find this stuff everywhere in the financial

00:26:17.000 | planning business. One guy says, "Only invest in stocks and real estate is a waste of money."

00:26:22.000 | Another person says, "Stocks are a sham and real estate is the only way to make money."

00:26:26.000 | Are they right? Well, it depends on how you look at it. They each have advantages and

00:26:30.000 | disadvantages. One person says, "Only buy passively managed index funds." And the other

00:26:37.000 | person says, "I only buy actively managed mutual funds." Is one right? Is the other

00:26:41.000 | one wrong? Depends. What are we talking about? We'll go into that another time. One person

00:26:48.000 | says, "Only buy term life insurance and invest the difference." Another person says, "Only

00:26:53.000 | buy permanent life insurance." Why? What's the difference? One person says, "Debt snowball.

00:26:58.000 | Lowest balance first." The other person says, "Debt avalanche. Highest interest rate first."

00:27:03.000 | One person says, "Roth IRA." The other person says, "Traditional IRA." One person says,

00:27:07.000 | "Pay for college." The other person says, "Forget college. Start a business." One person

00:27:10.000 | says, "Use a financial advisor." The other person says, "Do it yourself." One person

00:27:14.000 | says, "Save money and be frugal." And the other person says, "Design your ultimate lifestyle."

00:27:19.000 | I'm just so sick and tired of these things because every single one of them is right

00:27:23.000 | in the situation. And so one of the things that this show is going to do is we're going

00:27:28.000 | to talk about what makes them right so that you can actually look at your situation and

00:27:35.000 | you can decide what is right for me. Because that, in my opinion, try not to be dogmatic

00:27:41.000 | about it. That's what matters. Although, if you want to know what I'm dogmatic about,

00:27:48.000 | it's the fact that it's your money, you live your life how you want to live it, and you're

00:27:51.000 | the only one who can decide what's right for you. I'm dogmatic about that. I'm also dogmatic

00:27:54.000 | about the fact that everything has to be done in the context of a personal financial plan.

00:28:02.000 | I've been a financial advisor and I've learned a lot. And I've learned that there are lots

00:28:07.000 | of different situations. And to me, when you help people get clear on their goals, not

00:28:14.000 | your goals for them, but on their goals, the answer, the appropriate financial planning

00:28:20.000 | answer, will generally just simply present itself. "Okay, I want to save for college."

00:28:27.000 | Or, "I want to go to college." "Why do you want to go to college?" "I want to party and

00:28:31.000 | have fun." Okay? Maybe a good course of action for you not to spend $200,000 on the Ivy League

00:28:36.000 | education if your primary goal of college is to party. Maybe better for you to save

00:28:42.000 | that money and have more money for partying. Now, on the other hand, I want to pursue a

00:28:46.000 | liberal arts education and blah, blah, blah. Okay? That may be something where a college

00:28:51.000 | experience might be really good and this specific university might have a really great program

00:28:56.000 | for you. And we all know this intuitively because this is what we do. But we've got

00:29:02.000 | to bring that into the financial discussion. Why are you going to college? Are you going

00:29:06.000 | to college because you want a liberal arts education? A liberal arts education has nothing

00:29:10.000 | to do with job skills. Or are you trying to build job skills? They're two radically different

00:29:16.000 | things. And so, the idea that I'm going to get a liberal arts education so it makes more

00:29:21.000 | money for me, that's antithetical to what a liberal arts education is. But on the other

00:29:25.000 | hand, does that mean that a liberal arts education has no value? You know, me personally, I have

00:29:30.000 | a liberal arts education. I ascribe a lot of value to it. But I don't say it helped

00:29:34.000 | me make more money because I had a college degree. Same thing with technical financial

00:29:38.000 | planning. You know, all people should buy a Honda Civic because it's, you know, Tom

00:29:42.000 | Stanley says it's the most driven car by millionaires who are engineers. Is that right? I mean,

00:29:48.000 | what if you have six kids? You know, obviously, you're not buying a Honda Civic. So, whether

00:29:52.000 | it's a Honda Civic versus a 15-passenger van or whether it's term life insurance versus

00:29:59.000 | whole life insurance. If you are--give me an example. You're buying a business, you

00:30:03.000 | have a note for five years to buy out the business and your business partner to protect

00:30:07.000 | the note says, "I need life insurance for five years." Guess what? Term life insurance

00:30:11.000 | in that situation every single time. No question about it. Now, on the other hand, the majority

00:30:16.000 | of your wealth is made. You're establishing an ILA, an Irrevocable Life Insurance Trust,

00:30:21.000 | and this is intended to be a wealth replacement trust so that the bulk of your assets can

00:30:25.000 | go to charity and it can replace the wealth of your family. You don't anticipate putting

00:30:29.000 | further assets in that other than the life insurance policy. Are you going to buy a term

00:30:32.000 | policy in that trust? Never. Never. Every single time, that's got to be a permanent

00:30:37.000 | life insurance policy. You know, should I--should I do a charitable lead trust or a charitable

00:30:45.000 | remainder trust, you know, or a charitable annuity trust or a charitable remainder annuity

00:30:50.000 | trust? I don't know. Let's talk about what you want. Who needs the income? Who doesn't

00:30:54.000 | need the income? Does the charity get the money? Who doesn't? You know, should I do

00:30:57.000 | a Roth IRA or a traditional IRA? Well, it depends. Let's talk about how they work and

00:31:01.000 | let's discuss your situation, what you're trying to accomplish. Should I own a business?

00:31:07.000 | Should I establish a 401(k) for my employees or should I do a money purchase pension plan

00:31:12.000 | or a SEP IRA or, you know, a solo 401(k) or a profit sharing plan or a cash balance pension

00:31:18.000 | plan? You know, and by the way, if you don't understand all these technical lingo words,

00:31:23.000 | stick with me. That's what the show is going to be about. We're going to talk about it.

00:31:26.000 | So I'll explain what a charitable lead trust is. I'll explain what the idea of a wealth

00:31:31.000 | replacement trust is, which is not any kind of, you know, technical trust. It's just simply

00:31:35.000 | the idea of a trust, you know, and money set aside so that the bulk of the assets of the

00:31:40.000 | estate can go to someone else and we can replace the wealth for the heirs. I'll explain the

00:31:44.000 | technical and the non-technical aspects of this. And that's why I'm doing this show.

00:31:47.000 | So my overriding principle is that there is a rational approach to money. And the rational

00:31:53.000 | approach to money is probably going to be found in getting rid of dogma. Here's an example.

00:32:01.000 | You would expect a financial advisor in a financial show to say that you should save

00:32:05.000 | money, right? Okay. But should you always save money? So to use an extreme example,

00:32:12.000 | you've just been diagnosed with a terminal illness and you have no more than 12 months

00:32:17.000 | to live. You have no family members. You have no heirs. You have no charitable inclinations.

00:32:22.000 | You don't care about necessarily spending or giving the money to anybody at your death.

00:32:26.000 | You've been saving money towards a retirement, but you've now discovered you have 12 months.

00:32:31.000 | And there's no chance that you're going to live past 12 months. You have a million dollars

00:32:36.000 | in the bank. Is it at all rational for you to continue saving money? So what about my

00:32:42.000 | medical costs? Okay. You have insurance. It's completely irrational in that situation that

00:32:47.000 | I described. And I'm kind of building a straw man here. But it's completely irrational for

00:32:51.000 | you to save money. I would be spending every dollar I had and enjoying it. And I would

00:32:57.000 | set up a strategy in place to make sure that I could not live it. But I would be spending

00:33:01.000 | every dollar I have. That's a situation where it's completely irrational to save money.

00:33:07.000 | Now, are there a lot of situations where it's totally rational to save money? Absolutely.

00:33:11.000 | I personally am in the wealth building stage of my life. I value what savings means for

00:33:17.000 | me. It buys me freedom to be able to close businesses and start new ones. It buys me

00:33:23.000 | freedom to be able to close and stop working as a financial advisor and being able to start

00:33:28.000 | a financial planning podcast that has no income potential at all. But that's also rational.

00:33:36.000 | So even dogma that you would say this is always correct is not always correct. I'm going to

00:33:42.000 | do my best to sell you on saving money. But the only rational reason to save money is

00:33:47.000 | because you value what the saved money can buy you in the future more than what you value

00:33:51.000 | what the money can buy you today. That's it. So if you're a saver and investor, you value

00:33:56.000 | the fact that your money will be worth much more in the future with successful investing

00:34:00.000 | than it is today. And you'll be able to buy more of what you value, whether that's stuff

00:34:05.000 | or lifestyle or freedom or from work or whatever, than you do today.

00:34:11.000 | My wife and I are pretty frugal generally. I value frugality. I don't care that much

00:34:17.000 | about appearance. I value personally. My highest money values are freedom, financial freedom.

00:34:23.000 | And I feel that money buys me freedom. So I don't put a big value on stuff and having

00:34:29.000 | a fancy car and a fancy house and all that stuff. So usually we try to save a good percentage

00:34:35.000 | of our income. However, we're reworking some things on our house right now. So we're making

00:34:40.000 | a rational decision to spend money on our house. And the reason is very simple. We value

00:34:46.000 | more what spending the money on the house will buy us as far as current lifestyle. We

00:34:53.000 | value that more than what having more money in the future will buy us at that point in

00:35:00.000 | time. Simple as that. Right? When you have these ideas of the rational decisions behind

00:35:10.000 | you, you can apply it to your financial plan. And you can understand how to make better

00:35:14.000 | decisions. I'm making a business decision. I've walked away from a moderately lucrative

00:35:20.000 | practice to pursue a different business that I'm interested in building because I feel

00:35:25.000 | called to do it. I want to do it. So I'm willing to take less money of compensation because

00:35:31.000 | I value the freedom and the ability to pursue something I feel a great desire to do, which

00:35:36.000 | is build this podcast. Same thing with retirement. When you face that retirement decision, what

00:35:40.000 | do you do? You're making a decision that you value your free time and freedom from work

00:35:46.000 | more than you value the income that you earn from that work. It's as simple as that.

00:35:52.000 | So why the name "Radical Personal Finance"? Well, I'm intensely curious in everything.

00:36:00.000 | And you'll learn that as the show goes on. I personally am fascinated by life. And I

00:36:05.000 | think it's, on one hand, I think it's so interesting just to learn from extreme examples. I think

00:36:11.000 | it's so fun to learn from how do you live on the street if you're a homeless person?

00:36:15.000 | And also from how do you live as a billionaire? What's the differences? And what are the strategies?

00:36:21.000 | And I just think about what are all the ways that I could bring in someone else's strategy

00:36:26.000 | into my life? Always keeping in mind my personal goals. But the strategy of how homeless people

00:36:32.000 | live may be extremely useful to you at a stage in life when you're starting a business. And

00:36:37.000 | then when that business starts as a -- transforms you into a billionaire, the knowledge of how

00:36:43.000 | billionaires manage their finances may be extremely useful to you in those beginning

00:36:47.000 | years when you don't have any money, when you're establishing things using the proper

00:36:51.000 | entities and structures, which are going to save you a lot of tax money down the road.

00:36:55.000 | So just because you're homeless doesn't mean you can't learn from the billionaire. Just

00:36:58.000 | because you're a billionaire doesn't mean you can't learn from the homeless. I love

00:37:03.000 | the ideas of -- what's it called? The philosophies like Marcus Aurelius and kind of the stoic

00:37:12.000 | philosophies. I love the idea that from time to time live as though you're broke just to

00:37:18.000 | see what it's like so you're not scared of it. And if you're a billionaire and you're

00:37:21.000 | not scared of being broke and homeless, you'll probably be willing to take that -- or excuse

00:37:25.000 | me, if you're a millionaire and you're not scared of being broke and homeless, you'll

00:37:28.000 | probably be willing to take the risk that would transform you into being a billionaire.

00:37:32.000 | And all of these are just basically just life choices. You can -- my thought and feeling

00:37:39.000 | is this. You can learn from people without feeling threatened as to the decisions that

00:37:43.000 | you made. So at the end of the day, just learn from situations. And then apply it to your

00:37:48.000 | own goals. I'm not homeless. I don't necessarily plan to be homeless, although I can appreciate

00:37:52.000 | certain aspects of it. And I don't particularly want to be a billionaire. So -- but I can

00:37:57.000 | still learn from them. And they have advantages. And I can understand the advantages of being

00:38:01.000 | a billionaire and the advantages of being a homeless person. And then I can more appreciate

00:38:05.000 | my present reality. You know, I want to cross this chasm. So I've got a lot of goals for

00:38:13.000 | this show, but I want to cross the chasm between the professional world of financial advisors

00:38:18.000 | and the nonprofessional world. And I personally believe both are valuable. My hope is that

00:38:24.000 | the people who haven't -- who are laypeople -- I don't know the words to say. I hate these

00:38:31.000 | classification words. But my hope is that people who are just learning about advice

00:38:35.000 | or financial planning can contribute to the conversation. And then people who are very

00:38:40.000 | expert in financial planning can contribute to the education. I think my show will be

00:38:46.000 | a little different because it's coming from the world of being a professional financial

00:38:50.000 | advisor. I think we'll help -- we'll make a little bit of a difference. Most of the

00:38:55.000 | people who are working in that world can't speak out publicly, can't be as radical or

00:39:01.000 | as -- I don't know -- can't be as strong and passionate as I may be. So that's why a lot

00:39:10.000 | of us get frustrated -- a lot of us have gotten frustrated by media personalities.

00:39:16.000 | When I was a practicing financial advisor, if I said some of the things that media pundits

00:39:20.000 | say continually, I would be -- I'd have my pants sued off of me and I would be out of

00:39:26.000 | a job in about two seconds. But does that mean the media is good? I mean, bad? No, absolutely

00:39:32.000 | not. It's so valuable because it keeps advisors accountable. There's a lot of scumburgers

00:39:37.000 | in the world of financial advice. Money seems to attract people. But there's also a lot

00:39:41.000 | of scumburgers that are doctors. There's a lot of teachers that are really bad. And there's

00:39:46.000 | a lot of religious priests that have abused kids. It's natural to people. It's not necessarily

00:39:54.000 | unique to the world of financial advice. So I think coming from that world helps to give

00:39:59.000 | me a little bit of perspective.

00:40:02.000 | You know, one comment. I was never the best financial advisor. I happen to think personally

00:40:07.000 | I'm a pretty darn good financial planner. And you'll have to judge for yourself. And

00:40:13.000 | I did pretty well my first few years as far as leading my firm in terms of production

00:40:18.000 | numbers and things like that. But nobody would look at my production record and say, "Oh,

00:40:23.000 | Joshua, you're the world's leading financial advisor." I never was that interested in that.

00:40:28.000 | At least me personally, my lifestyle decisions, I'd rather take two months off than work that

00:40:32.000 | two months and earn extra money. But that's me. So I'm not making a claim to being the

00:40:37.000 | world's greatest financial advisor as far as the most successful, having the biggest

00:40:41.000 | firm, any of that stuff.

00:40:43.000 | I do enjoy financial planning. And I've always really enjoyed the close personal relationships

00:40:48.000 | I've built with clients. And I do feel like I would be -- I'm really proud of my record

00:40:54.000 | with clients. I've served some really well and I've served some not so well. There's

00:40:59.000 | a few clients where I've made mistakes and I've wished I'd done things better. But that's

00:41:05.000 | life, right? I guess that's not unique to me. But when you're a financial advisor, I've

00:41:11.000 | always taken that duty pretty seriously. And I've always wished I'd done a better job with

00:41:15.000 | everyone. But we learn.

00:41:17.000 | But I do -- I'm really proud of the work that I've done. But I'm not trying to say I'm the

00:41:21.000 | world's greatest financial advisor. My hope is just to give you ideas that you think will

00:41:25.000 | be helpful and to learn along with you. This is a creative outlet for me. This is something

00:41:29.000 | -- I love studying this stuff. I love talking about ideas. I love debating with people and

00:41:34.000 | learning about the things I'm wrong about. So I will screw some stuff up, I guarantee

00:41:38.000 | you. And I'm going to tell you when I screwed it up. And then -- but if I -- just because

00:41:42.000 | I think something is controversial, if I think it's right, I'll argue with you but we'll

00:41:45.000 | be friends. I don't personally -- opinions are one thing. But so many of these opinions

00:41:52.000 | that you have are -- feel free to disagree with me. In fact, if you agreed with me, I

00:41:56.000 | would think there was something -- on everything, there would be something wrong. So feel free

00:41:59.000 | to take what you find valuable and discard what you don't.

00:42:03.000 | Moving on. What's the show going to be like? First of all, it's going to be a daily show.

00:42:10.000 | Plan to come here every day. Monday through Friday. I'm sure I won't get every day. Holidays,

00:42:14.000 | et cetera, and vacation and whatnot. But it's going to be a daily show. And we are going

00:42:19.000 | to be willing to go into in-depth topics here. So we're not scared by depth. Feel free to

00:42:25.000 | skip any show you don't care about. If I do a show on grantor retained annuity trusts,

00:42:31.000 | skip it if you don't care about that stuff. But if you're sitting in front of your estate

00:42:35.000 | planning attorney and he's saying, you know, Tom, you really should consider establishing

00:42:38.000 | a grantor retained annuity trust, you might want to listen because you might learn something.

00:42:42.000 | And if you ever have any desire of having wealth or working in the business, you know,

00:42:47.000 | listen. I'm going to do my best to make it interesting. I'm not exactly sure what order

00:42:54.000 | I'm going to tackle the financial planning topics, but I have a personal goal of I would

00:42:57.000 | like to cover at least the equivalent of the CFP curriculum here.

00:43:02.000 | So some of my shows are going to be opinion shows and some of them are going to be more

00:43:07.000 | fact-based shows. And so over time I'd love to at least cover the CFP curriculum. It's

00:43:13.000 | a little bit tricky because I got to make sure that I cover it with general knowledge

00:43:18.000 | and don't plagiarize off of somebody's book and just read a textbook. But I'm going to

00:43:22.000 | try to at least give a cursory knowledge that could help somebody, you know, allow a lay

00:43:28.000 | person. My personal goal is I'd love to create content that's compelling enough and interesting

00:43:32.000 | enough and detailed enough to allow somebody who didn't use anything else to take my show

00:43:37.000 | or at least the necessary episodes of my show, listen to them, and sit and pass the certified

00:43:42.000 | financial planner exam. To me that's kind of a good foundation to start from. Beyond

00:43:46.000 | that, I don't think I would want to go much deeper than that because it gets pretty boring

00:43:50.000 | once you get deeper than the CFP exam. But it's a good, you know, that's a personal goal

00:43:56.000 | I have. I'd like to do a lot of interviews and I'd like to do a lot of in-depth interviews

00:44:00.000 | and especially enjoy them with people who disagree with me. I think that obviously I'll

00:44:04.000 | bring on a lot of people who I would agree with, but I would enjoy discussing things

00:44:08.000 | with people who disagree with me. I think a lot of times there can be a lot of--there's

00:44:12.000 | a lot of value in conversations where the interlocutors, you know, the people talking

00:44:21.000 | agree with each other, but there's also a lot of value in when they really disagree.

00:44:25.000 | And I'm not scared of a good debate. I think it's really fun and it's a good stretching

00:44:29.000 | exercise to debate the issues. So let's debate the issues of, you know, all of the stuff

00:44:34.000 | that people are interested in financial planning. I want to increase the financial literacy

00:44:39.000 | of the general American public. That's my mission. I always found when I was an advisor,

00:44:44.000 | I always found that, you know, Cy Simms with the Simms Clothing Stores used to have a saying

00:44:51.000 | on his bags, on their bags. It said, "Educated consumers are best customers," is what their

00:44:57.000 | saying was. And I always found that to be true as an advisor. My favorite clients were

00:45:02.000 | the clients who--the easiest to work with clients are the clients who are the most financially

00:45:06.000 | literate. The toughest clients were the clients who are the least financially literate. And

00:45:10.000 | so, if I can improve--help people improve their financial literacy, I would--I'd be

00:45:14.000 | thrilled with that result. I plan to provide commentary on issues, in-depth commentary

00:45:21.000 | on, you know, my opinions. I plan to do teaching on issues. I plan to do a lot of different

00:45:30.000 | things. Now, I will be interested in your feedback as far as what works well. I don't--as

00:45:35.000 | we get going here, in the beginning, it's going to be a little bit--a little bit slow.

00:45:39.000 | Excuse me, it's going to be a little bit varied as far as the topics. But as we get going,

00:45:43.000 | as far as my weekly schedule, you know, I imagine something like this. Maybe Monday,

00:45:47.000 | I'll do a commentary on current events or a commentary on markets or a commentary on

00:45:54.000 | what's going on in the world or, you know, riff off of a news story of some kind. Tuesdays,

00:46:01.000 | maybe I'll do an in-depth interview. Maybe Wednesday, I'll do a teaching session. So,

00:46:05.000 | we'll take a specific topic and try to present it in a, you know, in a straightforward way,

00:46:12.000 | whether this is how to, you know, what are the various types of ways to save for college

00:46:16.000 | and what are the advantages and disadvantages of each or things like that. Thursday, maybe

00:46:21.000 | another interview. Friday, maybe listener questions. You email me questions or call

00:46:24.000 | in questions or things like that and I'll answer them and I'll try to talk about--not

00:46:28.000 | less about what someone should do but rather how I would think about it. Because to me,

00:46:32.000 | I think the biggest value of working with a financial planner is hearing how a financial

00:46:36.000 | planner is going to think about--think about--think about things. And over time, you know, some

00:46:41.000 | of this content will be specific to a specific point in time but I'd like some of it to be

00:46:48.000 | really evergreen content, meaning just always available. I've got a personal dream and I'll

00:46:53.000 | share it with you. My vision is in the world going forward, it's my assumption that everybody

00:46:58.000 | has or will have a smartphone. And it's my assumption that data will become essentially

00:47:02.000 | free. And so, I envision, you know, whatever, you know, mask--whatever like example you

00:47:13.000 | want to use. I envision a poor kid in the ghetto, you know, who has a smartphone. He

00:47:19.000 | goes down and gets his cheap smartphone and he has his internet because that's, you know,

00:47:23.000 | it's fairly--fairly in within reach and he stumbles across my podcast. And I imagine--this

00:47:28.000 | is again, this is my personal dream, I'm just sharing vulnerably. I imagine this person

00:47:32.000 | stumbling across my podcast and I want to create content that takes that person from

00:47:37.000 | zero level of knowledge about money, broke and debt, you know, a kid growing up to master's

00:47:45.000 | level financial planning knowledge. And both the technical side of things and then also

00:47:51.000 | the behavioral side of things, the non-technical, you know, the goal setting, the goal planning

00:47:55.000 | and kind of--because it all matters, you know, it really all matters. And it's not one or

00:48:02.000 | the other. Am I trying to replace financial advisors? No. I personally have an opinion.

00:48:08.000 | Information is and always has been and should be free. I mean, I guess it hasn't always

00:48:13.000 | but in modern history, information is free. You can go down to your local library and

00:48:17.000 | you can learn everything you need to know about money right there for free for the cost

00:48:21.000 | of, you know, some shoe leather to get you down there. But the specific application isn't

00:48:26.000 | free. So, I want to--I'm going to give away all the knowledge but then if you just want

00:48:29.000 | an expert answer, talk to your financial advisor or if you want behavioral modification, talk

00:48:33.000 | to your financial advisor. That's where a good financial advisor comes in. So, I want

00:48:37.000 | to compliment--I want to compliment financial advisors. You know, what qualifies me to do

00:48:44.000 | this? You know, again, probably nothing. I mean, you judge that. The qualification of

00:48:48.000 | anybody is based upon the response and the results that they get. I do have some technical

00:48:53.000 | qualifications. I've had a long time interest in this. I've read--I've always loved reading.

00:48:58.000 | I still do financial planning books. So, you know, you throw a book at me, I probably read

00:49:02.000 | it or I will if you say it's good. I'll read it. I'll do a review for it. I've done some

00:49:06.000 | really stupid stuff with money. I've made some mistakes and I've done some really smart

00:49:09.000 | stuff with money and I've learned a lot of lessons. Probably the biggest skill is I've

00:49:13.000 | worked with financial advisor--excuse me, I've worked with hundreds of clients over

00:49:17.000 | the last six years and I've learned to become a pretty good listener. And in listening and

00:49:21.000 | talking with people in depth, you learn a lot. You know, being a good financial planner

00:49:26.000 | is a unique role in someone's life as I feel like I know more about some of my clients

00:49:30.000 | than their own spouse knows about them. And that--when you start to see what works and

00:49:33.000 | what doesn't, when you--and when you work with a young person just getting started,

00:49:37.000 | when you work with an old person finishing up and you see what's going on, you know,

00:49:42.000 | you start to learn a lot about--you start to learn a lot. I feel like that probably

00:49:49.000 | gives me most of the most broad experience. Over the years, you know, I've learned--you

00:49:58.000 | know, the more I see actual client situations, the more I've worked with actual clients,

00:50:05.000 | I learned that when you actually apply knowledge, you know, my strong opinions about my strong

00:50:10.000 | mind in the past, either I was wrong or I was just limited in scope or application to

00:50:15.000 | one specific scenario. And that was my problem--that's become my problem with a lot of financial

00:50:19.000 | planning stuff. As I used to give away--I used to carry certain financial planning books

00:50:22.000 | or recommend certain financial planning books and I still do. But, you know, the author

00:50:27.000 | would oftentimes be very dogmatic. This is the way. I'd have to give it to somebody and

00:50:31.000 | say, "Okay, in your situation, I think this is the book that most closely fits what you're

00:50:35.000 | trying to do and this book can spend more time with you than I can face to face. However,

00:50:39.000 | you need to ignore--you know, you need to take note of this, this, this, this and ignore

00:50:43.000 | this, this, this, this." You know, and then I would learn some more and I'd work in more

00:50:47.000 | situations. And then I'd say, "Well, that book doesn't work in this situation." And,

00:50:50.000 | you know, I don't--I don't actually have the answer. The only answer I know at this point

00:50:54.000 | is not--is not found in a book, it's found in the advice of a good financial planner.

00:50:58.000 | A good financial planner with broad-based knowledge that can apply and help with person

00:51:02.000 | in specific knowledge. It's the difference between a diet book and a personal knowledgeable,

00:51:08.000 | you know, diet consultant. Someone who knows your situation, knows what's working and knows

00:51:12.000 | what's not working and is aware of all the diets and aware of the principles of why they

00:51:16.000 | work, aware of the technical minimal details that need to be applied and then can apply

00:51:20.000 | that, you know, can talk to you about applying it in your situation. I think it's so valuable

00:51:26.000 | to learn to understand all aspects of a side--of an argument. You know, I compare it to political

00:51:32.000 | discussion. It's hard to have a political discussion if you can't understand why your

00:51:35.000 | opponent feels the way they do. And that's what you--I see in our culture nowadays is

00:51:40.000 | people get on opposite sides of a political discussion. A, they're not friends and B,

00:51:45.000 | they just think the other is stupid. Instead of saying, "I understand the principles that

00:51:48.000 | the other person--the other person is espousing and why they feel that way. But, you know,

00:51:57.000 | here's what my principles are and here's why my position is stronger." So, to me, that's

00:52:04.000 | what I plan to do with financial planning is try to help people, you know, why certain

00:52:07.000 | things are, what certain philosophies are about, what certain principles are and kind

00:52:11.000 | of connect the dots. I do have, you know, a bunch of professional designations. A lot

00:52:15.000 | of those of us in the business, we get made fun of, you know, the people who collect education.

00:52:20.000 | I'm guilty. I would, you know, sometimes I get a little embarrassed about it but--because

00:52:26.000 | I have a bunch of silly letters after my name. But I'll--I mean, it does matter. And I'm

00:52:33.000 | really proud--and I shouldn't be quite so--I guess I shouldn't be so downcast. I am proud

00:52:37.000 | of the work that I've done. I worked hard to learn some of the technical aspects of

00:52:41.000 | financial planning. As far as, you know, my professional designations, in the past--some

00:52:47.000 | of these are current, some of these are--I no longer carry. Certified in long-term care

00:52:53.000 | planning, a chartered life underwriter, a certified financial planner, a chartered financial

00:52:59.000 | consultant, chartered advisor for senior living, chartered advisor in philanthropy, registered

00:53:03.000 | health underwriter, registered employee benefit consultant, and then I am almost finished

00:53:07.000 | with a master's degree in financial planning. So it's a bunch of letters, you know, CLTC,

00:53:11.000 | CLU, CFP, CHFC, CSL, CAP, RHUR, UBCR, MSFS. So my business card is a little obnoxious.

00:53:18.000 | It's not intended to be. But--I mean, it's not intended to be, "Hey, look at me," but,

00:53:23.000 | you know, it is. You know what? I'm going to--I'll walk through. Let me just tell you

00:53:27.000 | what that stuff means. Feel free. This is going to sound like self-promotion. I apologize.

00:53:32.000 | Skip the next five minutes if you don't care about this stuff. But designations do matter

00:53:36.000 | in the financial planning world. And just because someone has a bunch of letters after

00:53:40.000 | their name doesn't necessarily mean anything. So let me give you kind of a quick overview

00:53:46.000 | as far as what certain ones mean. Letters and numbers and all of that stuff, again,

00:53:50.000 | doesn't mean anything. It doesn't really mean anything unless--oh, in addition to all

00:53:57.000 | the designations, I passed some serious exams over the years and had insurance licenses,

00:54:02.000 | so that matters too. You know, some designations can be achieved with, you know, basically

00:54:07.000 | a one-day class in a hotel conference room. And some designations are really, really rigorous.

00:54:11.000 | So for example, you know, the first designation that I ever got was a certification in long-term

00:54:16.000 | care, long-term care planning. And this one was really important to me at the time because

00:54:21.000 | my grandfather had needed long-term care and I was a--was a--not a--I guess not a primary,

00:54:26.000 | but I was a caregiver for him for years fresh out of college along with my parents. And

00:54:31.000 | I really, really feel strongly about long-term care planning. So I went and got this designation.

00:54:36.000 | Well, this designation is really useful but it's really, really focused on long-term care.

00:54:40.000 | So, if my memory is right, it was two days of class and then an hour--one hour exam.

00:54:46.000 | Really, really useful for me. I learned a lot and it really is a good class to kind

00:54:50.000 | of get you started. But, you know, the next designation that I got was a CLU, which stands

00:54:55.000 | for Chartered Life Underwriter, and that's a designation with--that's an insurance specialty,

00:55:01.000 | basically a life insurance largely specialty. So to give you an idea, let me surf over to--the

00:55:08.000 | CLU is administered by a college, a financial planning college called the American College.

00:55:14.000 | And the classes--it's eight classes that are required. And these are basically the equivalent

00:55:19.000 | of college classes although there's no in-class time. You're--basically, they ship me--ship

00:55:24.000 | me a textbook. Each one of these is a, you know, basically a college textbook and you

00:55:28.000 | read the textbook and you go take an exam, a hundred question exam. It's a two-hour exam.

00:55:32.000 | And some of the exams are easier, some of the exams are more difficult. But a CLU is

00:55:37.000 | eight classes, five of which are required and three of which are optional. So the five

00:55:41.000 | required classes are fundamentals of insurance planning, individual life insurance, life

00:55:46.000 | insurance law, fundamentals of estate planning, planning for business owners and professionals.

00:55:50.000 | And then I think the three electives I took were financial planning, process and environment,

00:55:56.000 | income taxation, and investments. So when you actually see somebody with a CLU behind

00:56:02.000 | their name, you can have a pretty good confidence that person has done some studying. I don't

00:56:06.000 | remember how many hours each of this took but, you know, take picture of college textbook

00:56:12.000 | in your mind and figure out how long it takes you to read it and then absorb the information,

00:56:16.000 | practice the questions and then go take the exam. It's not insubstantial. And when you

00:56:20.000 | go through it in an organized way, you learn a lot more than if you just have an idea--you

00:56:24.000 | learn a lot more about the foundations of things like life insurance and where it comes

00:56:29.000 | from and how it's designed and how the different products evolved than if you just read an

00:56:33.000 | opinion in Money Magazine about, you know, what life insurance should be. So a CLU designation

00:56:40.000 | is--I have a huge degree of respect for people that have studied and gotten a CLU designation.

00:56:45.000 | I think after my CLU, I took a few more classes and I sat for the CFP exams. The CFP stands

00:56:51.000 | for Certified Financial Planner. And CFP board is trying to make their designation to kind

00:56:57.000 | of the gold standard of the business. It's--I don't know if it's--maybe it's there, maybe

00:57:00.000 | it's not, I don't know. But the way the CFP exam works is different. You have to take

00:57:04.000 | a certain number of classes, I can't remember, it's eight or ten, something like that, and

00:57:07.000 | then you have to pass a comprehensive 10-hour exam. If somebody has a CFP--if somebody has

00:57:13.000 | passed a CFP exam, that's a pretty substantial--that's a pretty substantial achievement. And I would

00:57:19.000 | encourage you that--it's worth paying attention to what they say even if they have a different

00:57:24.000 | philosophy. I personally think the CFP exam is one of the harder financial exams because

00:57:31.000 | it's been a little bit shortened now. When I took it, it was a 10-hour exam over a two-day

00:57:36.000 | period. And what's tough about it is that CFP covers five or six different things. It

00:57:43.000 | covers general financial knowledge, investments, income tax, estate planning, insurance planning,

00:57:48.000 | college planning, retirement planning, and estate planning. I think I said estate planning

00:57:52.000 | and college planning. And so, when you've got all those different situations, you've

00:57:55.000 | got to cover each of them in an exam that's comprehensive that's, you know, you don't

00:58:00.000 | have an open book. So, what will happen is that your knowledge of retirement planning

00:58:04.000 | factors into your knowledge of estate planning in this one specific question. Each of the

00:58:08.000 | answers--it's a challenging exam. I think it's--and I haven't--I've never taken the

00:58:13.000 | CPA exam, but I have some friends that do. And the CPA is a challenging exam for accountants.

00:58:18.000 | In some ways, my personal opinion is probably CFP is probably harder because the CPA is

00:58:23.000 | divided into four sections. Each of them is a four-hour exam, but they're subject matter

00:58:27.000 | specific. So, I think the CPA is like the first--what is it? The first section is, I

00:58:33.000 | think, like auditing. The second one is--or like auditing and attestation. The second

00:58:39.000 | one is business concepts. And then the third one is financial accounting and reporting.

00:58:44.000 | And then the fourth one is regulation. So, you know, the accounting part of it or the

00:58:47.000 | tax part of it is one smaller bit because they have to know auditing, but that can be

00:58:51.000 | divided up. The one that's harder, I don't have, is the CFA designation. That's a Chartered

00:58:58.000 | Financial Analyst designation. And a Chartered Financial Analyst is--I think there's three

00:59:03.000 | sections on the exams, level one, level two, and level three. You know, I thought about

00:59:07.000 | doing that, but that is not my special--the technical, all the formulas and stuff, that

00:59:13.000 | stuff puts me to sleep. So, I just--I've taken various--some classes that are like the start

00:59:20.000 | of it, but those are my least favorite classes that I really enjoyed. But I think the CFA

00:59:24.000 | is probably harder, but anyway, they're all challenging. And anybody who's worked at that,

00:59:27.000 | worked at them is, you know, I think that deserves some respect. Book knowledge doesn't

00:59:35.000 | necessarily make for an expert, but it can contribute. I then went on after CFP and did

00:59:41.000 | a Chartered Financial Consultant, CHFC. That's also by the American College. And that one

00:59:45.000 | has nine courses. Let me look here. Okay, nine courses, seven are required, two are

00:59:50.000 | optional. So, you've got the seven required, financial planning process and environment,

00:59:54.000 | fundamentals of insurance planning, income taxation, planning for retirement needs, investments,

00:59:58.000 | fundamentals of estate planning, and financial planning applications. And I think the two

01:00:02.000 | electives I did were executive compensation and financial decisions for retirement. And

01:00:06.000 | so, you'll notice some of the classes overlap. What I did was when I set out to do this stuff,

01:00:10.000 | I was trying to finish everything, a bunch of study work up. I have a nine-month-old

01:00:15.000 | son. I was trying to do all that study work before my son was older so that I don't have

01:00:20.000 | to be taking exams and studying at four in the morning or five in the morning once he's

01:00:26.000 | a little bit older. So, I laid out kind of the most efficient process through all these

01:00:30.000 | things that I could and tried to take the minimum number of classes to get it done but

01:00:36.000 | still learn. So, maybe that's cheating the system a little bit. I call it being, what's

01:00:43.000 | the term? Planning, good planning. Then I did the chartered advisor for senior living.

01:00:51.000 | So, this one is a five courses and chartered advisor for, and again, each of these courses

01:00:56.000 | has an exam afterwards. And this is one that's really focused on kind of working with retirees

01:01:00.000 | and understanding how to work with older clients. So, you've got five classes, investments,

01:01:05.000 | fundamentals of estate planning, understanding the older client, which was really interesting,

01:01:10.000 | kind of a study on social gerontology, health and long-term care financing for seniors,

01:01:16.000 | and then financial decisions for retirement. So, that was really useful. Then did a chartered

01:01:22.000 | advisor in philanthropy. I loved that class. Those classes are awesome. Three classes.

01:01:27.000 | Number one is planning for impact in the context of family wealth. Number two is charitable

01:01:32.000 | strategies. Number three is gift planning in a non-profit context. Did that course with

01:01:36.000 | actually a local study group here in West Palm Beach of other professionals and really

01:01:40.000 | enjoyed that. Finished the RHU, which is a registered health underwriter. That one had

01:01:45.000 | three classes. Group benefits, which is all about your group benefits, how to put in different

01:01:51.000 | programs at different companies. Advanced topics and group benefits and advanced topics

01:01:55.000 | in managed care. And that one was fascinating to learn about kind of the health insurance

01:02:01.000 | industry and the history of it, some of the history that I never understood, which is

01:02:05.000 | extremely applicable to today's world of the Affordable Care Act and all of the changes

01:02:10.000 | that are happening. Really enjoyed that. And then the, excuse me, that would be a little

01:02:14.000 | bit of a misstatement. I enjoyed some aspects of it. Other aspects of it were not my thing.

01:02:20.000 | Then I did the REBC, which is a registered, what is that, registered employee benefits

01:02:25.000 | consultant. And that's five classes. Group benefits, planning for retirement needs, advanced

01:02:29.000 | topics and group benefits and executive compensation and advanced topics in managed care. You can

01:02:33.000 | see the overlap there. So I tried to design an efficient course through that. And then

01:02:38.000 | I'm almost finished with a master's degree in financial planning. So this is technically

01:02:43.000 | an MSFS by the American College. So this is a master's degree in financial planning. There's

01:02:49.000 | 12 courses. I think it's 36 hours. So it's comparable to some other master's degree programs.

01:02:55.000 | And the 12 courses are, these are all separate from all of the rest of the credentials. There's

01:03:01.000 | no overlap, with the exception of one class. I think group executive compensation is overlap.

01:03:07.000 | But the master's in financial planning is financial statements and business valuation

01:03:13.000 | analysis. Loved that class. Awesome. Really, really interesting. Security analysis and

01:03:19.000 | portfolio management. Really enjoyed that one. Qualified retirement plans. Really fun. Advanced

01:03:24.000 | -- I guess you know a financial geek when you say really, really fun about qualified

01:03:29.000 | retirement plans. Advanced estate planning, personal tax planning, mutual funds, analysis,

01:03:33.000 | allocation and performance, executive compensation, planning for impact in the context of family

01:03:37.000 | wealth, charitable strategies, gift planning in a non-profit context. Okay. So there was

01:03:41.000 | overlap from the CAP courses with those that I did. Then there's a case study, which is

01:03:45.000 | a comprehensive financial plan. And then there's some residencies, which are called issues

01:03:49.000 | in advanced retirement planning and ethics and human values. So those are the two classes

01:03:54.000 | that I haven't completed. And I'm actually scheduled to do those in September 2014.

01:03:58.000 | At this point, I'm sick and tired of taking exams. And I'm done for a while. Although

01:04:04.000 | I'm really interested in some of the theoretical aspects of financial planning. And at some

01:04:08.000 | point, I have thought it would be interesting to do the Ph.D. program at the American College.

01:04:13.000 | I just think that some of the work that's being done to advance the discipline of financial

01:04:20.000 | planning, just the actual profession of financial planning has really developed and really been

01:04:26.000 | advanced over the last few decades. And some of the work is really interesting. The papers

01:04:30.000 | and the research that is fascinating. So at some point, maybe I'll go back to school.

01:04:34.000 | But at this point, I'm tired of getting up early and studying. And I want to do something.

01:04:38.000 | I want to go to the beach on Sunday afternoons instead of reading financial planning books.

01:04:42.000 | So with this, I think we'll wrap up. Oh, last thing. What do I want to take the show?

01:04:48.000 | So tough question. If nothing else, the show for me is intended to be a creative outlet.

01:04:56.000 | I think of financial planning as much like art. And believe it or not, it's really satisfying

01:05:02.000 | when you have a challenging client situation. It's really, really satisfying to be able

01:05:09.000 | to create a financial plan that kind of perfectly hits what they're trying to do and what their

01:05:14.000 | needs and their goals are. I think it's -- in my head, I've never really been that artistic

01:05:21.000 | visually. I don't have the ability to express myself really in paint or music or anything

01:05:25.000 | like that. But as I've grown as a financial planner, I have learned what artists feel

01:05:31.000 | when they kind of say it just like comes alive in your head. And for me, that's how financial

01:05:34.000 | planning is. I hear somebody's "woe is me" tale about how difficult their life is, and

01:05:39.000 | I just say, "Well, look, you know, you do this, do that, do that, do adjust this and

01:05:43.000 | change this, and now you're living the life of your dreams." And I'd like to -- I don't

01:05:47.000 | want to get too dramatic with it, but I mean, it really does feel that way for me.

01:05:51.000 | And so if for nothing else, the show would be a creative outlet. I would love this show

01:05:57.000 | eventually to become a business, self-supporting. As far as how, I don't know. I've got some

01:06:03.000 | ideas. And if you guys, the listeners, like it, let me know and we'll figure out if that

01:06:08.000 | can work. In the meantime, I'm not depending on the show as any kind of financial support.

01:06:17.000 | I think that really destroys shows when they're designed for -- purely for economic benefit.

01:06:23.000 | I don't think there's any -- my opinion, I don't think there's any problem with having

01:06:26.000 | that in mind. But, you know, I think it really just destroys shows when they're just designed

01:06:32.000 | for economic benefit. So hopefully this show won't do that. I want to provide really good

01:06:37.000 | info. And I'd just love to make some impact and, hey, if it makes some money in the long

01:06:42.000 | term, great. In the meantime, I am doing some consulting work, which pays me income, has

01:06:49.000 | some savings, and then also I'm actually going to be building in the future a new financial

01:06:56.000 | planning firm. And I've got some ideas as far as a way to financial planning. And that'll

01:07:00.000 | provide for the bulk of my income. And I should still be able to do that and do this show.

01:07:05.000 | So if nothing else, then that'll be the -- that's the show.

01:07:10.000 | Questions, comments? Hopefully this has been interesting. I'm excited about having the

01:07:15.000 | chance to do this. I'm excited about the potential of this. I'm excited for where things can

01:07:21.000 | go in the future. I think that there is a tremendous potential for this. And I am thrilled

01:07:26.000 | with -- I see just a hunger in our society of people wanting good financial knowledge.

01:07:31.000 | And I see that every goal and every dream incorporates good financial planning. How

01:07:35.000 | do you achieve your goals and dreams without good financial planning? I was reading a book

01:07:39.000 | this morning, and the author said, you know, if you want to buy a yacht, the first thing

01:07:42.000 | to do is go out and find out how much they cost and figure out how much money to buy

01:07:45.000 | and to sell. So no matter the dreams, big or small, yacht or financial freedom, money,

01:07:50.000 | time, stuff, whatever it is, it all incorporates some aspect of financial planning.

01:07:55.000 | So thank you for listening. Thank you for listening to the Radical Personal Finance

01:07:59.000 | podcast, episode 11. Would love to hear your comments. If you have questions or comments,

01:08:04.000 | especially if you think I'm dead wrong about something, come to radicalpersonalfinance.com/11.

01:08:12.000 | Radicalpersonalfinance.com/11. That is the URL for this show. Tell me about it. Tell

01:08:20.000 | me where I'm wrong. Let's debate this a little bit. And hey, if I think you're good enough,

01:08:25.000 | I'll have you on the air to debate me. If you want to reach me personally, email me

01:08:28.000 | at joshua@radicalpersonalfinance.com. Joshua@radicalpersonalfinance.com. And as always, with all financial planning

01:08:36.000 | information, I've done my best to give, you know, really authoritative, I will always

01:08:40.000 | do my best to give authoritative and accurate information. But you know what? Laws change,

01:08:44.000 | and I'm human, and I screw things up all the time. If you find an error I've made, if you

01:08:48.000 | spot a problem, if you bought a mistake, come to the show page and notify me of it, and

01:08:53.000 | I will correct myself. I appreciate that very much. Financial planning is very personal,

01:08:58.000 | and it's state and country specific. So consider asking a professional for their opinion on

01:09:03.000 | your specific situation. I live in Florida. I don't know all of the laws for every state,

01:09:07.000 | but I do hope that the content of this show will help you to be equipped for that conversation.

01:09:12.000 | Have a great day. Thanks for listening.

01:09:14.000 | [music]

01:09:36.000 | And that is a wrap.

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