RPF0183-Friday_QA
00:00:00.000 | Are you ready to make your next pro basketball, football, hockey, concert or live event unforgettable?
00:00:05.500 | Let Sweet Hop take your game to the next level.
00:00:08.100 | Sweet Hop is an online marketplace curating the best premium tickets at stadiums, arenas and amphitheaters nationwide.
00:00:14.800 | Sweet Hop's online marketplace makes it easy to browse and book the best seats.
00:00:19.400 | With no hidden fees and a 100% purchase guarantee, you can feel confident when you book your premium LA tickets with Sweet Hop.
00:00:26.500 | Visit swithop.com today.
00:00:31.000 | Friday Q&A today. Got four questions lined up for you.
00:00:34.700 | Let's see if I get through them all. Number one, question on 529s.
00:00:38.800 | How to effectively use them for the purpose of just simply pulling dividends out to pay for your kids college.
00:00:44.600 | How to find and decide on various types of life insurance coverage.
00:00:48.200 | How to lower the cost of owning a home. And what are the actual 401k contribution limits?
00:00:53.500 | And how does it work when you want to put more than the $17,500 in there?
00:00:58.500 | Oh, and before we do that, a few responses to recent episode 181.
00:01:07.000 | Not most of the audience didn't really seem to enjoy it.
00:01:10.100 | What is Joshua's response? Stay tuned.
00:01:15.500 | Welcome to the Radical Personal Finance podcast.
00:01:30.900 | My name is Joshua Sheets and I'm your host.
00:01:32.500 | And today is Q&A. That'll be a little bit fun.
00:01:36.500 | Some of these questions are interesting. Most of the questions are fairly uncontroversial.
00:01:40.900 | But I will address a little bit of the feedback that came from recent episode 181.
00:01:45.900 | It's the first time of any of the shows that I've done where it seems like almost nobody liked the show.
00:01:50.600 | So what does a content producer do when nobody likes their show?
00:02:01.000 | The way I see it, you've got a couple of questions. You can ignore it and just move on.
00:02:04.500 | You can address it and change something or you can address it and not change something.
00:02:08.000 | And so I figured, well, I probably owe just a couple – a little bit of feedback here to the content of the show.
00:02:14.000 | In case you haven't heard it, episode 181 was a discussion of why we need more discussion of politics and religion and philosophy and morality and ethics in modern financial conversation.
00:02:28.000 | And it certainly didn't seem to be a very well-received show.
00:02:32.000 | I've gotten a couple of positive comments but for the most part, most of the comments were fairly critical.
00:02:37.000 | What's interesting is in trying to wade through the feedback, it's a challenge to wade through.
00:02:42.000 | I have a personal, I guess, axiom that I try to keep in mind is that there's no such thing as negative feedback.
00:02:51.000 | Feedback is neutral and it's just simply feedback.
00:02:55.000 | So if something is not working, just take it as – don't get all upset about the negativity of it.
00:03:00.000 | Just take it as feedback and incorporate it.
00:03:02.000 | And so I pay careful attention to the feedback that I get from different things and then try to decide how to incorporate it.
00:03:09.000 | And so as I paid careful attention and have paid careful attention to the feedback from episode 181, I just thought about it.
00:03:16.000 | And I'm not going to take the whole show today.
00:03:18.000 | I thought about doing a whole show.
00:03:20.000 | I just decided that would be a waste of time.
00:03:22.000 | But I will respond a little bit and then we're going to get to the questions.
00:03:24.000 | If you don't want to listen to this, just skip forward and I'll try to put a note in the show notes about the timing of when I'm done with this.
00:03:30.000 | But if you are interested, then here's some of my response.
00:03:33.000 | I thought about the show.
00:03:34.000 | I thought very carefully about what I said and what I did and did I have regrets about what I said or what I did or was I confident in it?
00:03:41.000 | And it's kind of a mixture.
00:03:43.000 | I really wish I'd done a better job clarifying what the purpose of that show was.
00:03:48.000 | I thought maybe that would have helped.
00:03:49.000 | I'm not sure it would have helped all that much.
00:03:51.000 | But I thought maybe it would have helped.
00:03:53.000 | I think I probably shipped the show too soon and I was so focused – believe it or not.
00:03:58.000 | I was so focused on being politically correct that I didn't – that I didn't, I guess, make as clear as I should have the point of the show.
00:04:07.000 | And the number one point of the show, the number one thing I was trying to get across was I was trying to get across the importance to recognize the – I guess the – how propaganda is used in modern society and how social control is exerted on a collection of people.
00:04:27.000 | And how that's directed by underlying goals and worldviews and agendas.
00:04:33.000 | That was what I was trying to do.
00:04:36.000 | And as I thought about how do I get this across, I could have used finance.
00:04:40.000 | I could have used all kinds of financial examples.
00:04:42.000 | But the problem with finance is that usually they're not very connected to – they're hard for us to see.
00:04:50.000 | Undoubtedly, the structures, the frameworks behind society affect every aspect of finance.
00:04:59.000 | Every single one of our lives is affected by this.
00:05:01.000 | Each one of us pays 7.5% of our wages into a doomed system of social security and Medicare because of a social contract to put forward a specific worldview.
00:05:14.000 | But that happened so long ago that you and I have no idea of how it happened, even though people who can run a calculator and have a pen can sit down and say, "This doesn't work.
00:05:25.000 | This doesn't work.
00:05:26.000 | This doesn't work."
00:05:27.000 | And even though – hold on.
00:05:30.000 | I just got – hold on one second.
00:05:31.000 | All right.
00:05:32.000 | Just found it.
00:05:33.000 | So, social security, I guess, is sending out statements again.
00:05:35.000 | So, my wife and I just got our social security statements in the mail last week.
00:05:38.000 | And so, even though everyone says this, right from the official social security statement from the Social Security Administration, listen to this stupidity.
00:05:47.000 | Question, under their frequently asked question, "Social security, what's in it for you?"
00:05:51.000 | Question, "Will social security be there for me?"
00:05:54.000 | Social security is there for you right now.
00:05:57.000 | Like most people, you probably think of social security as just a retirement program.
00:06:01.000 | However, depending on your circumstances, you may need the protection of social security well before retirement.
00:06:06.000 | What a bunch of garbage.
00:06:08.000 | That's not the question.
00:06:09.000 | So, then it goes on in two paragraphs later.
00:06:12.000 | It only answers the question.
00:06:13.000 | The question is, "Will it be there for me?"
00:06:14.000 | It's there for you right now.
00:06:16.000 | It's true, by the way.
00:06:17.000 | Promise of security.
00:06:18.000 | It is true that social security faces financial problems and action is needed to make sure the system can continue to pay approximately the same level of benefits.
00:06:25.000 | Social security has been a contract between generations since 1935, and America has always kept the promise of security for workers and their families.
00:06:34.000 | What is that blithering nonsense?
00:06:37.000 | It doesn't answer the question.
00:06:38.000 | It doesn't answer the question.
00:06:41.000 | You got to dig deep to find out about the underfunding, the statistical underfunding of the whole thing.
00:06:48.000 | And the problem is social security isn't even the bad one.
00:06:51.000 | Social security has been changed so many times.
00:06:54.000 | I hope he changes it again.
00:06:55.000 | That's not even the one that's a problem.
00:06:57.000 | So I could have led with something like that and talk about how things change.
00:07:01.000 | But the problem is those things are so long-winded.
00:07:03.000 | We're talking about something that was almost 100 – put into force almost 100 years ago.
00:07:08.000 | And even though for 30 years people have been banging the drum, "This doesn't work.
00:07:13.000 | This doesn't work.
00:07:14.000 | This doesn't work," things move so agonizingly slowly in society that you can't see it.
00:07:18.000 | You can't put your hands on you.
00:07:20.000 | It's like standing on a continent and you know the continent is moving.
00:07:25.000 | They say, "Oh, it's growing or it's moving by six inches a year," or whatever the geological formation is.
00:07:30.000 | But you don't – you can't stand on that.
00:07:32.000 | That's different than sitting on a small iceberg right next to the shore.
00:07:36.000 | Every one of us in the United States now either has health insurance or we're paying a penalty tax.
00:07:41.000 | Well, that entire program was passed using social tricks.
00:07:47.000 | Argue all you want about whether you want it or whether you don't.
00:07:50.000 | The whole thing was passed with social tricks and the dead of a night and collaborating bills together and was based on lies.
00:07:57.000 | And you got the primary architects of the program publicly admitting we lied.
00:08:02.000 | It's all absolute lies.
00:08:04.000 | But even that, well, that's so long ago that you can't – you go back and try to expose the information.
00:08:09.000 | How do you use that?
00:08:10.000 | That's a financial issue.
00:08:11.000 | But how do you use that to show the manipulation of a society?
00:08:14.000 | I probably should have read – I don't know.
00:08:17.000 | I've got – I was thinking this was one of the things that I thought about presenting in that show.
00:08:21.000 | I've got the Financial Crisis Inquiry Report, the authorized edition, the final report of the National Commission on the Causes of the Crisis.
00:08:26.000 | It's the National Commission on the Causes of the Financial and Economic Crisis in the United States.
00:08:29.000 | It's ridiculous – I mean not ridiculous, 400, 500-page book on the reasons for the financial crisis.
00:08:37.000 | And if we look right here on page 22 of the introduction, the conclusions of the commission, we conclude there was a systematic breakdown in accountability and ethics.
00:08:46.000 | They go on and talk and talk and talk about ethics and all the different ethical positions on it.
00:08:51.000 | But the problem is whose ethics?
00:08:53.000 | And so it's really hard to use finance to talk about this stuff because finance generally moves so slowly.
00:09:00.000 | Or at least introduce the topic, which was one of my primary purposes.
00:09:03.000 | I wanted to talk about – kind of open up the discussion of how in general societies are governed so that we can have a foundation to talk about some of the real financial threats that face us.
00:09:15.000 | But it's hard to believe that stuff.
00:09:17.000 | It's hard to find the historical references and go through and make it compelling.
00:09:24.000 | It's hard for me to go through a 400-page financial crisis inquiry report, which I haven't gotten even through myself.
00:09:29.000 | Even though I have it.
00:09:32.000 | It's very, very dense.
00:09:34.000 | It's hard for me to find that and extrapolate ethics from it when it's all written in government speak.
00:09:38.000 | How do I do that effectively?
00:09:40.000 | That was my – that's my major challenge.
00:09:42.000 | How do I effectively articulate how change happens?
00:09:45.000 | And so I thought – the major goal that I had was I said, "Well, I can use social discussion."
00:09:53.000 | Because social movements are not necessarily based upon numbers or statistical evidence or charts and graphs of, "Look, this is doom.
00:10:01.000 | This is statistically unlikely to happen because the mortality rates and the levels of tax collection, they're based on opinion and worldview."
00:10:08.000 | And we all have opinions and have worldview.
00:10:11.000 | There's little proof or evidence in social movements.
00:10:14.000 | It's perception.
00:10:16.000 | It's perception.
00:10:18.000 | That was the major point of what I wanted to get across is I wanted to say, "Watch how the perception of issues is manipulated based upon careful PR techniques.
00:10:28.000 | Watch the effectiveness of it."
00:10:30.000 | And so my thought was, "Well, by just simply carefully discussing the plans involved and then leaving you free to draw your own conclusions,
00:10:39.000 | I'll treat you as an adult and leave you free to think what you like."
00:10:42.000 | So I hoped I could use a controversial subject to kind of stimulate your thinking and then get you to watch what's happening around you to pay attention because this is the time that things are changing.
00:10:55.000 | And so unlike trying to say, "Well, let's go back to 2008," that's old history at this point.
00:11:00.000 | You can't see it.
00:11:01.000 | You can look back in retrospect and read boring history books about it.
00:11:04.000 | But right now if you watch, you can see how society is changing.
00:11:09.000 | That was my point.
00:11:10.000 | I think it was wrong.
00:11:12.000 | I guess I didn't do a very good job.
00:11:14.000 | I didn't do a very good job of it or at least that's what the feedback has said.
00:11:18.000 | Now, what's interesting is that ironically the majority of the negative feedback to that show was based upon emotional responses to things I didn't say.
00:11:25.000 | I was very careful in dealing with the issues because I know how emotionally charged they are.
00:11:31.000 | I hate controversy myself personally.
00:11:33.000 | Believe it or not, I hate controversy.
00:11:35.000 | But I also hate how people run from important issues because they're scared to talk about them and people are bullied into shutting up.
00:11:43.000 | So I thought about the question carefully and I said, "I really believe that this is a useful way to look at modern society and be able to interpret it."
00:11:53.000 | And I thought, "How can I present some important information and documents in the most open-minded and objective way possible?"
00:12:02.000 | And that's why I read the documents.
00:12:04.000 | Now, I disagree personally with the documents.
00:12:07.000 | I made that clear, but I didn't even talk about my own disagreements with them.
00:12:10.000 | I took the risk of boring the audience to tears, which is what a lot of people do, by reading the actual documents.
00:12:16.000 | I can't go through a 400-page book and read you that document.
00:12:21.000 | I can't go through all of these articles that are historical things.
00:12:24.000 | And I thought, "Here is something where I can just read a document and present it fairly."
00:12:27.000 | And I took the risk of just making this horribly long and boring show because I wanted to be fair.
00:12:33.000 | I initially planned just to pull excerpts from the documents because I said, "Here is a social movement that no matter what you believe or what you think, you can sit back and watch.
00:12:41.000 | And here are documents that outline what the goals are of these social movements.
00:12:46.000 | You can look at them being achieved and you can understand.
00:12:48.000 | I understand what's going on."
00:12:51.000 | But then I felt, "Well, wait a second.
00:12:53.000 | I got to be careful because maybe I'm unfairly representing just a portion of the platform and the position."
00:12:58.000 | So I had some excerpts and I added more and then I added more and then I said, "Well, I should include this because otherwise it will be too slanted.
00:13:05.000 | So I'll include this."
00:13:06.000 | And finally I said, "You know what?
00:13:07.000 | I'll just read the documents with little comment."
00:13:10.000 | So when I read these documents, I didn't make any snide remarks.
00:13:13.000 | I didn't necessarily point out all the logical fallacies.
00:13:15.000 | I just read them.
00:13:16.000 | I did make comments afterward but I was careful in the comments.
00:13:20.000 | My guess, although perhaps I'm wrong, is if a three-hour show, I would guess that at least two hours of it was me reading from The Humanist Manifesto, The Overhauling of Straight America and Wikipedia, just directly reading.
00:13:31.000 | And I cut mountains of material out of Wikipedia that I planned to read once I got into the flow of the show and just kind of felt how much it was dragging.
00:13:40.000 | And then people are upset with the documents.
00:13:42.000 | So if you're upset with the documents, don't blame me.
00:13:44.000 | Blame the writers themselves.
00:13:46.000 | One person wrote me and said, "Joshua, I can't believe you used such ugly words.
00:13:50.000 | How could you use such language?"
00:13:52.000 | I didn't use ugly words.
00:13:54.000 | I was reading the document.
00:13:58.000 | I've never used any of those disgusting statements in my life.
00:14:04.000 | Not once.
00:14:08.000 | And one of the last things, and with this I'm done, but it was funny.
00:14:14.000 | I carefully avoided actually commenting on the question of homosexuality or specifically commenting on homosexual marriage for a few reasons.
00:14:21.000 | Number one, my comments are irrelevant to the debate.
00:14:24.000 | In our society, the question is generally assumed to be settled.
00:14:28.000 | Read a newspaper headline and you'll see that declared.
00:14:30.000 | So what are my comments or my opinion matter?
00:14:33.000 | I'm not involved in any court cases.
00:14:35.000 | I don't care about political office.
00:14:36.000 | I'm not lobbying for or against any laws.
00:14:38.000 | I'm just trying to say watch the information because we're going to apply it to finance.
00:14:43.000 | If you absorb the information I presented and you notice the timing, I did that in April because in the next forthcoming – I forget when it is, but we're going to hear oral arguments in the Supreme Court.
00:14:54.000 | And then I think it's in June that the rulings are expected.
00:14:57.000 | And we've been in this environment for the last couple of years.
00:15:00.000 | This is the major environment.
00:15:02.000 | Look at what's kicking off in the presidential elections.
00:15:04.000 | Watch what's happening.
00:15:07.000 | Watch it and draw your own conclusions.
00:15:12.000 | So if you absorb the information that I presented objectively for the most part, carefully, in full, without editing and excerpting things that prove my point, this is something that you can see.
00:15:27.000 | And then you can understand some of the tools that are used behind the manipulation of public opinion over certain courses of action.
00:15:38.000 | That's the point.
00:15:39.000 | It doesn't matter what I think.
00:15:41.000 | The point is watch and pay attention.
00:15:43.000 | And because it's a social issue, you don't have to sit out and pull out a calculator and try to figure out who's right or wrong.
00:15:48.000 | You have an opinion.
00:15:50.000 | And there's probably nothing that I said that makes it right or wrong as far as there's nothing that I said that's right or wrong.
00:15:56.000 | As far as there's nothing that I said that can convince any of you one way or the other.
00:15:59.000 | Most of us are convinced about our side and we very rarely listen to other things.
00:16:02.000 | I'm not trying to say convince you to a different position.
00:16:05.000 | I'm saying watch.
00:16:07.000 | Because when we get into the world, which is where we're going in future months, when you get into the world of trying to figure out what is going on in the financial world on a macro scale and how do I deal with that and also stay focused on my life, it is way harder than talking about social movements.
00:16:25.000 | The information is not as publicly available.
00:16:29.000 | It's much more difficult to figure out what's right or wrong and you've got to deal with a lot of facts and evidence and numbers.
00:16:35.000 | With social movements, you don't have to think about that.
00:16:37.000 | We all have a system, a construct, a way of thinking.
00:16:40.000 | Don't agree with me.
00:16:42.000 | Look at your own.
00:16:44.000 | So that's the first thing is my comments.
00:16:46.000 | I avoided really commenting because with the exception of some personal opinion that came out at the end, which I'm not a robot.
00:16:55.000 | I'm not a news reporter.
00:16:57.000 | I'm not sitting here just trying to present things without personal opinion.
00:16:59.000 | I'm trying to be fair and objective and say here are the arguments.
00:17:03.000 | Watch.
00:17:04.000 | Watch.
00:17:05.000 | Second reason I avoided commenting is I don't want to tell you what to think.
00:17:09.000 | One of the things I try to do and I'm imperfect at it, but I don't want anyone to be connected to me just because of what I say.
00:17:19.000 | If you're connected to me and you just do what I say, then in my opinion, I'll have failed.
00:17:23.000 | I'm not out proselytizing for followers.
00:17:26.000 | I'm trying to give you some information and some ideas and to equip you as an individual to think critically about life.
00:17:32.000 | And then my hope is that you'll teach others the same way.
00:17:35.000 | I don't want fans.
00:17:36.000 | I don't want you connected to me.
00:17:37.000 | Now, again, of course, that has to be balanced with we all have an ego.
00:17:42.000 | We all like our ego to be stroked.
00:17:44.000 | But what I try to do is I try not to tell you what to think.
00:17:49.000 | It's the exception of Q&A shows.
00:17:50.000 | I think I slip up.
00:17:51.000 | Sometimes, obviously, I do.
00:17:53.000 | Again, I'm human.
00:17:54.000 | We can't disconnect from our biases.
00:17:56.000 | We can't disconnect from our preconceived ideas.
00:17:58.000 | We can't disconnect from our worldview.
00:18:00.000 | But I try to model that as much as I can.
00:18:05.000 | But here's the big reason, and I'll go ahead and make this very clear because I don't like to be accused of things that are different.
00:18:14.000 | I specifically avoided commenting because I'm confused myself on what the right answers are for society with some of these social questions.
00:18:24.000 | Now, there's a big difference between how I think I as an individual should behave and how I'd encourage you as an individual to behave versus how we work together in a society.
00:18:37.000 | Those are two majorly different questions.
00:18:40.000 | I didn't talk about the question of what I think because I don't know.
00:18:45.000 | I'm actually confused on the subject in this way, and I'll make this very clear.
00:18:50.000 | For years, I was actually a supporter of the concept of homosexual marriage or what I preferred is just give the same civil union relationship under it.
00:19:02.000 | I think it's a violation of terms to talk about marriage.
00:19:04.000 | I won't argue that today.
00:19:05.000 | That's a waste of time right now.
00:19:07.000 | But I was for that for years, not really a supporter as far as I'm not out signing petitions or trying to get people to think what I do.
00:19:15.000 | But if you ask me, I'm pretty ambivalent about it.
00:19:17.000 | Fine.
00:19:18.000 | Whatever.
00:19:19.000 | That was generally my opinion for years.
00:19:21.000 | And if people asked me about it or it came up in private conversation, I would tell people I don't really care.
00:19:28.000 | What do I care about how other people live their life?
00:19:30.000 | There are a few reasons for that.
00:19:31.000 | And that's an unpopular opinion in certain scenarios, but that was the opinion that I held for a long time up until recently.
00:19:41.000 | I'll get to that in just a second, but here's a few reasons.
00:19:42.000 | Number one, I don't personally acknowledge any authority of the government over marriage in the first place.
00:19:47.000 | I don't acknowledge their authority over my marriage or over anyone else's marriage.
00:19:52.000 | As far as I'm concerned, government has always used marriage as a tool for social control.
00:19:56.000 | So what's funny is that incidentally, most of my homosexual friends agree with me on that topic.
00:20:06.000 | Or at least the ones that I talk to in personally in real life where you can actually talk with somebody about difficult issues instead of arguing each other into the ground in the public debate.
00:20:15.000 | They agree with me.
00:20:17.000 | I've had friends and clients that I've worked with who were homosexuals in a long-term committed relationship, and they would say this to me.
00:20:25.000 | I had one friend that I talked with who was married in a foreign country in Europe that had – where they recognized homosexual marriage as part of their judicial system.
00:20:35.000 | And he just simply said this.
00:20:36.000 | And so he's living in the United States.
00:20:38.000 | We're in the US government at that time.
00:20:40.000 | He didn't recognize that.
00:20:41.000 | And he said, "I'm married to my partner whether or not the government says I am or not."
00:20:45.000 | So, huh, we actually agree.
00:20:48.000 | We both agree that the government has no say in the matter.
00:20:51.000 | So why not start there?
00:20:53.000 | Why not talk about that?
00:20:54.000 | So since I've always been of the opinion, well, I don't acknowledge their authority over my marriage or over other people's marriages.
00:21:00.000 | So why do I even care?
00:21:02.000 | The other reason that I've been generally in favor over – or at least not opposed to – and again, that's probably my best position.
00:21:10.000 | Neutral on the subject.
00:21:11.000 | Ambivalent over how the government defines marriage is I don't understand how it's possible for any state to legislate morality.
00:21:19.000 | I don't see how you can legislate morality on a society.
00:21:22.000 | I just don't see how it's possible.
00:21:24.000 | Now here's the question that brings up on the other side.
00:21:28.000 | If morality were not legislated, what would the society look like?
00:21:31.000 | So we actually do legislate morality and this is why I have such a major confusion myself over how this should work out.
00:21:38.000 | Because what I think should be done versus what is being done aren't working together, and I've been trying to figure out the question for at least a year, like heavily thinking and researching and trying to figure out how to clarify my own position on it.
00:21:50.000 | So we say government can't legislate morality.
00:21:53.000 | I say that.
00:21:54.000 | But yet we legislate lying, morality.
00:21:59.000 | We call it perjury.
00:22:00.000 | We legislate theft, morality.
00:22:03.000 | We legislate family obligations, divorce law, caring for your child, alimony, child support.
00:22:10.000 | We legislate murder.
00:22:12.000 | We even legislate against families.
00:22:17.000 | Look at the impact of – we're talking about abusive families and child protective services and whatnot.
00:22:22.000 | So then why not legislate marriage?
00:22:24.000 | That was why I took the risk of going into such difficult issues.
00:22:27.000 | It's not because I don't know the answer, but I was describing – when I went into all of Peter Singer's discussions and I said, "Look what this man believes," and you look at that and you compare it and you say, "Well, I agree with him on this, but I don't agree with him on that."
00:22:38.000 | That was what I was hoping – what I figured most people would probably think.
00:22:41.000 | So on what basis do we – here's the problem.
00:22:46.000 | On what basis do we legislate and permit us to kill a baby before it comes out and breathes its first breath but not afterward?
00:22:56.000 | Singer would say that's wrong.
00:22:58.000 | Now, I would also say that's wrong.
00:23:01.000 | So where do we – how do we deal with that in society?
00:23:03.000 | I don't have a clue.
00:23:05.000 | But I wanted to bring those questions up to give you something interesting to think about because those are real questions.
00:23:11.000 | Those are real questions that are debated.
00:23:14.000 | Now, they're not debated in public news because of course not.
00:23:16.000 | We wouldn't actually talk about something that's tough.
00:23:18.000 | But they're real questions.
00:23:20.000 | So for years on the subject, my own personal opinion, I basically ignored it.
00:23:25.000 | I didn't desire to go out and campaign to change the law.
00:23:28.000 | But if questioned and talked about it, I would just simply say, "Fine.
00:23:31.000 | I would – yeah, whatever.
00:23:33.000 | I would probably say you might as well just change the law so that it doesn't matter, heterosexual versus homosexual."
00:23:39.000 | And that largely has come from my viewpoint of primarily I guess libertarianism.
00:23:43.000 | I just want to be left alone and I'll leave you alone.
00:23:48.000 | I supported that opinion for a long time in private and in discussions with friends.
00:23:54.000 | Until I started watching the vicious attacks and the violence that came against people that came the other way.
00:24:01.000 | I started to watch the violence that was inflicted on people like the florists and the wedding cake people.
00:24:06.000 | Those just simply chose not to participate in homosexual ceremonies.
00:24:09.000 | I saw them baited and destroyed and that really shocked me.
00:24:13.000 | It really shocked me because that was very different to see how people are treated in the news versus my own private conversations with friends and acquaintances.
00:24:21.000 | Big difference.
00:24:23.000 | I realized, "Wait a second.
00:24:25.000 | There's more going on here," and that was one of the things that really got me to study it in detail.
00:24:31.000 | The whole debate is tilted in a ridiculous direction.
00:24:35.000 | So if you want to criticize me, I'll give you some things to criticize me for.
00:24:40.000 | Criticize me for what I actually believe.
00:24:44.000 | I serve my clients in a professional capacity.
00:24:47.000 | I serve everybody.
00:24:49.000 | But I wouldn't attend a homosexual marriage ceremony.
00:24:52.000 | Before you decry my bigotry, here's one even worse.
00:24:56.000 | I also don't attend heterosexual marriage ceremonies for people who are divorcing and remarrying.
00:25:01.000 | Now, which of those do you think is a much more difficult decision for me to make and stand for in modern society?
00:25:06.000 | The one that's the current political opinion or the one that was argued 75 years ago?
00:25:11.000 | If you want to criticize me for moral objections, don't stop with homosexuality.
00:25:16.000 | I won't sit around and watch pornography with you.
00:25:18.000 | I won't go and get drunk with you at a party or participate in a drunken party or in a drunken orgy.
00:25:24.000 | I also won't lie to you about a financial product in order to make an excessive amount of money on the transaction.
00:25:28.000 | I'm not going to pick up a gun and go to the other side of the world and kill people with a different skin color than me just to spread the American empire and enrich a fat cat politician.
00:25:37.000 | I don't do drugs. Never have. Never will.
00:25:40.000 | But I'm not going to hang out and I don't think you should be – it should be illegal to you to do it.
00:25:46.000 | I'm just not going to go hang out at a drug party.
00:25:49.000 | I'm not interested in that.
00:25:51.000 | Now, remember this though. In the past, I would have done all those things.
00:25:55.000 | I used to be addicted to pornography.
00:25:57.000 | I'm not 100 percent sure if I've ever been fully drunk but I came pretty close on two different occasions.
00:26:04.000 | I've never knowingly swindled someone on a financial transaction but I used to be a habitual liar.
00:26:09.000 | So what's the difference?
00:26:11.000 | When I was young, I seriously thought about joining the military and doing my patriotic duty.
00:26:16.000 | And again, I've never done drugs, but I've voted a bunch of times for the stupid laws to be abolished.
00:26:22.000 | The only people who win from drug laws are the criminals who sell them and the police and military departments who pile up money to theoretically fight them.
00:26:28.000 | That's my point.
00:26:31.000 | There's a major difference between how I believe I should live my life and even how I'd offer you to live your life versus how the government responds.
00:26:39.000 | What the government is supposed to do.
00:26:41.000 | And I don't know the answer to the question on the government. I don't have an answer.
00:26:46.000 | So to me, I'm perfectly content to say there's a difference in personal morality versus how I think society should function.
00:26:53.000 | I don't know how society should function.
00:26:56.000 | Do you know this?
00:26:58.000 | I've been set free from all of that sin.
00:27:01.000 | Now, obviously, I have to be careful in how I walk.
00:27:04.000 | I have to be very careful. We all do.
00:27:06.000 | But I've been set free and I'm not controlled by that stuff anymore.
00:27:09.000 | And that's the entire point of Christianity.
00:27:11.000 | That's the entire point of the gospel of Jesus Christ.
00:27:13.000 | Christ died so we can live a righteous life, so we don't have to be a slave to the sin.
00:27:18.000 | That's the entire point of it.
00:27:21.000 | Paraphrase a guy that used to live a couple thousand years ago, a guy named Paul.
00:27:26.000 | He said, "The things I want to do, I don't do, and the things I don't want to do, I do.
00:27:30.000 | Who shall deliver me from this body of death?
00:27:33.000 | I thank God through Jesus Christ."
00:27:37.000 | And later it says, "The law of the spirit of life sets us free from the law of sin and death."
00:27:41.000 | I used to live there.
00:27:43.000 | So if you're going to condemn me and criticize me, do it accurately.
00:27:47.000 | Do it because I talk about sin of all kinds and I dare to use the S-word called sin.
00:27:51.000 | Talk about all kinds of sexual sins.
00:27:53.000 | Don't keep it down to homosexuality.
00:27:57.000 | That's one, yeah.
00:28:00.000 | But why don't we expand it and actually talk about what's real.
00:28:03.000 | You see some Bible words called sexual immorality.
00:28:05.000 | That includes homosexual sex, but more importantly it includes premarital sex, extramarital sex, a.k.a. adultery, animal sex, a.k.a. bestiality, and it even includes lustful thoughts.
00:28:15.000 | So that's my actual position on the matter.
00:28:18.000 | Now, how to bring that together as far as what's right for me or for you and society, I don't know.
00:28:24.000 | I do not know.
00:28:26.000 | Again, for years I've subscribed to the idea of, "Well, maybe if I just leave people alone, then they'll leave me alone."
00:28:31.000 | That's been my perspective.
00:28:34.000 | I've been content just to live my own personal life and not get involved in that stuff.
00:28:38.000 | I don't want to fight with people.
00:28:39.000 | I don't want to deal with government.
00:28:40.000 | I just want to live my life.
00:28:41.000 | And I want to encourage you and help you to live a life that's better.
00:28:45.000 | That's it.
00:28:47.000 | I'll tell you though, I've watched over the last year and I've significantly questioned whether or not that's even viable.
00:28:55.000 | I'm still searching for an answer to that myself.
00:28:57.000 | I don't have a clue what the right answer is, but that's why I've been silent on the subject.
00:29:00.000 | That's why I was very careful.
00:29:02.000 | There's all kinds of other comments that could be made, but I'm not really interested in talking about them right now.
00:29:07.000 | It's just kind of funny to me how I go out of my way to try to be objective and whether or not it was the right move, I don't know.
00:29:15.000 | Maybe I should have used just stuck with the financial crisis inquiry report.
00:29:19.000 | But come on, look at the society and you're going to tell me that we're going to figure out the Dodd-Frank bill and whether that actually matters?
00:29:26.000 | Who cares about the Dodd-Frank bill?
00:29:29.000 | How do I – nobody knows what it is.
00:29:31.000 | Nobody knows what's in it.
00:29:32.000 | Nobody knows how it impacts society, and you don't know whether it should or shouldn't.
00:29:36.000 | That's my point.
00:29:37.000 | The financial stuff is this like dark curtain that no one seems to be able to see through.
00:29:41.000 | So my thought was, well, if I do social – if I use social issues that we all have strong opinions on,
00:29:46.000 | maybe you'll see and be able to look and watch and then we can make more sense when we look at the financial issues.
00:29:53.000 | I do want to make one last comment and I want to thank a commenter on the show.
00:29:57.000 | The commenter goes by the handle of Dragline.
00:29:59.000 | And Dragline, by the way, thank you for making the time to comment on my show.
00:30:02.000 | I always look forward when I see your name pop up in the comment section.
00:30:06.000 | You make the best comments on the show.
00:30:08.000 | They're always insightful.
00:30:09.000 | They're always useful.
00:30:11.000 | They're always targeted and I always learn something, and I thank you for doing that.
00:30:15.000 | So Dragline made a comment on that show and he talked about – he said – well, he was very kind.
00:30:21.000 | He said, "Joshua, you're in over your head," which might be true.
00:30:24.000 | I do my best but at the end of the day, you got to realize I'm a young guy and I haven't studied this stuff for 50 years.
00:30:30.000 | I've tried desperately to keep pace with the flow of information in life.
00:30:35.000 | I'd much prefer to sit by and do nothing for the next 40 years and just simply study until I kind of had to figure it out how the world was doing.
00:30:43.000 | I look and say no one is talking about stuff that should be talked about and for whatever reason, I feel like I got to do it.
00:30:48.000 | But Dragline made a comment and he mentioned a book by a guy named Edward Bernays called Propaganda.
00:30:53.000 | This book was published back in I think it was 1928, '29, something like that.
00:30:57.000 | And Dragline, I have not read the book.
00:31:00.000 | It was on my list of books that I need to get to but that list has about a thousand books on there.
00:31:06.000 | I read as much as I can but I can't keep pace with it all.
00:31:10.000 | He mentioned this book and so I went and pulled the PDF of it and looked at it and found a couple of interesting things on it.
00:31:16.000 | Let me just read you two quotes.
00:31:17.000 | Remember, this was written in 1928.
00:31:19.000 | And so this chapter one here, very first page and a half of the book says this.
00:31:26.000 | The chapter is entitled Organizing Chaos.
00:31:29.000 | "The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society.
00:31:39.000 | Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.
00:31:48.000 | We are governed.
00:31:49.000 | Our minds are molded.
00:31:51.000 | Our tastes formed.
00:31:53.000 | Our ideas suggested largely by men we have never heard of.
00:31:58.000 | This is a logical result of the way in which our democratic society is organized.
00:32:03.000 | Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society.
00:32:10.000 | Our invisible governors are in many cases unaware of the identity of their fellow members in the inner cabinet.
00:32:17.000 | They govern us by their qualities of natural leadership, their ability to supply needed ideas and by their key position in the social structure.
00:32:26.000 | Whatever attitude one chooses to take toward this condition, it remains a fact that in almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking,
00:32:40.000 | we are dominated by the relatively small number of persons, a trifling fraction of our 120 million, 300 million plus today, who understand the mental processes and social patterns of the masses.
00:32:54.000 | It is they who pull the wires which control the public mind, who harness old social forces and contrive new ways to bind and guide the world.
00:33:05.000 | From 1928.
00:33:07.000 | Interesting, huh?
00:33:09.000 | Now again, I don't know if I – I guess time will tell.
00:33:14.000 | I don't know if the show is effective or not.
00:33:16.000 | I thought it would be – I've talked so much about education.
00:33:19.000 | I went and looked. Bernays has a whole chapter on education and the propaganda of education in here.
00:33:26.000 | I'll read just a moment of it.
00:33:29.000 | So, right here. "Education is not securing its proper share of public interest.
00:33:33.000 | The public school system materially and financially is being adequately supported.
00:33:37.000 | There is market eagerness for a college education and a vague aspiration for culture expressed in innumerable courses and lectures.
00:33:44.000 | The public is not cognizant of the real value of education and does not realize that education as a social force is not receiving the kind of attention it has the right to expect in a democracy."
00:33:57.000 | It's kind of interesting to hear someone from 1928 go through a lot of stuff I've talked about on the show on education, about it and say, "Here's what the point is.
00:34:05.000 | Here's what the goal is.
00:34:06.000 | Here's what the point is.
00:34:07.000 | Here's what the goal is.
00:34:08.000 | We should be using education more to shape the minds of a social system."
00:34:14.000 | So, I'm done with the topic.
00:34:17.000 | Again, I don't know if – I don't know.
00:34:20.000 | Who knows if it was a mistake or who knows if it was good.
00:34:22.000 | I tried to do it the best, most fair and objective way I did.
00:34:25.000 | If it was a mistake, I hope you'll be merciful and allow me to make some mistakes and learn from it.
00:34:31.000 | I guess I just get so frustrated that so much of the financial stuff is impenetrable.
00:34:35.000 | Some of you listen to the stuff on education.
00:34:38.000 | You're like, "Ah, it doesn't happen."
00:34:39.000 | And for me, when I started studying what I covered in that show and I actually started reading the documents and then I started going back through my mental history of my involvement in culture and I thought of, "Ah, that TV show, that happening, that event, that politician.
00:34:54.000 | Look how that person was badgered for that.
00:34:56.000 | Look how this person was badgered for this.
00:34:58.000 | Look what's going on.
00:34:59.000 | Look at today."
00:35:00.000 | And this is one of the things why I'm not too particularly upset about.
00:35:03.000 | I pay attention to the feedback that's logical, but I don't pay attention when someone just says, "Josh, what are you talking about stuff?
00:35:08.000 | I can't believe you have this personal opinion."
00:35:10.000 | That's the whole plan.
00:35:12.000 | Now, right or wrong, I don't know if it's right or wrong, but that's the whole plan.
00:35:16.000 | In the final phase of the social movement, you just attack anybody that has a different opinion and you try to bury them.
00:35:23.000 | Whatever.
00:35:25.000 | I'm not being buried by it.
00:35:26.000 | I'll give you the ammo that you need to fight with me, but actually fight with me for what I actually believe, not for what you think I believe.
00:35:33.000 | So, I don't know.
00:35:36.000 | I don't know if it was right or wrong.
00:35:38.000 | I have no idea.
00:35:39.000 | But hopefully, if it was not useful to you, toss it out.
00:35:43.000 | I just wanted to say, "Look, here is an example that I can actually connect to.
00:35:47.000 | I can't connect to Edward Bernays' book.
00:35:49.000 | I don't understand German Nazi propaganda."
00:35:52.000 | Look at that and say, "How on earth could somebody be snookered by that?"
00:35:56.000 | But I look at my own life and I look at how the debates are shaped in my own life.
00:36:01.000 | And over the last 30 years, with this social movement, I say, "Ah, I see.
00:36:07.000 | I never understood.
00:36:09.000 | Now I do."
00:36:10.000 | So, maybe it's just for me.
00:36:11.000 | Maybe it's for you.
00:36:12.000 | But anyway, I'm done.
00:36:14.000 | I hope that's helpful to some of you.
00:36:16.000 | And if it's not, I apologize.
00:36:17.000 | I'll keep working hard to do better.
00:36:19.000 | Just one guy.
00:36:20.000 | I'm an amateur at this.
00:36:21.000 | I've never done media before.
00:36:23.000 | And so, whatever.
00:36:25.000 | I'm sure other media personalities have to learn from what they do.
00:36:29.000 | And if you ever know – if I'm wrong, tell me I'm wrong or tell me why though.
00:36:32.000 | Don't just get mad at me for saying something.
00:36:34.000 | Tell me what's actually where I made a mistake.
00:36:38.000 | Anyway, done.
00:36:40.000 | Next question here comes from Brian.
00:36:42.000 | Email question on 529s and let's get into some financial topics.
00:36:45.000 | Brian says this, "Joshua, I'm embarrassed to say I've become slightly addicted to
00:36:49.000 | financial education podcasts but I can comfortably state that yours is the most detailed and informative.
00:36:54.000 | I have a question regarding a specific method for paying for my child's – children's college education.
00:36:59.000 | Putting aside the merits of a college education in general and putting aside thoughts that I have no obligation to pay for my children's school,
00:37:05.000 | let's assume I would like to pay nearly all tuition expenses for my three daughters, ages 12, 10, and 5.
00:37:11.000 | I see 529 plans as piggy banks that I will fund and will one day need to break, spend, and never see again.
00:37:18.000 | However, striving to create a large enough portion of dividend-paying stocks seems like an option in which I could pay tuition
00:37:24.000 | with the money strictly generated from my investments.
00:37:27.000 | Assuming – still a moderately big assumption on my end – that I can create the principle to generate about $25,000 in dividends at a 4% yield,
00:37:35.000 | does this seem like a viable option?"
00:37:39.000 | Warm regards, Brian.
00:37:40.000 | I gave a few other details but they're not pertinent to the question here.
00:37:44.000 | So in short, yes, you can do that.
00:37:47.000 | But your major question is going to be then what?
00:37:50.000 | Then what do you do afterwards?
00:37:52.000 | So let's just run some quick math here and try to figure out is this even doable.
00:37:55.000 | It depends on how much money you have and depends on what your income is.
00:37:59.000 | He says, "I'm in the top income tax bracket."
00:38:01.000 | So let's just assume you have enough money coming in that it's not a big deal.
00:38:04.000 | So if the goal is to create $25,000 at a 4% dividend yield, let's figure out what the capital sum would be that we'd actually need to pull off of that and not invade the principle.
00:38:15.000 | So if we just use a 4% dividend rate, take $25,000 and divide that by 0.04 to be 4%.
00:38:22.000 | Hit Divide and that will give you the amount of money, that's $625,000.
00:38:26.000 | That's how you figure out how much money if you're doing a simple thing like that.
00:38:30.000 | Divide it by 0.04%.
00:38:32.000 | So that's $625,000.
00:38:34.000 | So in order to fund this, assuming $25,000 a year in dividends at a 4% yield, you need a capital sum of $625,000.
00:38:42.000 | So let's figure out if that is a realistic amount.
00:38:44.000 | You may have some money in the accounts already.
00:38:46.000 | But let's assume that you're starting with $0 in the account and you have extra money in other investment accounts that you want to use to pre-fund it.
00:38:54.000 | So you can pre-fund this with five years of gift tax exclusion amount.
00:38:59.000 | So whatever the amount is that you're allowed to put in as far as – that's excluded from gift tax, the annual exclusion amount for gift taxes.
00:39:09.000 | You multiply that times five and that's what you can put into the account as a transfer to the beneficiary.
00:39:14.000 | The limit on 529 accounts is not a hard and fast limit of $2,000 a year like it is with the covered LESA.
00:39:20.000 | The limit is based upon what's the amount that the college education costs.
00:39:23.000 | But when you're putting in a large amount like this, you're limited to five years of the annual exclusion amount.
00:39:29.000 | So take $14,000, multiply it times five, and that equals $70,000.
00:39:35.000 | Now, your wife can also make a contribution of $14,000 times five into the account as well.
00:39:43.000 | Or if you were doing this for your grandchildren, anytime you're married, you can split the gift and you can put it in there.
00:39:50.000 | So each of you could put in $14,000.
00:39:52.000 | So that's a total of $28,000 between you and her and times five.
00:39:56.000 | So that equals $140,000 per child that you can put into the account.
00:40:01.000 | And then because you have three children, you can do that for each of them.
00:40:04.000 | So $140,000 times three would be $420,000.
00:40:08.000 | So you can contribute to the account $420,000 as a capital contribution right now.
00:40:16.000 | Now, if we needed to grow the $420,000 to equal $625,000 and let's assume that we've got basically 10 years because your children are aged 12, 10, and 5.
00:40:27.000 | So you can use different numbers.
00:40:29.000 | Well, let's use 10 and then we'll drop this down to 12.
00:40:32.000 | It would be to 18.
00:40:33.000 | We wouldn't need the full amount there.
00:40:35.000 | But let's just – yeah, we'll do it in six years and in 10 years and let's figure out how much you actually need.
00:40:39.000 | So if we stay $420,000 as our principal value and then our ending value is $625,000, we put that in as our future value.
00:40:49.000 | We put in $0 for our payments and we put in the term here.
00:40:56.000 | So we're going to put in 10 for the number of periods for 10 years and we hit our interest button on the calculator.
00:41:01.000 | That will tell us how much of a percentage rate that we need and the answer is 4.05%.
00:41:07.000 | If we could deposit $420,000 capital today, wait 10 years, and we want to know what's the interest rate we need to be $625,000, that's 4%.
00:41:15.000 | Now, if we dropped it to six years and we put that six in as our number of periods, then the interest rate that we need to grow $420,000 to $625,000 is 6.85%.
00:41:28.000 | So you're in a realistic ballpark as far as you're actually being able to do this.
00:41:33.000 | So yes, you can do this.
00:41:35.000 | Now, what about the problems?
00:41:37.000 | Kind of three things emerge and come to mind right away.
00:41:40.000 | Number one, can you actually find a good dividend-paying mutual fund within your 529 program?
00:41:46.000 | Remember, with the 529 programs, you can only select mutual funds that are preselected by the 529 plan.
00:41:52.000 | So do you have access to a good one that's primarily focused on dividends?
00:41:57.000 | Is the fund well-run?
00:41:58.000 | Does it have good expenses?
00:41:59.000 | Is it a well-run fund?
00:42:01.000 | That's one question.
00:42:02.000 | The next thing is you do need to consider how is this going to impact financial aid.
00:42:06.000 | Chances are, I mean, you're going to be paying for it if you're in the top income tax bracket.
00:42:10.000 | Unless you've done some fancy planning, you're going to be paying for it.
00:42:13.000 | But do consider that.
00:42:14.000 | Always consider financial aid considerations and that's one of the challenges.
00:42:18.000 | Then finally, the big question is what do you want to do with the account on the backside?
00:42:23.000 | Let's say that you do this.
00:42:25.000 | You're going to have three children through college and you're going to have $600,000 sitting in this 529 account.
00:42:31.000 | What are you going to do with it?
00:42:33.000 | Is it going to stay in the fund and be used for the grandkids?
00:42:36.000 | Do you want to get it out and spend it at some point?
00:42:39.000 | Are you going to make just distributions back into your own life?
00:42:41.000 | Think through that because that's one of the questions.
00:42:44.000 | If you're going to leave it in the account and have this as a funding for the grandkids and you've got plenty of other money in other places, that's fine.
00:42:50.000 | That would be a good thing to do.
00:42:51.000 | It will be very tax-advantaged over the years assuming the rules stay consistent with what they are now.
00:42:56.000 | It will be very tax-advantaged and you've got so much money that the money can just grow to an enormous sum
00:43:00.000 | and you can essentially use this to establish a very low-cost trust fund in essence for the kids' education.
00:43:07.000 | I mean just think about, let's just say $600,000.
00:43:10.000 | How much would $600,000 grow to?
00:43:12.000 | No payments.
00:43:14.000 | So let's say that you're – okay, let's go with your 10-year-old.
00:43:18.000 | Your 10-year-old graduates from college at 22.
00:43:20.000 | Average age of marriage in our society is 25.
00:43:23.000 | You have kids at 30.
00:43:24.000 | So let's just say 25 years.
00:43:26.000 | I'll just use that.
00:43:27.000 | So 25 years in which case you've got – it would probably be more than that.
00:43:30.000 | Let's go with 30 years.
00:43:31.000 | So 30 years from now when you've got kids that might be going to school maybe.
00:43:35.000 | So 30 years from now at let's just – what?
00:43:37.000 | 8% interest just for funds, $0 for the payments.
00:43:40.000 | In 30 years at 8% interest, that capital sum that would be in that 529 account would be $6 million.
00:43:46.000 | Now you take 4% off of that and you've got $241,000 a year that could come off of the account.
00:43:53.000 | Do you need $241,000 a year coming in in 30 years to pay for your grandkids' education?
00:43:59.000 | I don't know.
00:44:00.000 | Probably not unless they're all going to go to Ivy League schools
00:44:03.000 | and they're all going to get master's degrees and things like that.
00:44:06.000 | It's probably a little bit high.
00:44:07.000 | So that's your question is how are you going to distribute it?
00:44:09.000 | If you're going to distribute it, you're going to pay taxes and then you've got to work through the penalties and fees.
00:44:13.000 | You can do some of the creative things that I talked about on the 529 show to use the money for yourself.
00:44:18.000 | But I would generally prefer you to underfund the college accounts versus overfunding them.
00:44:25.000 | That's my personal opinion.
00:44:27.000 | Underfund it a little bit and make it up with other assets.
00:44:30.000 | But you're going to have to decide.
00:44:31.000 | So hopefully that's helpful for you.
00:44:33.000 | Next question comes from Vikram and it's on life insurance.
00:44:37.000 | So here's the question.
00:44:38.000 | Joshua, I listen to your podcast regularly.
00:44:40.000 | Thanks for the wonderful work you're doing.
00:44:42.000 | The topics are as interesting as the guests and interviews are.
00:44:44.000 | I'm 42 years old and I currently have life insurance from my employer.
00:44:48.000 | I'm trying to buy life insurance from one of the providers but I have the following questions.
00:44:52.000 | Question number one, should I continue the life insurance at work even after I get it from outside
00:44:57.000 | and will the two ever be mutually exclusive?
00:44:59.000 | Should I search for an agent?
00:45:01.000 | If so, are there any websites that can help me find one?
00:45:03.000 | Are websites like AccuQuote reliable?
00:45:05.000 | How else should I compare the products of various providers?
00:45:08.000 | And then can you provide any other pointers?
00:45:11.000 | So Vikram, I'll answer these questions one at a time and these are good questions.
00:45:14.000 | So here's the rule with life insurance from work versus outside of work.
00:45:18.000 | The major problem with having your life insurance at your job is generally this.
00:45:23.000 | When you leave your job, you lose your life insurance.
00:45:26.000 | It's as simple as that.
00:45:28.000 | Now you might leave your job on positive terms because you got a job paying you twice as much money
00:45:33.000 | or because you got fired all of a sudden.
00:45:36.000 | But it can be a real problem if all of your insurance is associated with your job.
00:45:41.000 | That's the problem.
00:45:43.000 | And it puts a big risk on your back and think about this.
00:45:48.000 | This is an unusual scenario but it can happen.
00:45:51.000 | You're working all your life insurance is with your job.
00:45:54.000 | You get diagnosed with cancer.
00:45:57.000 | Your boss probably will want to continue your benefits at some point
00:46:01.000 | because that's where your health insurance is connected and that's where your life insurance is connected
00:46:05.000 | and most employers are going to want to try to help you at some point.
00:46:08.000 | But the problem is unless they have an ongoing plan established,
00:46:11.000 | they put themselves at legal liability risk if they do that for you and don't do it for everyone.
00:46:16.000 | And so what if at some point in time you're fired from your job
00:46:19.000 | and now you can no longer maintain the life insurance policy?
00:46:23.000 | You go on. You recover from your cancer and you go to another place of work
00:46:27.000 | or you can go back to the job for whatever reason though your life insurance policy has lapsed.
00:46:31.000 | Now, in general, most of the group financial plans don't have the ability to continue the life insurance contract on an individual basis.
00:46:39.000 | Or if they do, they are usually there with terms that you have to convert it
00:46:47.000 | from a term life insurance policy to a whole life insurance policy.
00:46:51.000 | And that could be disastrous to your budget either because it's a bad policy
00:46:56.000 | and you don't want to own it or because you just don't have the money because there's a reason why you left.
00:47:00.000 | You got fired.
00:47:02.000 | I have seen plans and plan documents that were written differently where they're starting to change a little bit.
00:47:08.000 | But still for the most part, I'm uncomfortable generally with it.
00:47:12.000 | So my rule of thumb on the topic is this.
00:47:16.000 | Take all the free insurance that your job gives you.
00:47:20.000 | Your employer can deduct $50,000 up to – the cost of $50,000 of total life insurance for you as a non-taxable fringe benefit.
00:47:30.000 | But many employers will go ahead and give you a certain amount of insurance, two times your annual salary, three times of annual salary.
00:47:36.000 | If they're paying for it, even if it's not a tax-free fringe benefit, just take it.
00:47:41.000 | Take all the free insurance I can get.
00:47:43.000 | But then in general, you want to supplement the insurance from an outside perspective,
00:47:48.000 | from an outside broker, from an outside policy, something that's not connected to your job.
00:47:54.000 | There are very rarely any benefits to paying for additional insurance through your job.
00:48:01.000 | I'll get over some of the exceptions to that.
00:48:03.000 | But generally, there's no benefit for it.
00:48:06.000 | My experience has been that usually you can get cheaper insurance outside of your job than you can at your job.
00:48:13.000 | If it's convenient for you to simply have a deduction on your paycheck, then you can usually get a better rate outside of your job.
00:48:25.000 | Now, the major exception to this is if you can't get insurance in the open market at a good price.
00:48:31.000 | If you're in that kind of situation, then being able to buy life insurance at your job can be a real benefit for you,
00:48:38.000 | whether it's some health thing, whether it's a tobacco thing or whatever.
00:48:42.000 | Usually, if you're buying additional amounts of insurance at your job, it will either be what's called guaranteed issue,
00:48:47.000 | which means there's no question about – you don't have to answer a question on all these things about your health.
00:48:53.000 | You don't have to go through a health exam.
00:48:55.000 | Or it will be – if it's not guaranteed issue, it will probably be something called simplified underwriting,
00:49:00.000 | where instead of going through a detailed medical questionnaire, they just simply ask you a few questions.
00:49:06.000 | As long as you don't have cancer and you didn't have a heart attack last week, it's a little bit simpler.
00:49:11.000 | So if you find yourself in the open market trying to shop for and buy life insurance in the open market,
00:49:16.000 | then you might want to go ahead and pursue it through your job because a lot of times you can get insurance through your job
00:49:26.000 | that you can't get out individually.
00:49:29.000 | Now, as far as the question, the question as far as how much things cost, it varies.
00:49:33.000 | Most people that buy insurance at their job, they never price insurance in the open market.
00:49:37.000 | It's a little bit challenging sometimes without actually analyzing what are the costs at your job versus what are the costs outside of your job.
00:49:44.000 | Then because people confuse different policy designs, then they often get bad information.
00:49:50.000 | So let's say for example in the open market you're comparing a 30-year level term policy versus what you're paying at your job,
00:49:57.000 | which is a yearly renewable term policy.
00:50:00.000 | Well, then you look at it and say, "Well, I'm paying $80 a month for level term insurance outside of my job,
00:50:06.000 | but they're going to charge me $18 a month for insurance at my job."
00:50:10.000 | Well, it's not quite a fair comparison.
00:50:12.000 | You need to compare the type of insurance you can get at your job with what's outside of your job.
00:50:16.000 | So as with anything, the answer is always it depends and analyze it.
00:50:21.000 | But if you were going to buy 30-year level term insurance at your job, then that would make a difference.
00:50:27.000 | Then you would want to – then that would be comparable in price to what's outside of your job.
00:50:31.000 | There's no difference as far as what the cost of insurance is for insurance companies,
00:50:35.000 | whether they're offering insurance at your workplace or whether they're offering insurance outside of the public market.
00:50:41.000 | If there is a difference, it's going to be negative to buying insurance at work because they're doing, again, what's called guaranteed issue.
00:50:50.000 | So usually that will be offered at a different underwriting band than out in the open market.
00:50:55.000 | In the open market, they'll come and see you and you'll do a blood test and you'll do a urine analysis.
00:50:59.000 | They'll ask you these 322 questions and they'll get all your doctor's reports.
00:51:04.000 | Then they can be confident.
00:51:06.000 | So if you're healthy, you're almost always going to be able to get a better deal out in the open market.
00:51:09.000 | If you're not healthy, you might be able to get a better deal at your job.
00:51:12.000 | I hope that's a good starting point.
00:51:15.000 | So the answer – the next question, should I continue the life insurance at work even after I get it from outside and will the two ever be mutually exclusive?
00:51:23.000 | This comes down to pricing.
00:51:25.000 | So what is the price of the insurance that you get at work?
00:51:28.000 | If you're a rank and file employee at a major corporation, the price is just basically probably the price of insurance.
00:51:34.000 | But sometimes you might have a benefit that's been negotiated as part of your group benefit package where the price is substantially discounted.
00:51:42.000 | I did some consulting work for some clients who worked in a law firm here in West Palm Beach.
00:51:48.000 | The law firm was an established, prestigious law firm with an excellent benefits compensation package.
00:51:55.000 | Well, in that situation, the insurance – as one of their benefits, once they reached a certain level of standing in the terms of the employee hierarchy, they had access to just a really great group insurance question – operation.
00:52:09.000 | And it had such favorable terms of being if they left the job, they could take the policy with them.
00:52:13.000 | It was structured – the way that one was structured, it was structured as a universal life insurance policy.
00:52:18.000 | The company paid the cost of the term insurance within the universal life insurance policy and then the employee could make additional contributions to the policy if they wanted to.
00:52:26.000 | I sat down with my client, analyzed it, and I said drop the – they had a term insurance policy with me and the answer was drop some of the term insurance and take this because it's undoubtedly better and it's undoubtedly cheaper.
00:52:36.000 | But that was because it was an executive benefit that was established.
00:52:39.000 | So from a simplified, again, rank-and-file employee answer, then what you should do is you should take as much free insurance as they give you at work.
00:52:48.000 | Then get all the insurance that you need outside of your work.
00:52:51.000 | And then if you can't get it or if you need more outside of your work, then go back to your question at work and get it at work.
00:52:59.000 | The only other thing that comes to mind to answer that question fully would be you can get additional amounts at work.
00:53:06.000 | So anytime you're trying to navigate the difference between insurance at work versus insurance out, remember this.
00:53:13.000 | If you have – let's say that your total – let's do it like this.
00:53:17.000 | So your total – your annual income is $50,000 and the insurance companies will give you an amount of insurance equal to 20 times your annual salary.
00:53:26.000 | That's a million dollars of total coverage.
00:53:28.000 | There's always a ratio of your income to the amount of coverage that they'll give you.
00:53:33.000 | And the goal is because they're not going to put themselves on the hook for adverse selection where if you go and you commit suicide, your family gets $10 million but you're only making $50,000 at work.
00:53:43.000 | So depending on your age, there's always going to be a ratio depending on the – and the company of what amount they'll give you.
00:53:48.000 | So let's just say you're making $50,000 and the ratio at your age bracket is 20.
00:53:52.000 | So you can qualify for a total of $1 million of coverage.
00:53:55.000 | If you don't have any insurance at work and you go out and you call a life insurance company and you call up AIG or Prudential or New York Life or MassMutual or any of these companies, they'll give you a million dollars of coverage.
00:54:09.000 | But if you already have $500,000 of insurance at work, they'll only give you $500,000.
00:54:17.000 | So if you want a lot of coverage, your best plan is don't get any insurance at work.
00:54:22.000 | Go and call Prudential and get your million-dollar term policy outside of work.
00:54:28.000 | Then the next time open enrollment comes around, go ahead and sign up for the $500,000 policy at work because when you enroll in group policies, they don't generally have anywhere where you need to put in information about other insurance.
00:54:41.000 | But when you apply for individual policies, you do have to list other insurance that you have.
00:54:46.000 | So if you get it in the open market as an individual policy first and then go back to your job and get the $500,000, you could get your total amount of insurance up to $1.5 million instead of $1 million.
00:54:59.000 | So that can also be useful for you.
00:55:01.000 | Next part – answer to your next question here.
00:55:04.000 | Should I search for an agent?
00:55:06.000 | If so, are there any websites that can help me find one?
00:55:08.000 | Then are websites like AccuQuote reliable?
00:55:12.000 | Here's the challenge.
00:55:14.000 | I've been thinking about this lately.
00:55:15.000 | I'd really love to bring you guys a life insurance solution.
00:55:19.000 | I know it's a big deal.
00:55:20.000 | I don't do it anymore.
00:55:21.000 | I've thought about how I could do it and I'm working on it because it's a real question.
00:55:25.000 | I'd love to have somebody that I could trust that I could bring on as a referral relationship for you.
00:55:31.000 | I used to – and I've learned a lot doing media.
00:55:36.000 | I've tempered some of my statements a lot.
00:55:38.000 | One of the things I used to be very critical of, for example, Dave Ramsey and his Xander Insurance relationship.
00:55:45.000 | They've been business partners forever.
00:55:48.000 | I used to say, "That's just not right."
00:55:50.000 | But I've realized that I'm sure that Dave has gone – went through exactly what I'm going through where people that want your opinion and value it are coming to you and saying, "I need a solution.
00:56:02.000 | Can you help me?"
00:56:03.000 | Now, I think I see a little bit more maybe that I didn't before and I see a little bit more about how things are developed over time and how he's just built out programs and services to serve his audience.
00:56:14.000 | I think I was probably too critical of him in the past for that scenario.
00:56:18.000 | But as far as these companies and these – and an agent, all of the life insurance companies, the brokerages, whether it's Xander Insurance, whether it's AccuQuote.com or I don't know, SelectQuote.com or TermInsurance.com or TermLifeAAA blah, blah, blah.com or 1-800-TERM-LIFE, just what you see advertised.
00:56:38.000 | All of these are simply brokerage companies.
00:56:42.000 | So none of them are life insurance companies.
00:56:45.000 | All of the life insurance companies behind the gates are all exactly the same and no broker necessarily – few brokers have any benefit over another broker.
00:56:56.000 | So if you are going to buy a Banner Life 20-year level term policy, the product that you're going to buy from AccuQuote.com or from XanderInsurance.com or from TermLife.com or from Joshua Sheets back when I was a life insurance agent with Northwestern Mutual, it's exactly the same product.
00:57:14.000 | There's no difference in price.
00:57:18.000 | There's no difference – I can't rebate commissions.
00:57:21.000 | There's nothing that can be done as far as it's going to be exactly the same product from the same insurance company.
00:57:26.000 | What you're primarily looking at is you're looking at the broker on the way through and the broker's advice.
00:57:31.000 | All of the companies are going to be paid exactly the same amount.
00:57:37.000 | So all life insurance policies have a commission that's associated with them.
00:57:41.000 | That commission will go either to AccuQuote.com or to XanderInsurance or to Joshua Sheets.
00:57:49.000 | Then Joshua Sheets – if I have a brokerage, I get all the commission.
00:57:53.000 | I could set that up or if I have a relationship with a brokerage, which is how I used to do it, then the broker would get part of the commission and I would get the rest of the commission.
00:58:02.000 | But there's no difference as far as the commission.
00:58:05.000 | Every single one of the brokerages is paid on commission.
00:58:08.000 | So when you actually look at it, the only ability as far as – the only thing that you can shop for, if you're shopping based upon price, the only thing you can really shop for is the expertise of the person who's helping you with the life insurance need.
00:58:26.000 | This is where my concern is.
00:58:28.000 | I've never called any of these brokerage agencies on the phone and talked to them.
00:58:32.000 | But you could bring somebody in and teach them.
00:58:35.000 | All we do is term insurance. We have 10-year level term, 15-year level term, 20-year level term, and here's a simple calculator.
00:58:41.000 | You could go on the web and you can find a gazillion calculators online.
00:58:46.000 | And so here's how you figure out how much they need, figure out how much they want to be able to pay off death benefit and how much they want for income, and they can do that.
00:58:54.000 | OK, here, apply for these companies.
00:58:56.000 | So – but you're basically in a situation where there's no benefit from one or the other except the expertise of the agent.
00:59:04.000 | I'm generally uncomfortable with a lot of these phone-in places because I just think it's probably a phone person.
00:59:09.000 | Now, I've got one that I'm going to try to talk to of somebody that I know and try to assess the professional – just the professional knowledge of the agent as far as how helpful they are and to try to see if I can find one that I could be confident in.
00:59:25.000 | But that's my question.
00:59:26.000 | So that's why if I could ever find an agent who can help you and look at things collectively, then that's better.
00:59:33.000 | But then the problem that many people have is the fear of, well, now I have an individual agent.
00:59:38.000 | Now they're going to get their hooks into me and they're going to oversell me what I actually need and they're going to try to sell me more and they're going to try to switch me from term life to whole life or they're going to try to sell me the term life with the return of premium rider instead of the not return of premium rider, et cetera.
00:59:51.000 | So it's a tough question for me to answer.
00:59:55.000 | There's nothing wrong with them.
00:59:57.000 | They're all producing the same scenarios.
00:59:59.000 | I would love it if you had an individual advisor, an individual insurance agent that had those relationships set up with the companies through a broker and could give you some personalized service.
01:00:09.000 | You could meet with face-to-face.
01:00:11.000 | You could take more time to explain the options to you and that we're a little bit more of an expert.
01:00:15.000 | Problem is the career of the life insurance agent is in decline.
01:00:19.000 | It really seems to be that most – there's very few people that want to specialize in life insurance.
01:00:23.000 | Most financial advisors want to do comprehensive planning, everything about financial planning and investments and insurance, and so it's really tough.
01:00:30.000 | The best way to get a life insurance agent is still to go with one of the traditional insurance companies.
01:00:37.000 | So if you know somebody from New York Life, a Northwestern Mutual, I've got some friends who are reps at Prudential, Mass Mutual, things like that.
01:00:45.000 | These are the more traditional life insurance shops and even one of their new trainees is going to do – probably do, in my opinion, probably do a little bit better of a job for you than somebody on the phone at a call-in place.
01:00:58.000 | It's just manning a phone.
01:01:00.000 | Now, beyond that, next question, how should I compare the products of various providers?
01:01:05.000 | You got to listen to the series of shows that I'm doing.
01:01:08.000 | There's really little way for you to compare the products.
01:01:11.000 | You got to decide what you need and then compare same products to same products.
01:01:15.000 | If you're super healthy, it's pretty easy.
01:01:18.000 | Ten-year level term is ten-year level term is ten-year level term.
01:01:21.000 | That's the same.
01:01:22.000 | May or may not be right for you.
01:01:23.000 | You might need to figure out, "Should I buy a 30-year level term or 20-year level term or yearly renewable term?"
01:01:27.000 | That's why I'm doing all these shows.
01:01:29.000 | When it comes to choosing among individual companies, if you're buying a policy that has cash value, it's a much more important analysis.
01:01:37.000 | If you ever think that you're going to convert your term policy to a whole life policy of some kind, it's a much more important analysis.
01:01:43.000 | If you're just buying cheap term, cheap term, cheap term, just buy cheap term and go with that.
01:01:48.000 | As far as comparing them, the only other additional benefit of one company over another is going to be if you are rated by any of the companies.
01:01:56.000 | That's where you would want to have a broker that can shop your case and shop your file with multiple companies.
01:02:03.000 | Don't accept, "Okay, I'm level four here without your broker going ahead and I'm rated a tier four here," without your broker going and seeing, "Can I get you a standard plus with a different company?"
01:02:12.000 | Because each company has unique things and they have different cutoffs.
01:02:15.000 | There are different ways their underwriting systems work.
01:02:18.000 | So if you have an expert broker, that expert broker can help you with that.
01:02:21.000 | I hope that's helpful.
01:02:23.000 | Next question comes from Todd.
01:02:25.000 | Todd says, "Hey, Joshua. I'm a new listener. I really like the show, especially with your style of deep diving to get helpful insights and strategies instead of the normal flim-flam content out there.
01:02:32.000 | I wanted to ask you to consider a podcast show around radical ways to lower the cost of owning a home.
01:02:37.000 | Not the typical advice out there, but more along the lines of buying a property that meets your family needs but that could provide rental income to offset your mortgage too.
01:02:45.000 | Cash flow around homes is a large percentage of a take-home pay for most families.
01:02:49.000 | It just seems like an area that most people are not considering and could be a significant win. Thanks, Todd."
01:02:55.000 | Todd, great question and I love this show.
01:02:57.000 | One of the things that I love and I've written out the show outline for it just for whatever reason I haven't done it is years ago I started using the term homestead instead of a home.
01:03:08.000 | And I really love this idea.
01:03:10.000 | I love the use of this word.
01:03:12.000 | And I can't remember who talked – I mean it's not like it's a new term.
01:03:16.000 | But the idea of a homestead is how can my house be productive for me instead of me being productive for my house.
01:03:22.000 | If you go back and you think about the word in history where I always associated with is like the Oklahoma land rush or we're going to go out and we're going to homestead and we're going to get a section out in North Dakota or South Dakota.
01:03:34.000 | My family actually in the past, my grandfather – excuse me, my great-grandfather was a homesteader.
01:03:43.000 | He had gotten this section of land out in Colorado and way up in the mountains and they homesteaded it for years and split it off and you get the quarter section.
01:03:51.000 | And I think if my memory is right, quarter section is 40 acres and times four is 160 acres I think was a section.
01:03:58.000 | So I love the background of this and the idea.
01:04:01.000 | It's kind of that rugged individuality of the American West, that frontier spirit of going out and tackling something.
01:04:08.000 | But I think it was Jack Spierka who really hammered this home for me when he talked about how what was unique about that is when those people went out to homestead, they were not looking to provide for their land.
01:04:22.000 | They were looking for their land to provide for them.
01:04:25.000 | That's a radically different scenario.
01:04:28.000 | They were looking for their property to provide the needs of their house – excuse me, the needs of their life.
01:04:36.000 | So when they went out, they looked at the land and they said, "Well, this land has trees and we can use those trees to build our house with."
01:04:43.000 | When they went out, they said, "I need this farmland so that I can create food, grow food to feed my family.
01:04:48.000 | And I need it to grow food to feed my livestock so that my livestock can help me grow food to feed my family.
01:04:53.000 | And I need to grow food to feed my livestock so that my livestock can reproduce and then their babies can feed me and my family."
01:04:59.000 | And so everything was about producing and pulling a living out of the land.
01:05:05.000 | We don't look at housing very much that way anymore.
01:05:08.000 | We look at housing as a luxury good, as a lifestyle choice.
01:05:12.000 | Now, is there anything wrong with that?
01:05:14.000 | I don't think there's anything wrong with it.
01:05:15.000 | It's just a choice.
01:05:16.000 | But if you're looking at financial productivity, I love the concept of homesteading, of trying to pull it forward and say, "Here's the concept of homesteading and actually like – and apply it in modern life."
01:05:32.000 | So instead of saying, "How can my house be an energy suck out of my life?
01:05:37.000 | How can it be – provide for me and for my needs?"
01:05:40.000 | That's the whole idea.
01:05:43.000 | I don't really – I don't want to go back and be a homesteader in the concept of going out and farming my section of land.
01:05:51.000 | That is a tough life.
01:05:53.000 | By the way, I think I had the numbers wrong earlier.
01:05:56.000 | I think a section was 640 acres.
01:05:58.000 | That's what comes to mind.
01:06:00.000 | But that was a tough life.
01:06:01.000 | My life now is far easier.
01:06:03.000 | The high division of labor economy where I sit in a beautiful house and I sit with electricity that someone else produces and a computer that someone else produces and talking to a microphone that someone else has made and try to encourage you in your financial journey all around the world, that's a much easier life and a much better quality of life than going out there and making a hardscrabble existence from dawn till dark.
01:06:29.000 | I tell you, I listen to my dad talk about the way that his life was back in the day and it's a very different lifestyle.
01:06:36.000 | We don't realize how good we've got it.
01:06:38.000 | But I think the same concept, which is what you're asking, can be applied.
01:06:41.000 | So I think look at it in two different sides.
01:06:43.000 | Number one, in order to turn my house into a homestead, something that's productive for me, I think first look at lowering the costs, lowering the outflow from my pocket.
01:06:56.000 | So lowering the cost of purchase, lowering the cost of ownership, lowering the cost of maintenance, lowering all of the costs.
01:07:07.000 | And there's a bunch of ways to do it, which is you can do it in anything as being content, being a semi-minimalist and having a house that's half the size of the average house.
01:07:16.000 | You can do it through the concept of building your own house.
01:07:18.000 | As I've interviewed people on that subject, you can do it on the concept of – all of these things are – you could do it in a bunch of different ways.
01:07:28.000 | But anytime you can lower the output costs, that's going to be helpful.
01:07:31.000 | So lowering the cost of purchase and lowering the cost of ownership, lower mortgage interest rates, lower – more energy-efficient home, lower cost, longer maintenance, building structures, things like that.
01:07:44.000 | So first look at lowering the output costs and then look for ways to increase the productivity.
01:07:50.000 | So look at the entire thing and look at it as a point of productivity.
01:07:54.000 | The main point of productivity for a house is as shelter for the family.
01:07:59.000 | But we've gone – for most of us, we've gone far beyond just simple shelter.
01:08:04.000 | And now our houses are more about show than they are about shelter.
01:08:08.000 | That's OK.
01:08:10.000 | I mean it's different.
01:08:11.000 | I've been fortunate to travel in places of the world where shelter means such a challenging situation.
01:08:18.000 | But shelter is a piece of cardboard and a piece of tin.
01:08:21.000 | That's tough.
01:08:23.000 | If we could be content with that, we can get by with a lot different.
01:08:28.000 | But we live in a different lifestyle, most of us, than that.
01:08:31.000 | So now we look at houses primarily as show, but we can still take the houses that we live in and we don't have to go and move under a piece of cardboard and a piece of tin to try to show our solidarity with the rest of the world.
01:08:41.000 | But we could be more wise with what we do have and we can make things more productive.
01:08:46.000 | So, for example, my house has a home office.
01:08:49.000 | So just now, instead of the house sitting empty all day with me and my wife out of the house working somewhere else and just sitting there, we're both here all day.
01:08:59.000 | I'm here working.
01:09:01.000 | That's why you hear my son in the background sometimes or you hear my dogs and she's here all day.
01:09:05.000 | So we're using our house.
01:09:06.000 | If you look at the usage level of our actual house compared to the usage level of many people's houses, it's a very different scenario as far as the amount of time, the percentage of time that the home is occupied and being used.
01:09:17.000 | Well, that makes me feel a little bit more comfortable with having a little bit of a fancier or bigger house.
01:09:22.000 | I have a bigger house than I think we need.
01:09:24.000 | But we do use the house that we have.
01:09:26.000 | So make it more productive by using it.
01:09:29.000 | You can make it more productive by doing things out of the house.
01:09:32.000 | So we bring a lot of the things that many people outsource into the community, we bring those home.
01:09:38.000 | I run my business from home.
01:09:39.000 | So instead of needing to go out in the community, I run my business from home.
01:09:42.000 | That has challenges.
01:09:43.000 | Maybe at some point I need to go out and use an office space.
01:09:45.000 | But for right now, it's working okay.
01:09:47.000 | We work with our son and we teach him at home.
01:09:51.000 | So that allows our home to be much more useful.
01:09:54.000 | We eat a lot of our meals at home.
01:09:56.000 | We spend time at home.
01:09:57.000 | So now all of a sudden, it's more useful.
01:09:59.000 | So just focusing on actually using what we've already bought can be helpful.
01:10:03.000 | And the nice thing is some of the most productive things from home can help you with lowering your overall cost.
01:10:10.000 | So home office expenses now, a tax-deductible expense.
01:10:13.000 | One of the fun ones that my wife and I have talked about, if you run a daycare out of your house, some of your expenses – well, all of your expenses that are associated with that daycare are now deductible expenses.
01:10:23.000 | And that might mean that a portion of your house is now a deductible expense versus not.
01:10:28.000 | Then if you just walk around your house and look at the house and think, "Is there a way that I could use this asset to its highest capacity?"
01:10:36.000 | I remember years ago in a real estate seminar, they said the key with real estate investors is that a real estate investor can look at a piece of property and look for it to be at its highest functional capacity.
01:10:47.000 | A developer can look at a piece of raw land and say, "There ought to be a theme park here," or "There ought to be a house here."
01:10:52.000 | Or it can look at a broken-down house and say, "If I could improve that house, I could really make a big difference."
01:10:57.000 | So looking at things in an ideal scenario, so some easy ones.
01:11:00.000 | Can I rent out empty rooms?
01:11:02.000 | This is a lifestyle choice but it's a doable one if you need to.
01:11:06.000 | I live close to a college, so I could rent out – we could rent out one of our bedrooms to a college.
01:11:10.000 | We've talked about there's a little laundry room that's in our house that's kind of separate from the main living quarters.
01:11:15.000 | My wife and I talked about maybe we should convert that into a little efficiency apartment and rent that out for a few hundred dollars a month.
01:11:21.000 | We've chosen the lifestyle costs up till now.
01:11:24.000 | We've chosen the lifestyle cost – excuse me, the lifestyle benefit of having a lifestyle without other non-family members in our home instead of having the extra money.
01:11:33.000 | We've gone ahead and made that choice up till now, but it could be done.
01:11:36.000 | Can you – as you mentioned, can you bring together people that are in multiple generations of living?
01:11:43.000 | I really admire how so many other parts of the world with other cultures seem to really have multigenerational living as kind of a standard of their society.
01:11:54.000 | I think in the US American society, we've kind of gone the far other way where we don't really – we're not into multigenerational living or multifamily living.
01:12:03.000 | In my mind, there are downsides to both.
01:12:06.000 | Everything is so multigenerational.
01:12:08.000 | I'm a little uncomfortable with that.
01:12:10.000 | When my wife and I were setting up our household, it's important for us to set up our own individual household.
01:12:16.000 | That's not – I don't want to be in – I wouldn't want to do the situation where we moved into the back room of her parents' house like so many places in the world do.
01:12:24.000 | I get why it's done and it's done because there's just less – there's less wealth.
01:12:29.000 | I've traveled in Egypt.
01:12:32.000 | I remember talking to a bunch of people.
01:12:33.000 | It was more common like here when you get married, then your father will build you a room and you continue to live with the family.
01:12:39.000 | But you have your separate room.
01:12:41.000 | That's not my preference for a lifestyle choice.
01:12:44.000 | But on the other hand, my preference for a lifestyle choice is not to live so far away from family.
01:12:48.000 | So I think someday, maybe in the future, if – I'd love for my parents to come and live with us or for her parents and work with us so that we can enjoy that closer family dynamic.
01:12:59.000 | That makes a real – that makes a real – a much closer scenario.
01:13:03.000 | So that could be a good use.
01:13:04.000 | Or you could just look at things and say, "How could I use this?
01:13:07.000 | Look at my kitchen."
01:13:08.000 | And many people have a fancy kitchen that's rarely used.
01:13:11.000 | Why do we have a kitchen if we don't cook?
01:13:14.000 | I always like – there's a – there's a trend towards foodism and like gourmet foodism.
01:13:22.000 | I think it's great because we're actually using the kitchens.
01:13:24.000 | So just look at it.
01:13:27.000 | Now I look at other things and I think, "OK, if I've got a yard for example, in your context, how can your yard be best used?"
01:13:34.000 | Some of you, there's these little sharing services where you rent out your driveway.
01:13:39.000 | If you're near an airport and you – or you rent out this for a parking space, that could be useful.
01:13:44.000 | There's no market for that where I live.
01:13:46.000 | But for some of you, there's a market for that.
01:13:48.000 | But I've got a great big yard.
01:13:50.000 | I could do something like I could board dogs informally.
01:13:53.000 | I couldn't do obviously with dozens of them.
01:13:55.000 | But I've got a big yard.
01:13:56.000 | So it's no big deal if I wanted to have more dogs than we have.
01:14:00.000 | I could plant a garden in my yard and use the land that I have to supplement my diet or supplement my income.
01:14:08.000 | That's why I brought on the urban farming ideas.
01:14:11.000 | Could I grow fruit trees and sell that fruit?
01:14:14.000 | That's doable.
01:14:16.000 | It's probably not the highest value as far as the actual use of the property.
01:14:20.000 | I might be more inclined to do something like grow fruit trees and sell the fruit trees.
01:14:24.000 | Where I live, I don't do it now just simply because I've got 24 hours in a day and I haven't made the time for it.
01:14:29.000 | That's one of the things I could do.
01:14:31.000 | I've got plenty of room that I could set up to propagate fruit trees and I could sell mango trees right off of my front driveway.
01:14:39.000 | Could you use your yard and repair cars?
01:14:43.000 | This is one of the things that's different about American society is we have such strict zoning regulations that a lot of times you can hardly use your yard for things that are useful.
01:14:53.000 | But you look at the rest of the world and you just observe how they do it.
01:14:58.000 | You'll find that they use their houses.
01:15:01.000 | Historically in the US, you had a shop downstairs and you lived above your shop.
01:15:06.000 | Well, the same concept can be applied to our modern day scenario.
01:15:10.000 | How do you get things closer?
01:15:13.000 | How can the roof be used more effectively?
01:15:15.000 | How can the walls be used?
01:15:16.000 | I really love personally – I love studying permaculture design because of the emphasis on function stacking.
01:15:22.000 | So I've done very little of this on my own house right now just due to lack of time and other priorities.
01:15:28.000 | But let me give you my vision.
01:15:30.000 | So simple thing like my roof and my walls.
01:15:33.000 | I want my roof to be covered with long-term, long-lasting roofing.
01:15:39.000 | So I don't want to have to have this – I've got asphalt shingles.
01:15:43.000 | Asphalt shingles have to be replaced every so often.
01:15:45.000 | I'd love to have a metal roof instead that can go to a lifetime span instead of a 20-year span.
01:15:51.000 | I want that roof to be energy efficient.
01:15:53.000 | So I want it to do the primary goal of covering my living space and protecting us from the heat.
01:16:00.000 | But I also want that roof, for example, to be covered with solar panels, photovoltaic panels to collect the energy from the sun.
01:16:07.000 | Especially as prices continue to come down and the efficiency of the panels increases, I'd love to do that.
01:16:13.000 | So the solar panels could do multiple things.
01:16:15.000 | So the solar panels can make electricity for my house.
01:16:17.000 | But then also they will have the added benefit of providing a shading system for my roof.
01:16:23.000 | I've actually thought – I don't see any way to do this.
01:16:26.000 | But I've thought why on earth don't we build double roofs?
01:16:29.000 | Like why don't we always just shade our roofs and have a whole system that's shaded, that's free for airflow and then have the whole system underneath it?
01:16:38.000 | Well, obviously there are some practical construction techniques that don't allow that to happen.
01:16:41.000 | But I can sort of get some of that by shading my roof with solar panels or trees if I weren't going to collect the sun.
01:16:47.000 | But then also how can my roof collect rainwater from my house?
01:16:50.000 | So I'd love it if I had a complete rainwater collection system and all of the water that fell on my roof would be collected for the use of my house.
01:16:58.000 | And then if I could use that house, I'd love to have the rainwater be used multiple times within my house.
01:17:03.000 | I'd love to have it come in and be held in tanks and then use it as many times as possible depending on how it were used.
01:17:10.000 | Gray water versus black water.
01:17:12.000 | There's a great idea that I've seen online.
01:17:15.000 | I guess – I don't know where it's from but it's such a cool picture of efficiency to have a sink over the back of the toilet.
01:17:22.000 | And essentially what you see is there's a – not the toilet bowl but the back holding tank of a toilet.
01:17:27.000 | The top of the holding tank is a sink and then there's a faucet there.
01:17:30.000 | And what happens is you wash your hands in the sink.
01:17:33.000 | The water falls from the sink after you've rinsed your hands down into the toilet tank.
01:17:37.000 | And then that's the water that is used to flush the toilet.
01:17:41.000 | What a great idea, I think.
01:17:43.000 | Like what's the downside to that?
01:17:45.000 | And we can use the water multiple times.
01:17:47.000 | Now regardless – and you got to be careful with this but I'd love to have all the gray water after it's been used once or maybe multiple times but it's still gray water.
01:17:55.000 | I'd love to have the gray water flow into the garden and flow throughout my property and be used to water the trees and water the garden and use that water as many times on the property as possible.
01:18:04.000 | I'd love to have all the black water treated right on the property so I can take responsibility for that and care for it and just return clean water to the earth instead of polluted water.
01:18:14.000 | Walls for my house.
01:18:16.000 | Why do we just have these just walls that sit there?
01:18:19.000 | Why not cover my wall with trellises?
01:18:21.000 | And I've tried to figure out how I could design this on my house but cover a system of trellises and then plant food-producing vines across those trellises.
01:18:29.000 | That would have multiple functions.
01:18:30.000 | It would cool the house.
01:18:32.000 | So now instead of the sunshine beating on the exterior of my wall all day, heating up the wall and then transferring that conductive heat into the house or the radiant heat coming through, now my wall is shaded and it's cooled.
01:18:43.000 | Also it would help the paint to last longer because it's not subject to such temperature extremes.
01:18:49.000 | But then I'm also turning that vertical wasted space on a wall into something useful.
01:18:56.000 | Either plant beautiful flowers or provide beautifully scented flowers so that my house is filled with beautiful scents or create food.
01:19:05.000 | So I'd love for me every inch of my property to be productive in some way, either creating food or fuel or shelter or beauty or sound or scent or habitat for wild animals.
01:19:17.000 | I'd love to have birds everywhere and wild animals all around my property, even in the city, but I've got to build a habitat for them.
01:19:23.000 | At the moment my backyard is just an empty wasteland of grass and sand.
01:19:28.000 | We'll get to it at some point.
01:19:30.000 | But if you just look around your house and you look and say, "What can I do?
01:19:34.000 | I've got a garage.
01:19:35.000 | Can I use that garage to store things that are going to be able to buy and sell on Craigslist?"
01:19:39.000 | Or again, "Can I grow and propagate some plants out of my house and sell that?"
01:19:44.000 | I have a friend who grows small animals and sells small animals for meat or for pets.
01:19:50.000 | Inside and out, just looking and saying, "How can I make my property produce for me?"
01:19:56.000 | Don't exclude – there are the obvious ones.
01:20:00.000 | I'm going to plant – I've thought about maybe if I get an RV and then I'll rent the RV out.
01:20:04.000 | I'll park the RV in my backyard and I'll collect a few hundred dollars of rent.
01:20:07.000 | That would help to offset the cost of the RV and it would help to offset the property cost.
01:20:11.000 | Maybe it's build a garage apartment or a carriage house apartment.
01:20:15.000 | I know that was where – it's interesting.
01:20:18.000 | The place that my wife and I first lived when we were married was a carriage house apartment.
01:20:22.000 | It was behind somebody's house and this is common in many places.
01:20:25.000 | I've seen some people online that have actually – what they've done is they've just moved out of the big house
01:20:30.000 | and moved into the carriage house, rented the big house, and they quit working.
01:20:34.000 | So you can do that.
01:20:36.000 | There are a bunch of options for you.
01:20:39.000 | So hopefully that would be a good start.
01:20:41.000 | I know there are more.
01:20:42.000 | I'll cover this in more detail in the future.
01:20:44.000 | I did want to – I thought it was just useful just to give a few ideas as a Q&A show.
01:20:48.000 | Last question here comes from Herit.
01:20:51.000 | I'm not sure how you say your name, Herit.
01:20:52.000 | So forgive me.
01:20:53.000 | It's a quick question on 401 because I'm going to answer it quickly because I'm already at an hour and 20 minutes for this show.
01:20:57.000 | But the question is this.
01:20:58.000 | "Joshua, first of all, let me say I've thoroughly enjoyed listening to your podcast.
01:21:01.000 | I discovered it when I listened to you being interviewed on the Doe Ruler podcast.
01:21:05.000 | I started listening and then decided to go back and listen to all of your podcasts.
01:21:08.000 | In episode 36, you mentioned changing the 401(k) plan to be able to defer more than the $17,500.
01:21:14.000 | Can you let me know where I can learn more about this?
01:21:16.000 | Thanks for everything you do in regards, Herit."
01:21:18.000 | So, Herit, good question, and I'm going to give you the simplified answer without referencing all of the section codes and whatnot.
01:21:24.000 | But the major confusion with 401(k) plans is primarily about the difference between deferral limits and contribution limits.
01:21:32.000 | So you as an individual employee, you cannot defer more than $17,500 into your 401(k) plan.
01:21:40.000 | That's a deferral limit of the amount of your pay that you're able to defer into that account.
01:21:46.000 | You can't do more than $17,500.
01:21:49.000 | But that's not necessarily the contribution limit.
01:21:54.000 | So a simple thing, for example, there is an additional $5,000 catch-up contribution after age 50.
01:22:00.000 | So that means that instead of being able to put $17,500 in, you can put $22,500 in.
01:22:06.000 | That doesn't count against your deferral limit.
01:22:08.000 | That's an additional contribution that you can do.
01:22:11.000 | Now, the funky thing about the total limit is when you think about – think about if you have a fairly mainstream account.
01:22:19.000 | Let's say that the – let's say that your employer is going to match you on – they're going to put in up to $3,000 a year into your account.
01:22:27.000 | Well, already if you're putting in $17,500 and they match you and contribute $3,000 to the account, then in that situation, you are now putting $20,500 into the account.
01:22:42.000 | So you're already over the $17,500 limit.
01:22:45.000 | Now, the employer can write the 401(k) plan with fairly generous benefits or with fairly basic benefits.
01:22:53.000 | There are some specific rules regarding what they're allowed to put in and when they're allowed to put it in.
01:23:00.000 | And they have to make sure that the 401(k) serves all of the employees, especially the rank-and-file employees.
01:23:09.000 | That's one of the key things.
01:23:11.000 | So if they're going to offer $3,000, they've got to offer $3,000 to all of the employees.
01:23:15.000 | They can't offer $10,000 to the executives and $1,000 to the main – to the rank-and-file employees.
01:23:21.000 | What I was probably referencing, however, is the idea that there's no reason why you couldn't say that the employer is going to match the employee's contribution dollar for dollar up to the maximum.
01:23:35.000 | So in that situation, it could be written so that you put in $17,500 and they put in $17,500.
01:23:43.000 | And now you're up to $35,000 of contributions.
01:23:46.000 | Additionally, it's important that you know that 401(k)s are a subset of profit-sharing plans.
01:23:54.000 | So you essentially is most correctly labeled – a 401(k) as it's usually acquired is a profit-sharing plan with 401(k) features which allow the 401(k) features specifically allow the employee to actually defer money into the account out of their paycheck.
01:24:13.000 | So in a profit-sharing plan, the employer can put in a contribution to the account no matter what, no matter the individual contribution of the employee.
01:24:23.000 | So the company could establish a profit-sharing plan and they would need a formula for that.
01:24:28.000 | For the sake of simplicity, let's say that they came up with a formula that was going to put $10,000 into the account for each of the employees.
01:24:34.000 | They could establish a plan that would say no matter what, we're going to put $10,000 into the account and then we're going to let you put in additional deferral of your paycheck and we're going to match you on that deferral.
01:24:46.000 | So now if they put $10,000 into that account, there's 10 grand.
01:24:50.000 | You put in $17,500 and you're up to $27,500 of a contribution into that account.
01:24:57.000 | Then they match you of $17,500 into that account. Now you're up to $45,000 of deferral and contributions.
01:25:04.000 | So these limits have to be held multiple and there's the limit of total contributions to the account and there's the limit of deferral.
01:25:12.000 | You can't defer more than $17,500 and then you can additionally later do the $5,000 contribution.
01:25:19.000 | But your boss or your company can establish the paperwork and they can design the plan so that they're putting additional contributions into the account.
01:25:27.000 | Now, your employer could also write the plan in such a way that they permit after-tax contributions to the account.
01:25:36.000 | If your employer allows this, you can also use this to allow you to get more money into the account.
01:25:42.000 | I received an email from a listener one time and I'll just read you one paragraph from it and it's on my list of show topics to go over in detail.
01:25:50.000 | Just a quick answer right now.
01:25:51.000 | But there was a change in legislation recently that clarified this, an IRS letter that clarified this.
01:25:58.000 | But from this letter, this person worked at Google.
01:26:01.000 | They said you're probably familiar with the backdoor IRA.
01:26:03.000 | Are you familiar with doing something similar with some company 401(k) plans?
01:26:07.000 | In my company's plan, Google, I can contribute about $26,000 to an after-tax 401(k) after the pre-tax contribution and the company match and then convert that to a Roth IRA.
01:26:18.000 | It's unfortunate that most plans don't allow this.
01:26:21.000 | But for those that do, this is a powerful way to save quite a bit of money in a tax-advantaged way.
01:26:26.000 | And so this is another additional feature.
01:26:29.000 | So you've got a balance in – 401(k) planning is complicated from the perspective of establishing the accounts because it's a real balance of flexibility for the employees, the company treating all employees fairly and equally under the legislation, and making sure that the plan is incentivizing to the employees but it's not costing the employers too much.
01:26:53.000 | So most of the options to be able to put more money in than $17,500.
01:26:58.000 | When I talk about $50,000, that option is true but it's going to be primarily available to you if you're running an individual enterprise or if you are running something like an individual enterprise for you or a very small business where you're willing to be extraordinarily generous with the employees because you only have one and they're relatively low-paid.
01:27:20.000 | So you can match them or something like that.
01:27:22.000 | So you can write the documents.
01:27:24.000 | It's all in how the documents are written to accept massive amounts.
01:27:29.000 | But still at the end of the day, you can only defer $17,500 of your income into the account.
01:27:35.000 | The key action step for you, as with everything in financial planning, read your documents.
01:27:43.000 | It's hard for me to describe how many times I've had a client bring all of their deferred compensation programs in and all of a sudden they find out, "Wow, if I had this," or "Wow, if I had that."
01:27:54.000 | Employers, if they have a 401(k), that 401(k) needs to pass certain benchmarks.
01:28:00.000 | And some of those benchmarks sometimes, depending on how they're structured, whether it's a safe harbor plan or not, they have to put a certain amount of money in the 401(k).
01:28:07.000 | And many people don't ever sit down and recognize, "If I just open the account, then the employer has to fund it with a certain minimum amount."
01:28:14.000 | So read your documents.
01:28:16.000 | And unfortunately, if you're an employee without any influence over the human resources department or without any influences over the group compensation, it's basically just whatever is written there.
01:28:26.000 | That's going to be negotiated above your pay grade.
01:28:28.000 | If you're involved in that negotiation or if you're running a small business or your own individual enterprise, then that's where you'll want to talk with somebody who is a consultant in that field and figure out how to design a plan that's going to be the best type of plan for you.
01:28:42.000 | There are simple ways to do it and there are complicated ways to do it, but that hopefully is the quick and simple overview for you.
01:28:49.000 | Thank you all so much for listening to today's show.
01:28:51.000 | I hope it was helpful for you.
01:28:54.000 | Hopefully I did the right thing with my little clarification rant.
01:28:57.000 | Who knows? It's always hard to know how to deal with stuff in the public eye.
01:29:03.000 | I don't have any clue.
01:29:05.000 | And how do you – whatever.
01:29:07.000 | I guess it's always a challenge for me to compare because I really hate – I'm a peace-loving guy.
01:29:12.000 | I really hate arguing with people.
01:29:15.000 | And it's very challenging for me to know how to properly do things in the public space.
01:29:20.000 | In an individual space, it's easy.
01:29:22.000 | You can look across a cold drink at somebody and say to them – and understand they could stop you.
01:29:29.000 | Sometimes when you're creating media, it's challenging because the feedback mechanism is so deferred.
01:29:36.000 | And I'm finding that challenging.
01:29:38.000 | But that's all right. We learn as we go.
01:29:40.000 | Thank you all for listening.
01:29:41.000 | If you've enjoyed the content or if this has been helpful to you, I'd be thrilled if you consider supporting the show on Patreon.
01:29:45.000 | You can find the details of that at RadicalPersonalFinance.com/patron, RadicalPersonalFinance.com/patron.
01:29:53.000 | And thank you all for listening.
01:29:56.000 | Thank you for listening to today's show.
01:29:59.000 | If you'd like to contact me personally, my email address is Joshua@RadicalPersonalFinance.com.
01:30:06.000 | You can also connect with the show on Twitter @RadicalPF and at Facebook.com/RadicalPersonalFinance.
01:30:13.000 | This show is intended to provide entertainment, education, and financial enlightenment.
01:30:20.000 | But your situation is unique, and I cannot deliver any actionable advice without knowing anything about you.
01:30:28.000 | Please, develop a team of professional advisors who you find to be caring, competent, and trustworthy, and consult them,
01:30:39.000 | because they are the ones who can understand your specific needs, your specific goals, and provide specific answers to your questions.
01:30:49.000 | I've done my absolute best to be clear and accurate in today's show, but I'm one person and I make mistakes.
01:30:56.000 | If you spot a mistake in something I've said, please help me by coming to the show page and commenting so we can all learn together.
01:31:04.000 | Until tomorrow, thanks for being here.
01:31:06.000 | With Kroger brand products from Ralphs, you can make all your favorite things this holiday season,
01:31:12.000 | because Kroger brand's proven quality products come at exceptionally low prices.
01:31:16.000 | And with a money-back quality guarantee, every dish is sure to be a favorite.
01:31:21.000 | ♪ These are a few of my favorite things ♪
01:31:24.000 | Whether you shop delivery, pickup, or in-store, Kroger brand has all your favorite things.
01:31:31.000 | Ralphs. Fresh for Everyone.
01:31:34.000 | (dramatic music)