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00:00:30.000 | Today on Radical Personal Finance, we have a live Q&A call.

00:00:33.000 | Well, it's not live for you, obviously.

00:00:35.000 | You're listening to the recording of it.

00:00:37.000 | But it was recorded live,

00:00:39.000 | and I think we got some interesting topics.

00:00:41.000 | Sit back, relax, and enjoy.

00:00:43.000 | ♪

00:00:59.000 | Welcome to the Radical Personal Finance podcast.

00:01:01.000 | My name is Joshua Sheets, and I'm your host.

00:01:03.000 | Thank you for being with me.

00:01:05.000 | Today we have Q&A, and this was a live Q&A call,

00:01:09.000 | a conference call that was recorded with the patrons of the show.

00:01:11.000 | Some interesting topics came out.

00:01:13.000 | I thought the call flowed well,

00:01:15.000 | and I decided to share it with you.

00:01:17.000 | So instead of my handling your pre-recorded

00:01:19.000 | or pre-asked questions,

00:01:21.000 | today you get to hear me handle them live.

00:01:23.000 | ♪

00:01:31.000 | Been doing these conference calls

00:01:33.000 | with the listeners, the patrons of the show,

00:01:36.000 | patrons at the $10 and up level,

00:01:38.000 | and they've been really fun.

00:01:39.000 | Which, by the way, this was the deal of the century

00:01:41.000 | for some of you who are patrons.

00:01:43.000 | A couple of the calls, we've only had a few people there,

00:01:45.000 | and so I've had lots of time to be able to answer

00:01:47.000 | individual questions.

00:01:49.000 | So this has been super, super fun.

00:01:50.000 | There are a couple left, doing two more,

00:01:53.000 | and then I'll be back to a more regular schedule

00:01:55.000 | of what I've put out on the Patreon page

00:01:58.000 | of a monthly schedule instead of a weekly schedule.

00:02:00.000 | But here during the month of October and November,

00:02:02.000 | I've done one every week with patrons of the show

00:02:04.000 | at $10 and up, and there's been some really cool topics,

00:02:06.000 | some really cool discussions, and I decided today

00:02:08.000 | to release this audio to you for your show today.

00:02:12.000 | So we're gonna get straight to that super quick.

00:02:14.000 | I'm gonna cover sponsors today in record time.

00:02:17.000 | Two sponsors today.

00:02:18.000 | First sponsor is Jay Fleischman.

00:02:20.000 | Jay has been on the show recently.

00:02:22.000 | He was on episode number 214,

00:02:24.000 | and then also recently, 258,

00:02:26.000 | as we launched his sponsorship on the show.

00:02:29.000 | If you're not familiar with Jay,

00:02:30.000 | if this is your first time, Jay is awesome.

00:02:32.000 | He is a student loan attorney, a bankruptcy attorney,

00:02:35.000 | and a consultant and host of the Student Loan Show.

00:02:38.000 | The reason he's on the show as a sponsor,

00:02:40.000 | if you have student loans, he can help.

00:02:42.000 | So in short, if you haven't listened to those two episodes,

00:02:46.000 | go back and listen to those two episodes of the show,

00:02:48.000 | 258 and 214, and check out his information.

00:02:52.000 | You will learn more about student loans in those shows

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00:02:57.000 | And then if you have student loans,

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00:03:17.000 | That's why you should call Jay.

00:03:19.000 | Next, Patrick Snow, the publishing doctor.

00:03:21.000 | Patrick has also been on the show with episode 252.

00:03:23.000 | He is a publishing coach.

00:03:25.000 | And in short, if you have ever thought about writing a book,

00:03:29.000 | you should go to thepublishingdoctor.com.

00:03:31.000 | Take a look at some of his services that he has to offer

00:03:34.000 | and consider reaching out to him for a consultation.

00:03:37.000 | He can work with you in a consultative capacity

00:03:40.000 | to help guide you through the process of publishing your book.

00:03:44.000 | Patrick is awesome.

00:03:45.000 | He's been hugely helpful to me.

00:03:47.000 | And I think that some of his methodology,

00:03:50.000 | some of his resources can be a huge help to you.

00:03:52.000 | So that's sponsor of the day number two, Patrick Snow.

00:03:55.000 | He'll offer you a complimentary consultation

00:03:57.000 | if you would like to speak with him about publishing

00:04:00.000 | and ask him questions about your potential book project.

00:04:03.000 | His cell phone number is linked in the show notes today

00:04:05.000 | or just go ahead and remember it now.

00:04:07.000 | Text him at 206-310-1200

00:04:11.000 | and you can get in touch with him directly.

00:04:13.000 | Those are our two sponsors.

00:04:15.000 | Finally, patrons of the show, thank you.

00:04:17.000 | All of you who are on -- all of the callers

00:04:19.000 | that you hear on today's show are patrons.

00:04:21.000 | And there are many more of you.

00:04:22.000 | If you would like to support the show directly,

00:04:24.000 | please consider becoming a patron.

00:04:25.000 | Go to radicalpersonalfinance.com/patron.

00:04:27.000 | You'll find all of the benefits there,

00:04:29.000 | including benefits of being on calls like this.

00:04:32.000 | With that, here we go.

00:04:34.000 | Let's kick it off with Bob.

00:04:37.000 | Any questions, anything you're thinking about, Bob,

00:04:39.000 | that I can help you with,

00:04:40.000 | anything I can be of service to you on today's call?

00:04:44.000 | Yes, yes.

00:04:47.000 | Knowing the business that I work in,

00:04:50.000 | I would like to hear your opinion on disability insurance

00:04:55.000 | for self-employed.

00:04:58.000 | Hard to get, but valuable to have.

00:05:00.000 | Hard to get, yes.

00:05:03.000 | Have you shopped around?

00:05:06.000 | I'm a licensed producer as well,

00:05:08.000 | and knowing how hard it is to get

00:05:12.000 | and the hoops you have to jump through,

00:05:15.000 | I wanted your input.

00:05:19.000 | I've got a couple of workarounds,

00:05:21.000 | and I'll give you some ways to approach it.

00:05:25.000 | First, though, have you ever tried to get it?

00:05:27.000 | Have you ever applied for a policy before?

00:05:30.000 | Yes, yes, and I'm not qualified.

00:05:34.000 | Rejection.

00:05:36.000 | Based on income or based on where you work?

00:05:38.000 | No, no, no.

00:05:40.000 | Based on medical.

00:05:44.000 | Okay.

00:05:46.000 | All right, so a medical disqualification,

00:05:50.000 | that's the hardest to overcome

00:05:53.000 | because what that means is if you're in a situation

00:05:57.000 | where you're dealing with a medical condition,

00:05:59.000 | then that's not related to whether you're self-employed

00:06:02.000 | or whether you were employed as a straight W-2 employee.

00:06:06.000 | Depending on the medical condition,

00:06:08.000 | you want to shop around,

00:06:10.000 | and you want to look to see --

00:06:13.000 | you want to shop around, and you want to look to see

00:06:15.000 | if you can get a better offer from another carrier.

00:06:17.000 | How many carriers did you apply with?

00:06:19.000 | Two.

00:06:21.000 | Okay, and both of them turned you down?

00:06:23.000 | Yes.

00:06:25.000 | Who were the carriers?

00:06:28.000 | I don't remember.

00:06:30.000 | It's been six years, and at the time, I wasn't licensed,

00:06:33.000 | and I had an agent that was doing it for me.

00:06:36.000 | I'm confident in that agent, but I didn't --

00:06:39.000 | I let him shop it because he was independent.

00:06:42.000 | Okay.

00:06:44.000 | It's worth shopping yourself.

00:06:46.000 | What I would do -- you are licensed now

00:06:48.000 | with a health and life insurance license, right?

00:06:51.000 | All four terms, yes.

00:06:53.000 | Okay.

00:06:54.000 | Yes.

00:06:55.000 | Go to the broker that I used to use

00:06:57.000 | was a broker called DI Broker.

00:06:59.000 | Go to DIBroker.com and call their specialist

00:07:03.000 | and just tell them the details of the medical condition.

00:07:06.000 | Tell them what you're facing

00:07:08.000 | and talk to their underwriters on the phone.

00:07:10.000 | The way those brokers usually will work

00:07:12.000 | is they will have a phone answerer,

00:07:15.000 | basically somebody basic,

00:07:17.000 | and then they'll have a back-office underwriter.

00:07:19.000 | Just go ahead and ask them, maybe --

00:07:21.000 | just tell them what you're doing and ask them,

00:07:23.000 | "Do you need to talk to one of their internal underwriters

00:07:25.000 | or just give them all the details?"

00:07:27.000 | And what they'll do is they will look at the case.

00:07:29.000 | What you can do if you want to find out

00:07:32.000 | without making a formal application

00:07:34.000 | is submit what's called an informal inquiry

00:07:37.000 | and submit to them an informal inquiry,

00:07:40.000 | and depending on the carrier and depending on the case,

00:07:42.000 | what that means is you'll give them your name,

00:07:44.000 | all your contact information.

00:07:47.000 | You'll give them your Social Security numbers

00:07:50.000 | and your medical records, and then what they'll do

00:07:52.000 | is they'll pull your medical records.

00:07:54.000 | They will verify and look at the details

00:07:57.000 | of those medical records, and then they will --

00:08:02.000 | they'll shop it around.

00:08:03.000 | They'll talk to some underwriters,

00:08:04.000 | some of the carriers,

00:08:05.000 | without doing a full-blown application.

00:08:07.000 | So that can help you to get an answer

00:08:09.000 | on the medical question

00:08:12.000 | independent of the income question.

00:08:15.000 | So that's where I would start

00:08:16.000 | is with a disability insurance broker like DI Broker

00:08:19.000 | and submitting an informal inquiry.

00:08:21.000 | Assume for a moment you get good news back

00:08:23.000 | on the medical situation, and they say,

00:08:25.000 | "Hey, you know, we'd be willing to consider it."

00:08:28.000 | And DI Broker, I mean, they'll shop it with everyone.

00:08:32.000 | So depending on the case and depending on whatever,

00:08:34.000 | you might end up with, you know, Standard Insurance Company

00:08:37.000 | or you can place cases through them with Boys of London.

00:08:40.000 | And so sometimes, depending on the medical condition,

00:08:43.000 | they can achieve a specialized scenario.

00:08:47.000 | So it's all very subjective.

00:08:49.000 | As far as the financial underwriting,

00:08:51.000 | the things that hurt you on being self-employed

00:08:55.000 | are usually two things.

00:08:57.000 | Number one is generally your income is --

00:08:59.000 | you're going to show a lower income

00:09:01.000 | than you actually enjoy

00:09:03.000 | because you're going to be writing off so many expenses.

00:09:05.000 | And so that's good for your tax bill,

00:09:08.000 | but at the end of the year, it's bad

00:09:10.000 | for your disability insurance applications,

00:09:12.000 | and it's bad for your mortgage applications.

00:09:14.000 | So you got to take that into account.

00:09:16.000 | So most self-employed people are dissatisfied

00:09:18.000 | with the offers that they get.

00:09:20.000 | So to make up round numbers,

00:09:22.000 | let's say that you are showing $5,000 a month of income,

00:09:25.000 | but by the time you take out all the deductions,

00:09:28.000 | you're actually benefiting at $7,000 a month of expenses,

00:09:31.000 | part of which are flowing through your account.

00:09:34.000 | Well, remember, they're not going --

00:09:36.000 | your disability insurance broker isn't going to offer you

00:09:38.000 | anywhere close to 100% of your income.

00:09:41.000 | They're going to offer you, you know, maybe $3,000 a month.

00:09:44.000 | So this really annoys most business owners.

00:09:46.000 | They look down and say, "Well, what am I going to do

00:09:48.000 | with $3,000 a month?"

00:09:50.000 | What I would suggest to you is consider --

00:09:53.000 | consider that $3,000 a month.

00:09:57.000 | If you did get disabled, it's better than nothing.

00:09:59.000 | So it's not 7, but it's better than 0.

00:10:02.000 | So it's worth doing.

00:10:04.000 | The way you can supplement that is you can consider

00:10:07.000 | supplementing that with a disability overhead

00:10:09.000 | expense insurance policy.

00:10:11.000 | Are you familiar with DOE coverage?

00:10:13.000 | No.

00:10:15.000 | Okay.

00:10:16.000 | So the way it works for business owners

00:10:19.000 | is that you can get a personal disability insurance policy,

00:10:23.000 | and that personal disability insurance policy

00:10:27.000 | can cover your income.

00:10:29.000 | But as a business owner, you can also get

00:10:31.000 | a disability overhead expense policy,

00:10:34.000 | and that overhead expense policy can cover the expenses

00:10:38.000 | from your business.

00:10:40.000 | So with the expenses from your business,

00:10:43.000 | you can use that to run some of those

00:10:47.000 | and cover some of those fees and costs

00:10:51.000 | that you have associated with your business.

00:10:52.000 | That would be your rent, your phone lines,

00:10:55.000 | your web servers, your web hosting,

00:10:57.000 | that kind of thing, depending on employees,

00:11:00.000 | depending on the makeup of your business.

00:11:02.000 | Employees can be problematic, or they can work,

00:11:04.000 | but you can cover some of your overhead.

00:11:06.000 | So let's say that you have $2,000 a month

00:11:08.000 | of monthly business overhead.

00:11:11.000 | You can get a disability policy that might cover

00:11:13.000 | $1,500 a month of monthly business overhead.

00:11:17.000 | Now, with that $1,500 a month of monthly business overhead,

00:11:20.000 | if you get disabled, they'll cover that

00:11:24.000 | for a certain period of time.

00:11:25.000 | Disability overhead expense policies

00:11:27.000 | are generally short-term policy.

00:11:29.000 | Usually about a year or two years at the maximum,

00:11:32.000 | whereas an individual disability income policy

00:11:36.000 | can cover you out through maybe, you know,

00:11:38.000 | age 60, 65, 70, depending on the policy.

00:11:41.000 | So it's going to be a short-term deal

00:11:43.000 | that helps to cover your overhead.

00:11:45.000 | So look at your cash situation and see,

00:11:51.000 | would that be helpful to you?

00:11:53.000 | The purpose behind disability overhead expense policies

00:11:57.000 | is to cover you if you got disabled,

00:12:00.000 | to keep the business going in absence

00:12:03.000 | of some of the revenue so that you can either,

00:12:05.000 | you know, by the end of 24 months,

00:12:07.000 | with most entrepreneurs, if you're disabled,

00:12:08.000 | at the end of 24 months, you're going to know,

00:12:10.000 | I'm going to be back to work,

00:12:11.000 | or I'm going to sell this thing.

00:12:13.000 | And so it helps you to keep the business going

00:12:15.000 | in the interim and keep your bills paid

00:12:18.000 | so you can either keep the business

00:12:20.000 | as a going concern, so you can sell it

00:12:21.000 | at the end of two years, or helps it to still

00:12:24.000 | be healthy enough for you to come back into.

00:12:26.000 | So that can be a way for you to get

00:12:28.000 | a little bit of additional coverage

00:12:30.000 | on top of a personal policy.

00:12:31.000 | And sometimes it's worth your checking into,

00:12:35.000 | based upon your medical condition,

00:12:37.000 | it's worth your checking into as a component

00:12:41.000 | of your disability plan because it might have

00:12:43.000 | different medical underwriting.

00:12:45.000 | Because they're shorter-term policies,

00:12:47.000 | there are some medical conditions

00:12:49.000 | that are unlikely to cause problems

00:12:51.000 | in the short-term, but likely to cause problems

00:12:53.000 | in the longer-term.

00:12:54.000 | And disability insurance, disability overhead

00:12:56.000 | expense policies are shorter-term policies,

00:12:58.000 | so that you might be able to find some wiggle room

00:13:00.000 | there on the medical underwriting.

00:13:02.000 | The third idea doesn't work as well now

00:13:05.000 | as it used to, but one thing you might

00:13:08.000 | consider doing is looking for what's called

00:13:11.000 | a long-term care insurance cash indemnity policy.

00:13:16.000 | I don't know if these are available in your state.

00:13:18.000 | You need to find a friend or call somebody

00:13:20.000 | who does long-term care insurance

00:13:22.000 | and ask them or ask a broker if they know

00:13:25.000 | of any company that writes long-term care insurance

00:13:28.000 | cash indemnity policies.

00:13:30.000 | So let me explain the concept to you.

00:13:32.000 | It's hard to find these anymore,

00:13:34.000 | but most -- they're not indemnity policies.

00:13:39.000 | Yeah, they are.

00:13:40.000 | They are indemnity policies.

00:13:41.000 | I'm getting my lingo confused.

00:13:42.000 | Most long-term care insurance policies

00:13:44.000 | are reimbursement contracts.

00:13:47.000 | So let's say that you have a long-term care

00:13:49.000 | insurance contract that covers you

00:13:51.000 | at $5,000 a month, and in order to get benefits

00:13:54.000 | from that, you need to submit at the end of the month,

00:13:56.000 | you need to submit receipts for the cost of your care.

00:14:00.000 | So let's say you have $4,000 of care,

00:14:03.000 | then you can submit receipts for that $4,000,

00:14:06.000 | and they'll reimburse you for up to the amount

00:14:09.000 | of the cost of your care.

00:14:10.000 | But there is another type of policy

00:14:12.000 | that's called a cash indemnity policy,

00:14:14.000 | where they will -- if your policy is for $5,000,

00:14:18.000 | as long as you meet the circumstances

00:14:20.000 | of the contract where you would qualify as needing care,

00:14:24.000 | they'll pay you the straight cash fee.

00:14:26.000 | And so it'll be, you know, again, $5,000.

00:14:30.000 | What that can be useful for is it can be useful

00:14:33.000 | for somebody who needs to cover living expenses

00:14:40.000 | in addition to long-term care policies --

00:14:42.000 | long-term care expenses.

00:14:44.000 | Now, the qualifications to qualify as needing --

00:14:47.000 | as getting benefits under a long-term care contract

00:14:50.000 | are different than under a disability contract,

00:14:53.000 | but it is possible that a really significant disability

00:14:58.000 | would indeed qualify you as needing care

00:15:02.000 | from the long-term care insurance contract.

00:15:04.000 | And so the cool thing about it,

00:15:06.000 | if you can find one of those policies available

00:15:08.000 | in your state, the cool thing about it is

00:15:11.000 | that it'll give you a potential benefit there

00:15:14.000 | that can come in as cash,

00:15:16.000 | and those are medically underwritten differently

00:15:19.000 | than disability insurances,

00:15:21.000 | and also they don't have the stringent financial underwriting.

00:15:24.000 | So I only could have replaced one of these,

00:15:27.000 | but I had a client of mine who was a rancher,

00:15:29.000 | and he made a lot of money,

00:15:31.000 | but due to the nature of his business structure,

00:15:34.000 | his income, his paper income, his net profit

00:15:37.000 | at the end of the year was always extremely low,

00:15:39.000 | and so he couldn't qualify for a disability insurance policy

00:15:43.000 | that was worth anything to him

00:15:44.000 | based upon the amount of income he could prove on paper.

00:15:47.000 | But the long-term care insurance contract,

00:15:50.000 | we were able to get some contracts in force

00:15:52.000 | where it would cover him as a cash indemnity contract

00:15:56.000 | for $5,000 or $6,000 a month if he ever needed care,

00:15:59.000 | and so that provided a little cushion for him

00:16:02.000 | where if something happened and he met the minimum requirements

00:16:06.000 | of the policy to pay him out benefits,

00:16:08.000 | needing help with at least two of the six activities

00:16:10.000 | of daily living,

00:16:11.000 | then he would get simply a straight cash compensation,

00:16:15.000 | which he could use for anything that he wanted to,

00:16:18.000 | not just for the care expenses.

00:16:20.000 | So those would be my three big ideas for you.

00:16:22.000 | See if any of them pan out for you.

00:16:24.000 | Okay. A follow-up on that.

00:16:28.000 | The last one you talked about,

00:16:29.000 | is that kind of like an AFLAC-type plan,

00:16:31.000 | and then the other for business owners,

00:16:34.000 | is that through my BOP policy, business owner policy?

00:16:40.000 | No, your business owner policy covers you for--

00:16:43.000 | that's written with a property insurance company,

00:16:46.000 | and that covers you for the things that are associated

00:16:49.000 | with the business liability, on-premises, things like that.

00:16:53.000 | This is totally separate.

00:16:55.000 | So the disability overhead expense contract will be written--

00:16:58.000 | it's from a health insurance company,

00:17:00.000 | or a life insurance company,

00:17:03.000 | and you'll get that also through the same broker

00:17:06.000 | that you get a personal disability insurance contract through.

00:17:09.000 | So again, check with the DI broker,

00:17:10.000 | and they should help you out with that.

00:17:11.000 | Since you're licensed, you can talk to them directly.

00:17:14.000 | And on the long-term care policy, no,

00:17:19.000 | that is not an AFLAC policy,

00:17:22.000 | but you should check the terms of the AFLAC policies

00:17:27.000 | to see if they have anything that's going to interest you.

00:17:33.000 | But no, the long-term care cash indemnity policy

00:17:36.000 | is not written by AFLAC.

00:17:38.000 | It's going to be written by another company.

00:17:39.000 | The company that used to offer them here in Florida

00:17:41.000 | was a company called MedAmerica.

00:17:44.000 | The challenge is this is the most difficult area

00:17:47.000 | in the long-term care insurance marketplace

00:17:49.000 | because what happened was these policies used to be popular,

00:17:54.000 | but the companies that were offering them

00:17:56.000 | are not as financially sound as they once were.

00:18:01.000 | And so if you do buy that type of contract,

00:18:04.000 | you need to go into it with your eyes wide open,

00:18:06.000 | and you need to keep a careful eye on the actual carrier

00:18:13.000 | to make sure that they continue to be financially sound,

00:18:15.000 | and you need to be prepared to bail on the contract

00:18:18.000 | if the company starts to get into trouble.

00:18:22.000 | So it's the riskier side of the companies

00:18:25.000 | that offer that type of contract.

00:18:28.000 | All right, perfect. Thanks, Josh.

00:18:30.000 | You're welcome.

00:18:31.000 | On it, as a business owner,

00:18:33.000 | there are also a lot of things you can do

00:18:35.000 | to minimize your risk due to the structure of your company.

00:18:39.000 | So with owning a business, a plan for disability,

00:18:43.000 | remember that some things--

00:18:45.000 | insurance will solve some of the problems,

00:18:47.000 | but unlike an employee, you have more leeway.

00:18:50.000 | So an employee who's just a straight W-2 employee,

00:18:53.000 | if they get disabled and they can't work, they're screwed

00:18:56.000 | because that income is the only thing they have

00:18:58.000 | that's covering themselves.

00:19:00.000 | Well, as a business owner,

00:19:01.000 | depending on the nature of your business,

00:19:03.000 | you can go ahead and put in more systems.

00:19:06.000 | You can hire more people.

00:19:07.000 | You can set things up and plan in the business

00:19:10.000 | so that if you did get disabled,

00:19:12.000 | everything wouldn't fall apart.

00:19:14.000 | So keep an eye on both sides of the planning.

00:19:16.000 | Insurance is less relevant for business owners

00:19:19.000 | than is good planning.

00:19:21.000 | So I think it has a place and it's valuable,

00:19:24.000 | but also recognize that even if you can't get it,

00:19:26.000 | there's a lot you can do to set yourself up

00:19:28.000 | to protect yourself even without insurance.

00:19:32.000 | Agreed. Joshua, thank you for the answers.

00:19:35.000 | Detailed, that's what I need.

00:19:37.000 | Good stuff, Bob.

00:19:38.000 | All right, let's see.

00:19:40.000 | Who has a call next?

00:19:41.000 | Let me go--I've got a few more callers that have joined.

00:19:44.000 | Let's go to Indiana.

00:19:45.000 | Nate, anything I can answer for you today?

00:19:49.000 | Yeah, I do have a question.

00:19:51.000 | My dad has a cleaning company up in Fort Wayne, Indiana,

00:19:54.000 | northern Indiana,

00:19:56.000 | and he has a bunch of low-wage part-time workers.

00:20:01.000 | He has, like, 20 people that work for him,

00:20:04.000 | and probably three-quarters of them are doing whatever they can

00:20:07.000 | to pretty much, like, maximize their welfare.

00:20:11.000 | And he was explaining it to me.

00:20:13.000 | There's something like if they earn over 15--

00:20:16.000 | between, like, $15,000 and $30,000,

00:20:18.000 | they're basically not making any more money.

00:20:20.000 | They don't get married, and they have, like, a couple kids,

00:20:23.000 | and they're doing all this stuff to maximize their tax credits.

00:20:26.000 | And I don't really fully understand it,

00:20:29.000 | but I was just wondering if you could say something about that.

00:20:32.000 | And they seem to think it's just going to keep getting easier for them,

00:20:36.000 | but I tried to explain to my dad, you know,

00:20:38.000 | this whole welfare state thing isn't sustainable,

00:20:41.000 | and they're probably putting themselves at major risk.

00:20:44.000 | So I just wondered what you thought about that.

00:20:47.000 | Well, I applaud them for making use of the system.

00:20:51.000 | That's one of those areas I struggle to know--me personally,

00:20:55.000 | I struggle to know how to talk about the ethics of that situation.

00:21:01.000 | The conservative, you know,

00:21:05.000 | hardcore conservative libertarian in me

00:21:08.000 | wants to get up on my soapbox and jump up and down

00:21:12.000 | and rail at people about you should--

00:21:14.000 | you know, you're ruining the system, you're destroying everything.

00:21:17.000 | You know, how can you do this?

00:21:19.000 | What about the values of taking care of yourself

00:21:21.000 | and not being a leech off of the state?

00:21:23.000 | So that makes me--you know, that's my initial response.

00:21:27.000 | But then on the flip side, as I've watched,

00:21:29.000 | I've actually changed a lot my own personal opinions

00:21:32.000 | over the last number of years.

00:21:33.000 | If you look at the way that the U.S. government operates

00:21:36.000 | is we advertise most of the benefits

00:21:38.000 | to try to reach people that are in that situation.

00:21:41.000 | So, you know, the federal government runs advertisements

00:21:44.000 | for the, you know, food stamp program.

00:21:48.000 | There's advertisements for the WIC programs locally.

00:21:52.000 | There's advertisements for welfare payments.

00:21:54.000 | I mean, so they're advertising the services.

00:21:56.000 | Yeah, I've noticed that.

00:21:58.000 | It seems like they're, like, must be gaining more benefit.

00:22:01.000 | They must think they're gaining more benefit

00:22:03.000 | than they are from, you know, not doing that.

00:22:07.000 | And I've heard Warren Buffett talk about

00:22:09.000 | trying to increase the earned income tax credit

00:22:11.000 | and all this stuff, and it just doesn't make sense.

00:22:13.000 | Like, when you're already operating at a major deficit,

00:22:15.000 | how can you keep offering those programs?

00:22:19.000 | Well, and this is where we get into the very fun

00:22:22.000 | and very divisive political discussion is --

00:22:26.000 | and these are my opinions on the subject.

00:22:29.000 | If you recognize the interests of the people

00:22:32.000 | who pull the purse strings, the interests of the people

00:22:35.000 | who pull the purse strings is power.

00:22:37.000 | And so the way that you manipulate power

00:22:39.000 | and the way that you manipulate people

00:22:41.000 | once you have control over the purse is with money.

00:22:45.000 | And so you use the federal government

00:22:48.000 | and you use the purse strings of the federal government

00:22:50.000 | to create power for yourself,

00:22:52.000 | and you do that during your time in office.

00:22:54.000 | And then once you leave office,

00:22:56.000 | you've accrued the power for yourself,

00:22:58.000 | and then you go out into the private market,

00:23:00.000 | and that's when you benefit.

00:23:01.000 | So if you go and just go and study

00:23:03.000 | and watch what happens with the --

00:23:06.000 | watch what happens with those who run the government,

00:23:09.000 | and after their time of government service,

00:23:12.000 | then they go and slide over to the market,

00:23:14.000 | and that's when they get their compensation

00:23:16.000 | for all the inside deals.

00:23:18.000 | And so the inside deals happen --

00:23:20.000 | you need a voting block to get you in,

00:23:22.000 | and so you give away money as much as possible,

00:23:25.000 | and that helps you to secure a vote.

00:23:28.000 | And then you need a -- you need a --

00:23:31.000 | you need the corporate interest,

00:23:32.000 | the large corporate interest, to secure your --

00:23:35.000 | you know, to really move and fund your campaign.

00:23:38.000 | And so, you know, you can make the argument

00:23:41.000 | that, well, it's a sense of altruism

00:23:43.000 | and trying to help and keep people from being poor.

00:23:45.000 | I haven't seen enough evidence to convince me of it.

00:23:47.000 | That's the divisive political argument.

00:23:49.000 | That's why I think it's not.

00:23:50.000 | Now, to answer your question,

00:23:52.000 | how confident are you predicting the date

00:23:54.000 | at which the U.S. government is going to run out of money

00:23:56.000 | and not be able to do it?

00:23:58.000 | Are you ready to set the date on that?

00:24:00.000 | No, it seems like they can just push that

00:24:02.000 | into the future perpetually.

00:24:04.000 | Exactly. So --

00:24:06.000 | I mean, money -- the money is so fake.

00:24:09.000 | It just doesn't make any sense to me

00:24:11.000 | that we're even living in a money economy,

00:24:13.000 | because when you look around --

00:24:15.000 | I was a naturalist for years, an environmental ecologist.

00:24:19.000 | And when you look around at natural systems,

00:24:21.000 | like, no other animals are living in a money

00:24:23.000 | or really even a barter economy at all.

00:24:25.000 | And I don't -- I mean, I feel like, in a sense,

00:24:28.000 | like money is evil

00:24:30.000 | because it's forced everyone into far more labor

00:24:34.000 | than is needed.

00:24:36.000 | When you look at hunter-gatherer societies,

00:24:37.000 | they're only working --

00:24:39.000 | they're putting in a few hours of real work a day

00:24:41.000 | and then having lots of leisure time.

00:24:43.000 | But in our country, you know,

00:24:44.000 | people are working their tails off.

00:24:46.000 | It's weird.

00:24:48.000 | So you're opening probably one of my most --

00:24:52.000 | the most interesting cannons of worms

00:24:55.000 | that are just fun to talk about.

00:24:57.000 | And it's the kind of thing that,

00:24:58.000 | over a cold drink and a good cigar,

00:25:00.000 | you can go on for hours, all night long,

00:25:03.000 | on this stuff.

00:25:05.000 | It's -- have you studied the history of money

00:25:07.000 | at all yourself personally?

00:25:09.000 | No, not really.

00:25:11.000 | I know it kind of started as agriculture.

00:25:14.000 | But I'm sure there was, you know,

00:25:17.000 | some hunter-gatherer tribes that would just,

00:25:19.000 | you know, get together every once in a while

00:25:21.000 | so they would use a barter system.

00:25:22.000 | I'm not sure if that's really how it started.

00:25:25.000 | That's -- so with my understanding,

00:25:28.000 | and I'm not an expert in this space,

00:25:29.000 | I'd encourage you to go find someone who is.

00:25:31.000 | I'm a student. I'm not an expert.

00:25:33.000 | But there is a popularly held misconception.

00:25:36.000 | And I'll just give you a few thoughts

00:25:38.000 | and I'll answer your question.

00:25:39.000 | And this is one that I don't want to take the whole call

00:25:41.000 | and go for an hour on the topic.

00:25:43.000 | But I'll give you a few thoughts.

00:25:44.000 | There's a popularly held misconception

00:25:46.000 | that money developed from -- out of a barter economy.

00:25:49.000 | And this goes back all the way to, you know,

00:25:52.000 | I think Adam Smith was one of the writers

00:25:54.000 | who popularized this notion.

00:25:56.000 | And he went back and said,

00:25:58.000 | "Well, here's how money developed.

00:26:00.000 | We all started, you know,

00:26:01.000 | we were hunter-gatherer societies.

00:26:03.000 | And then you had a deer,

00:26:04.000 | and somebody else said,

00:26:05.000 | 'I want some of that deer in here.

00:26:06.000 | I'll trade you an arrowhead for the deer.'"

00:26:08.000 | And blah, blah, blah.

00:26:09.000 | And we developed the barter system.

00:26:11.000 | And then we needed some kind of currency

00:26:14.000 | that would be useful.

00:26:15.000 | And that currency would be --

00:26:17.000 | you know, so it came to the coin system.

00:26:19.000 | That's popular mythology around money.

00:26:22.000 | From all the research I've done,

00:26:23.000 | that there is no historical evidence

00:26:25.000 | that that was how money was developed and created.

00:26:28.000 | And there's substantial evidence

00:26:30.000 | that goes against that

00:26:33.000 | and demonstrates that that's demonstrably false.

00:26:35.000 | That money is normally, actually,

00:26:37.000 | and has historically been a system of credit.

00:26:40.000 | And that it's almost always based upon

00:26:42.000 | a system of credit.

00:26:44.000 | So I don't buy necessarily all of the arguments

00:26:47.000 | that people say,

00:26:48.000 | "Well, we just have to have a currency system

00:26:51.000 | that, you know, is based upon

00:26:52.000 | we all need gold and silver coins,

00:26:54.000 | and based upon the gold and silver coins,

00:26:56.000 | then we're going to be able to run things."

00:26:58.000 | I don't buy the barter concept, personally.

00:27:00.000 | Now, there are a bunch of other areas

00:27:03.000 | that these theories branch off into.

00:27:05.000 | And so I'm also not a fan of the way

00:27:07.000 | that the system currently functions.

00:27:10.000 | But we're doing some research on it,

00:27:12.000 | and you'll find that money has generally

00:27:16.000 | come down to a system of credit.

00:27:18.000 | And so back to the current situation,

00:27:20.000 | as long as the U.S. government

00:27:23.000 | can maintain faith in the credit

00:27:26.000 | of the U.S. government

00:27:27.000 | and the credit of the dollar,

00:27:28.000 | then our current economic system will continue.

00:27:31.000 | And this is what always really troubles people,

00:27:34.000 | is they look at it and say,

00:27:36.000 | "How on earth do I go through...

00:27:38.000 | How on earth is...

00:27:39.000 | You know, with the trillions of dollars of debt

00:27:41.000 | and the massive issues all around,

00:27:44.000 | how has the government been able

00:27:45.000 | to keep the fabric of society together

00:27:47.000 | for this long?"

00:27:48.000 | And I think they'll probably be able to do it

00:27:50.000 | much longer than people think.

00:27:51.000 | But at the end side,

00:27:53.000 | so back to the employees,

00:27:54.000 | at the end, in the short term,

00:27:56.000 | I don't think they have much to worry about,

00:27:58.000 | because the political force is,

00:28:03.000 | on all sides,

00:28:04.000 | is to provide people with more.

00:28:06.000 | You don't see any political candidates

00:28:08.000 | on either the Democratic or Republican Party

00:28:11.000 | arguing for cutting back on anything.

00:28:13.000 | You don't see anybody arguing

00:28:15.000 | for pulling back on the welfare state.

00:28:17.000 | All of the political candidates,

00:28:21.000 | with maybe the exception of Rand Paul or Ted Cruz,

00:28:25.000 | which neither of them looks like

00:28:26.000 | they've got a shot at any kind of traction

00:28:28.000 | in the Republican Party,

00:28:30.000 | all of the political candidates

00:28:32.000 | are big government progressives

00:28:35.000 | who are going to continue to expand

00:28:37.000 | the welfare state.

00:28:38.000 | And so, once you recognize that,

00:28:40.000 | you can...

00:28:41.000 | My opinion, who knows?

00:28:43.000 | History could prove me wrong,

00:28:44.000 | but my opinion is that you're not going to see

00:28:46.000 | any change in policies.

00:28:48.000 | Nobody is advocating for any serious change

00:28:51.000 | that's going to affect your dad's workers.

00:28:53.000 | In the long run,

00:28:54.000 | I think, ultimately,

00:28:56.000 | that I'm convinced that, in the long run,

00:28:59.000 | there will be the so-called "Great Default,"

00:29:04.000 | that there is no possibility

00:29:07.000 | that the U.S. government

00:29:09.000 | is able to maintain its overall promises.

00:29:13.000 | And so, those promises are multifold.

00:29:15.000 | Number one is you have the national debt

00:29:18.000 | that is on the books,

00:29:19.000 | and so that's about $18, $19 trillion right now.

00:29:22.000 | And then you have the major debts,

00:29:24.000 | which are the welfare programs,

00:29:26.000 | Medicare, Medicaid, and Social Security,

00:29:28.000 | and you total the unfunded liabilities up with that.

00:29:31.000 | And depending on what estimate you read,

00:29:33.000 | I go with Lawrence Kotlikoff's numbers

00:29:35.000 | from Boston University,

00:29:37.000 | you're up at about $200 trillion.

00:29:39.000 | And so, there's no possible way

00:29:41.000 | that that debt will be repaid

00:29:43.000 | or that those obligations will be shifted.

00:29:47.000 | And so, what will happen is, in my opinion,

00:29:50.000 | and this is a prognostication,

00:29:52.000 | and I could be absolutely wrong,

00:29:54.000 | but what will happen is that, ultimately,

00:29:56.000 | the voters will, over time,

00:29:59.000 | screw everyone who's got the obligations

00:30:01.000 | from the government.

00:30:03.000 | And so, all of the welfare programs,

00:30:05.000 | they'll be pulled back because they're unaffordable.

00:30:08.000 | The long-term payments to the pensioners,

00:30:13.000 | Social Security, Medicare,

00:30:14.000 | Medicare benefits will be pulled back.

00:30:16.000 | And you can see signs of that

00:30:19.000 | to some degree, I think,

00:30:21.000 | if you pay attention to inside situation,

00:30:25.000 | to inside industry.

00:30:27.000 | So, where I noticed this as a health insurance agent

00:30:29.000 | was in the long-term care space.

00:30:31.000 | We were talking a moment ago

00:30:33.000 | about long-term care insurance policies.

00:30:35.000 | In the past, Medicaid had generous benefits

00:30:39.000 | for long-term care coverage for seniors.

00:30:41.000 | And that coverage, and so many times,

00:30:44.000 | when I was selling long-term care insurance,

00:30:46.000 | people would say, "Well, Uncle Joe needed care.

00:30:48.000 | He had Alzheimer's,

00:30:49.000 | and the federal government paid for him

00:30:50.000 | for nine years to stay in a nursing home.

00:30:52.000 | And he had plenty of money,

00:30:53.000 | and they just had that as part of his benefit."

00:30:55.000 | Well, that was true, but it's no longer true.

00:30:57.000 | And the government has pulled back

00:30:59.000 | on all of those benefits,

00:31:00.000 | such that there is still long-term care coverage

00:31:03.000 | as a component of Medicaid,

00:31:04.000 | but it's nowhere near as generous as it once was,

00:31:06.000 | and it's much more restricted than it used to be.

00:31:09.000 | So, in the long run,

00:31:11.000 | anybody who's depending on the welfare state

00:31:14.000 | for their livelihood is gonna get screwed.

00:31:16.000 | Now, what's that long run?

00:31:18.000 | I have no idea.

00:31:19.000 | Is it 10 years, is it 40 years, is it 50 years?

00:31:22.000 | I don't know.

00:31:23.000 | So, my encouragement to your dad would be

00:31:25.000 | have him put in place

00:31:27.000 | and try to just simply provide education

00:31:29.000 | as much as possible to fulfill,

00:31:31.000 | I would say, his moral obligation to his workers

00:31:33.000 | to educate them, give them some,

00:31:36.000 | provide for them some resources

00:31:38.000 | so that those who are interested

00:31:39.000 | can liberate themselves.

00:31:42.000 | Because as long as you're living,

00:31:44.000 | as long as you are living off of the back of the state,

00:31:47.000 | you're a slave of the state.

00:31:48.000 | And so, if I were him, I would try to promote,

00:31:54.000 | I would try to promote some education

00:31:56.000 | and some knowledge for his workers,

00:31:57.000 | try to make some resources available,

00:31:59.000 | offer to help any of them that want help,

00:32:01.000 | but ultimately, he's not gonna change anything,

00:32:04.000 | and they're not gonna change

00:32:05.000 | until circumstances force them to change.

00:32:08.000 | Those are my thoughts.

00:32:09.000 | Yeah, I can definitely see that.

00:32:12.000 | In a certain sense, I feel like

00:32:14.000 | almost all of us are slaves to the state.

00:32:16.000 | Just property taxes,

00:32:19.000 | and it's just impossible to live a life

00:32:22.000 | without government.

00:32:24.000 | Well, that's why I promote the stuff that I do,

00:32:25.000 | and why you're promoting urban farming.

00:32:27.000 | The last call, you know,

00:32:28.000 | when we talked two weeks ago on this call,

00:32:30.000 | that's why, here's the dichotomy that I see.

00:32:34.000 | And again, this is kind of that fun,

00:32:36.000 | personal argument back and forth.

00:32:41.000 | In the aggregate, I don't see,

00:32:45.000 | the state has never been more powerful

00:32:47.000 | over our individual lives, in the aggregate.

00:32:51.000 | But on the individual level,

00:32:53.000 | there's never been more freedom than there is now.

00:32:56.000 | And so, yes, on the whole,

00:33:01.000 | society is carefully manipulated and controlled,

00:33:04.000 | but you and I as individuals

00:33:06.000 | can come out of the cave, to use Plato's allegory,

00:33:10.000 | and can make decisions that will enhance

00:33:12.000 | our own personal liberty.

00:33:14.000 | And there's never been more freedom, ever,

00:33:17.000 | that I'm aware of in the history of the world,

00:33:19.000 | to make those kinds of decisions.

00:33:21.000 | And when you can compound the fact

00:33:23.000 | that just simply by waking up,

00:33:25.000 | paying attention to your own situation,

00:33:28.000 | and living a lifestyle of freedom yourself,

00:33:32.000 | you can help to enjoy the freedom.

00:33:34.000 | And when you compound that

00:33:36.000 | with the ability that each individual person has,

00:33:39.000 | to influence other people individually,

00:33:42.000 | but also to influence people on a public stage,

00:33:45.000 | there you have the greatest harbinger of liberty of all time.

00:33:51.000 | Because you can start an urban farm,

00:33:53.000 | you can teach other people to start an urban farm,

00:33:55.000 | you can, and every individual person can go on Facebook

00:33:59.000 | and has their podium and their soapbox

00:34:01.000 | to be able to challenge other people

00:34:05.000 | and to affect other people.

00:34:07.000 | So, the way I look at it,

00:34:10.000 | and I am more optimistic about the future

00:34:16.000 | than almost anybody else is,

00:34:18.000 | and so as long as you prepare and plan

00:34:21.000 | for the death of the welfare state,

00:34:24.000 | which I don't see any way that that could ever be avoided,

00:34:31.000 | I don't have a clue as to when it will happen.

00:34:33.000 | But I could be wrong.

00:34:35.000 | But as long as you plan and prepare

00:34:37.000 | so that you are personally okay

00:34:39.000 | when the welfare state starts bouncing checks,

00:34:42.000 | then in the long term there's going to be more liberty

00:34:45.000 | and freedom for all of us than there ever has been

00:34:47.000 | in the history of the world.

00:34:49.000 | So, that's how I approach it, is on the whole, yes,

00:34:52.000 | government will continue to grow,

00:34:54.000 | state will continue to control,

00:34:56.000 | but as individuals, there's freedom.

00:35:00.000 | Encourage yourself with the statistics

00:35:05.000 | that give you hope.

00:35:07.000 | So, I focus on schooling because if you look at that,

00:35:10.000 | there have never been more people learning

00:35:13.000 | and developing independent education than ever before.

00:35:17.000 | And if you look at the trends, the mass trends,

00:35:19.000 | look at what has happened with the Khan Academy,

00:35:21.000 | look at what's happened with online education,

00:35:24.000 | that is the brightest hope for the future,

00:35:28.000 | is that steadily, little by little,

00:35:31.000 | the school systems will systematically implode.

00:35:34.000 | They're overburdened.

00:35:36.000 | The teachers are going to be replaced by online teachers.

00:35:39.000 | And so the best teachers in the world

00:35:41.000 | are going to be teaching the classes.

00:35:45.000 | Everything is going to be available for free online.

00:35:47.000 | Once you break that system,

00:35:49.000 | and there's no reason for it,

00:35:50.000 | no need for anybody individually to break it,

00:35:52.000 | it's just going to happen based on the market forces,

00:35:54.000 | then systematically that will result

00:35:57.000 | in a decreasing power of the state.

00:35:59.000 | So, those are my political prognostications.

00:36:01.000 | Now you can sit back and we'll find out if I'm right

00:36:03.000 | or if I'm wrong. I have no idea.

00:36:06.000 | Anything else on that, Nate?

00:36:09.000 | No, I think we're probably good on that.

00:36:11.000 | Cool. Let's go on.

00:36:13.000 | I mean, we could talk for hours about that.

00:36:15.000 | You've indulged my political vent,

00:36:18.000 | but let's see who else has a question.

00:36:22.000 | All right, who else would like to ask a question

00:36:24.000 | or chip in a topic for today?

00:36:33.000 | I've got a Maryland caller.

00:36:35.000 | I've got a 240 area code.

00:36:40.000 | Who's that calling in from Maryland today?

00:36:43.000 | Hello, my name is Daria.

00:36:45.000 | I'm calling from Maryland.

00:36:47.000 | Hi, Daria. Can I answer any questions or help you?

00:36:50.000 | Yes, I do have a question.

00:36:51.000 | I feel that for other listeners

00:36:53.000 | it will be very basic,

00:36:55.000 | but I guess I should ask anyway.

00:36:57.000 | I'm really new to financing,

00:36:59.000 | but I've been reading books and trying to figure out

00:37:02.000 | how should I start investing,

00:37:04.000 | what would my portfolio in the future look like,

00:37:07.000 | and so on and so forth.

00:37:08.000 | Now I am at the point when I know

00:37:12.000 | that when I save some money

00:37:13.000 | and I know that I want some individual stocks,

00:37:16.000 | some bonds, maybe treasury bills and rates.

00:37:20.000 | But what I don't know what to do next,

00:37:22.000 | so I assume that I need to open a brokerage account.

00:37:25.000 | But the thing is I don't know how to approach

00:37:28.000 | opening a brokerage account,

00:37:30.000 | because I'm thinking that there are, first of all,

00:37:32.000 | several of them which I don't know how to choose.

00:37:35.000 | I'm thinking there are fees associated

00:37:37.000 | that I might not be aware of.

00:37:39.000 | And I'm also thinking that probably

00:37:42.000 | they offer different investment vehicles,

00:37:45.000 | and depending on what I want,

00:37:47.000 | some may have it, some may not.

00:37:49.000 | So maybe if you can give me first advice,

00:37:53.000 | let's say I want to open an account and start investing,

00:37:57.000 | how should I approach this?

00:38:00.000 | Great.

00:38:02.000 | So I can do that, and I'll give you some suggestions.

00:38:06.000 | Before I do that, is it okay if I ask you

00:38:08.000 | a couple of quick questions just to get a sense

00:38:10.000 | of where you are in the process?

00:38:12.000 | Okay.

00:38:13.000 | Do you have an employer-sponsored retirement plan,

00:38:18.000 | 401(k) or 403(b), something like that available to you?

00:38:22.000 | Yes, and I have a match,

00:38:24.000 | and I use it to my advantage.

00:38:28.000 | I do.

00:38:29.000 | Okay, so you are participating, great.

00:38:31.000 | And why are you--

00:38:33.000 | and so you desire to purchase individual stocks,

00:38:36.000 | or you're trying to purchase mutual funds.

00:38:38.000 | Tell me about what type of investment plan

00:38:40.000 | you're hoping to pursue.

00:38:42.000 | So I read a book which is called "Investing 101,"

00:38:46.000 | but Christy Christoph--I don't know if you know it,

00:38:49.000 | but it's something that I started with

00:38:51.000 | to get myself oriented.

00:38:53.000 | So I know that I should probably purchase mutual funds,

00:38:59.000 | but because I work in the biotech industry

00:39:02.000 | and I have a PhD in a relevant discipline,

00:39:05.000 | I really want to--I have certain companies

00:39:08.000 | in biotechnology that I would like to have in my portfolio,

00:39:11.000 | and I wouldn't trust any broker to select them for them

00:39:15.000 | because I know maybe too much about the industry

00:39:19.000 | to trust other people.

00:39:20.000 | So this is the reason why I want to have some individual stocks

00:39:24.000 | because I feel I understand how to handle those.

00:39:28.000 | But I also want to diversify and have some mutual funds

00:39:31.000 | because I know very little about other industries

00:39:35.000 | and I know how biotech is risky and so on.

00:39:39.000 | Perfect, okay.

00:39:40.000 | So you said exactly the words that I was looking for,

00:39:43.000 | and the words that I was looking for was,

00:39:45.000 | "I work in this industry and I have some knowledge of this area

00:39:49.000 | and I have expertise."

00:39:50.000 | So the reason that I was looking for those words

00:39:52.000 | is I think that the mistake that most people make

00:39:55.000 | is assuming that they should be investing in stocks

00:40:00.000 | when they should really be considering investment

00:40:03.000 | on a larger scale.

00:40:04.000 | So one of my personal opinions is I do not like

00:40:08.000 | that when I say the word "invest,"

00:40:10.000 | most people automatically assume I should purchase

00:40:13.000 | publicly traded securities.

00:40:15.000 | When I use the word "invest," I would like people to think about

00:40:19.000 | all of the options that are available to them,

00:40:22.000 | and that can be everything from making sure that your car maintenance

00:40:27.000 | is up to date so that you don't have an expensive bill

00:40:31.000 | right at a moment when you can't afford it

00:40:33.000 | to purchasing the office building,

00:40:36.000 | the five-story office building that your company is in

00:40:39.000 | so that you can manage it and rent it out to your other friends.

00:40:43.000 | So if you look at investing, you've got to look at a couple of things,

00:40:47.000 | and I look at it, I think about it as a scale

00:40:51.000 | from passive to active.

00:40:53.000 | And so in many ways, I think that we should reserve

00:40:57.000 | the stock market as one option,

00:40:59.000 | and we should look to see what are the returns

00:41:01.000 | that I could expect to achieve from the stock market

00:41:04.000 | and use that as a placeholder,

00:41:08.000 | and then look to see can I beat that with something else in my life,

00:41:12.000 | some other inside information or some other inside knowledge

00:41:16.000 | that I have, and do I have the time and the ability to pursue that.

00:41:21.000 | So I like for people to think about investing bigger

00:41:24.000 | than just putting money into stocks.

00:41:26.000 | That said, stocks are powerful,

00:41:28.000 | and the ability to own small shares of other individual companies

00:41:33.000 | that people are running and pursuing for an entrepreneurial--

00:41:37.000 | from an entrepreneurial perspective is really, really powerful.

00:41:40.000 | When it comes to investing in individual stocks,

00:41:43.000 | there is a lot of noise out there and a lot of marketing hype

00:41:47.000 | about how people can beat the stock market.

00:41:50.000 | There are thousands and thousands of books

00:41:52.000 | about here are the types of stocks you should buy,

00:41:54.000 | here are the specific ways that you should approach it.

00:41:59.000 | The majority of those books and the majority of that advice

00:42:03.000 | has no-- there's no proof to it.

00:42:06.000 | They're baseless claims that, well, you can beat the stock market.

00:42:12.000 | At the end of the day, if you purchase the stocks

00:42:16.000 | of 10 so-called blue-chip companies,

00:42:19.000 | 10 big publicly traded companies,

00:42:21.000 | that's probably going to be pretty decent investments.

00:42:23.000 | They're well-regulated, they're well-run,

00:42:25.000 | the boards of directors do a good job of keeping those companies working.

00:42:28.000 | But to say I'm going to have some kind of inside information,

00:42:31.000 | you need to really be dedicated to that scenario

00:42:35.000 | in order for it to be worth it.

00:42:36.000 | So I try to discourage people from buying individual stocks

00:42:40.000 | and then let them kind of prove to me that I'm wrong.

00:42:44.000 | And the way that you can prove to me that I'm wrong

00:42:46.000 | is to say, well, there's an industry

00:42:48.000 | or there's something that I'm very interested in

00:42:51.000 | and I have some knowledge, I have an ability to look

00:42:55.000 | and I want to do the research and I want to look to see.

00:42:58.000 | So biotech would be a good example of that.

00:43:01.000 | You're involved in the industry,

00:43:02.000 | you would know what the companies are,

00:43:04.000 | you have an interest in it,

00:43:05.000 | and you have an ability to look at press releases

00:43:08.000 | and things like that and perhaps look for ways

00:43:14.000 | to find the companies that are going to be more promising.

00:43:19.000 | So how to go about opening the accounts.

00:43:23.000 | Before you open any kind of account,

00:43:24.000 | sit down and create an investment plan.

00:43:27.000 | It doesn't have to be complicated.

00:43:29.000 | Just sit down and write down on a piece of paper

00:43:31.000 | what you're investing for, why you're investing,

00:43:34.000 | and what you're trying to accomplish.

00:43:36.000 | This is the missing step that most amateurs never do

00:43:38.000 | is they never say, here's what I'm trying to do.

00:43:41.000 | And you should have a goal for what you want to do

00:43:44.000 | with the money, you should have a strategy,

00:43:47.000 | and you should be able to identify,

00:43:49.000 | here's what I'm trying to do.

00:43:51.000 | So the reason this is important is if you start there,

00:43:54.000 | you're going to make better investing decisions.

00:43:56.000 | If your reason for investing was,

00:43:58.000 | I want to buy a new beach house in three to four years,

00:44:02.000 | well now you're going to know that I'm probably

00:44:04.000 | not going to pursue the same scenario as,

00:44:07.000 | I want to potentially strike it rich

00:44:10.000 | and make some massive growth by investing

00:44:13.000 | in some small companies.

00:44:14.000 | So create a plan, make it simple,

00:44:16.000 | there's plenty of information out there,

00:44:18.000 | but at least start with being intentional.

00:44:21.000 | What am I trying to do?

00:44:22.000 | Next, look at all of your assets and figure out

00:44:24.000 | how much money can you afford to risk.

00:44:27.000 | So you should look at your savings,

00:44:29.000 | you should look at the money that you have

00:44:30.000 | in your 401k plans, and you should look to see

00:44:33.000 | how much money can I afford to risk.

00:44:35.000 | And only risk the money that you can afford to lose,

00:44:38.000 | especially in something speculative like biotech.

00:44:41.000 | My guess, and you may have more knowledge than I do,

00:44:44.000 | my guess is that in biotech,

00:44:46.000 | you're either going to have flat companies and losses,

00:44:51.000 | or you're going to have the potential for a company

00:44:54.000 | to hit something big, invent some hot new drugs,

00:44:56.000 | and have a huge, huge rate of return.

00:44:59.000 | So you're probably going to have a very wide-ranging

00:45:02.000 | investment portfolio where only a few of your companies

00:45:05.000 | are really going to make it big,

00:45:06.000 | and most of them are going to struggle,

00:45:08.000 | some of them are going to go bankrupt,

00:45:10.000 | some of them are going to develop some steady streams,

00:45:12.000 | but you're really looking for the big wins.

00:45:15.000 | That might be the case, I might be completely wrong.

00:45:18.000 | Make that plan.

00:45:19.000 | When it comes to actually buying stock,

00:45:22.000 | your company pension plan is probably

00:45:24.000 | not the right way to do it.

00:45:26.000 | If you're going to buy mutual funds,

00:45:28.000 | depending on the type of mutual fund you're going to buy,

00:45:30.000 | that's going to depend on the type of brokerage account.

00:45:33.000 | So if you were going to purchase index funds,

00:45:35.000 | well, you'd just go to Vanguard.com,

00:45:37.000 | you'd open an account with Vanguard,

00:45:39.000 | and you'd purchase your index funds there.

00:45:41.000 | But if you're going to purchase other types of mutual funds,

00:45:43.000 | you might want to purchase them directly

00:45:45.000 | from the mutual fund company,

00:45:46.000 | you might want to purchase them through a brokerage account,

00:45:49.000 | through an online discount broker.

00:45:51.000 | You can also purchase your stocks

00:45:52.000 | through an online discount broker.

00:45:54.000 | And for you choosing them yourself,

00:45:56.000 | that's probably going to be all you need to do.

00:45:58.000 | There are a number of good ones.

00:46:00.000 | So there are some big names, E-Trade,

00:46:03.000 | I think Schwab, TD Ameritrade,

00:46:05.000 | are some of the ones, Scottrade

00:46:07.000 | are some of the ones that come to mind.

00:46:09.000 | I am in the process of bringing on a sponsor on the show

00:46:14.000 | for a company called Trade King.

00:46:16.000 | We're in the final negotiation of a sponsorship deal.

00:46:19.000 | And Trade King, I interviewed the CEO on that show,

00:46:21.000 | his name is Don Monsenaro.

00:46:24.000 | I interviewed him a couple of weeks ago

00:46:27.000 | from the FinCon Financial Bloggers Conference.

00:46:30.000 | And they're down in Fort Lauderdale.

00:46:33.000 | And I decided to bring them on as a sponsor of the show.

00:46:36.000 | I really like them, I like what they're doing.

00:46:38.000 | They're not the biggest company,

00:46:39.000 | but I feel very confident that that would be a good choice for you.

00:46:42.000 | You can open an account with them,

00:46:44.000 | and you can, they'll wait a couple of days,

00:46:47.000 | and once you hear them,

00:46:48.000 | or maybe it might be a couple of weeks,

00:46:50.000 | but once you hear them come on the show as a sponsor,

00:46:52.000 | there'll be a special deal for listeners of the show,

00:46:55.000 | a special bonus if you open an account with them.

00:46:57.000 | And you can open an account with them,

00:46:58.000 | you can place your trades,

00:46:59.000 | and you can purchase the stocks of those companies with them.

00:47:02.000 | So that's the specific answer for how to open a brokerage account.

00:47:06.000 | I don't know of any reason why you would choose anybody

00:47:08.000 | other than Trade King,

00:47:09.000 | but as with anything, you should go and do your own due diligence.

00:47:12.000 | But I will be bringing them on the show as a sponsor,

00:47:15.000 | and they can help you with a brokerage account

00:47:17.000 | to purchase those individual companies.

00:47:19.000 | Make sure that when you're doing it,

00:47:21.000 | you're doing it within the context of your bigger investment plan,

00:47:24.000 | and your bigger financial plan, and your financial goals.

00:47:27.000 | And then you'll be able to make really good decisions.

00:47:29.000 | You'll be able to stick with your trading plans,

00:47:31.000 | and hopefully be able to make a lot of money.

00:47:33.000 | It'll be awesome.

00:47:34.000 | Does that help a little bit?

00:47:36.000 | Yes, that's perfect.

00:47:38.000 | I actually, I was considering Trade King.

00:47:40.000 | I think I heard the podcast that you did.

00:47:44.000 | And so, yeah, okay, so that's perfect.

00:47:48.000 | And then in terms of strategies, yeah, I'm thinking about it,

00:47:51.000 | and they're actually evolving of what I want to do.

00:47:55.000 | And my original idea was that I want to buy a house in cash,

00:48:00.000 | and I want to retire in 15 years.

00:48:03.000 | This was my kind of overall first thing that I was thinking on,

00:48:10.000 | and then I was trying to calculate what it means to get to this goal.

00:48:15.000 | But, you know, things are evolving as I am learning more and more about the area.

00:48:23.000 | Right, and so that's where -- that's exactly the type of plan that you want to put together.

00:48:28.000 | And so you start with how much money would I need to pay for the house in cash?

00:48:33.000 | Then you also look to say if I want to retire in 15 years,

00:48:36.000 | how much money do I think I would need in order to retire?

00:48:40.000 | And then you can plug that into a financial calculator,

00:48:42.000 | and if you know those numbers I'd be happy to help you do some math right now on the call.

00:48:46.000 | But you plug those numbers into a financial calculator,

00:48:49.000 | and you see based upon how much money you have, how much money you can save,

00:48:53.000 | and your time horizon, and you ask yourself,

00:48:55.000 | "Is this a realistic goal that I could achieve?"

00:49:00.000 | And then you're going to know, "Do I think I could hit this with my investment plan?"

00:49:06.000 | And so depending on how fast you want to retire, that's going to drive, again, how you invest.

00:49:16.000 | Mm-hmm. Mm-hmm. Makes sense.

00:49:19.000 | Yeah, I know rough numbers.

00:49:20.000 | I don't know if it's going to be too burdensome to do it right now, but I can do it.

00:49:25.000 | Let's do it real quick. It'll be fun. I've got a calculator right here.

00:49:28.000 | So how much money do you think that you need to retire?

00:49:32.000 | So I was thinking that $60,000 or $70,000 a year.

00:49:37.000 | Well, I would – okay, probably a minimum of $50,000 a year is what I would plan to do when I retire.

00:49:46.000 | And then if I retire in 15 years, I would assume that I would live at least 20 years after that.

00:49:54.000 | Okay.

00:49:55.000 | Yeah, and then –

00:49:56.000 | So let's do an – let's use that as an example.

00:50:00.000 | Let's use the 4% rule as a good guess on kind of a good ballpark range

00:50:06.000 | and assume that you want to spend $50,000 per year,

00:50:10.000 | and so you need a portfolio that you can withdraw $50,000 per year from.

00:50:15.000 | And so multiply $50,000 times 25, and that gives you $1,250,000.

00:50:21.000 | So that's the value of your portfolio that you need at the time of retirement.

00:50:26.000 | Now, ballpark – and again, this is a public call, so feel free not to say,

00:50:30.000 | but how much money do you have saved currently?

00:50:33.000 | And again, you don't have to answer if you don't want to.

00:50:36.000 | I can. I mean, the thing is, there are different things.

00:50:42.000 | Do I count 401(k) or do I not count 401(k)?

00:50:46.000 | Yes, count your 401(k).

00:50:49.000 | Oh, okay. So 401(k) is probably $40,000, $45,000, and then –

00:50:56.000 | it's actually a mixture of the raw pre-tax and post-tax, but let's say $45,000,

00:51:01.000 | and then plus savings probably around $40,000, $50,000.

00:51:07.000 | And I do not have any debt, neither college, no mortgage, nothing pretty much.

00:51:15.000 | Congratulations. Okay, so we've got $100,000 now.

00:51:18.000 | And then how much every year do you think that you can afford to contribute

00:51:22.000 | to your investment account?

00:51:26.000 | Every year? Okay. Right now, I'm using YNAB that you recommended to see

00:51:33.000 | how much I can actually contribute. Okay.

00:51:35.000 | I think I can at this moment $3,000 a month, which will make me $36,000.

00:51:45.000 | I persuade my husband to help me out, let's say $40,000 a year.

00:51:52.000 | Okay. So let me do this math for you, and let's assume that you want to retire

00:51:56.000 | in 15 years. That was what you said, right?

00:51:59.000 | Yes.

00:52:00.000 | Okay. So the way that we do this math – and this is just rough math,

00:52:03.000 | but to give you an idea of the type of investment plan that you need,

00:52:06.000 | we put in – into the financial calculator, and it's simple once you know

00:52:11.000 | how to run the financial calculator, but you're going to learn that on your own.

00:52:16.000 | I think I did a show on that, or I need to do some videos on it.

00:52:19.000 | So first thing we're going to do is we're going to put in our future value.

00:52:22.000 | So we type $1,250,000, and we put that in as our future value.

00:52:27.000 | We hit the FV button on our calculator.

00:52:30.000 | Next, we're going to put in our present value, and we're going to put in $100,000.

00:52:34.000 | And then depending on the calculator, usually you need to change the sign

00:52:38.000 | and put it in as negative, so you put in minus $100,000 as our present value.

00:52:43.000 | And then we're going to put in our annual payment.

00:52:46.000 | So we're going to do an annual payment here, and we're going to put $40,000

00:52:50.000 | of a contribution into the account as a payment.

00:52:53.000 | And then we're going to run this for 15 years, and we're going to solve

00:52:57.000 | for the necessary interest rate.

00:52:59.000 | I just solved for interest, and the calculator is running here.

00:53:02.000 | It's going to tell us how much interest we actually need to an interest rate

00:53:10.000 | that we need to earn on our money.

00:53:12.000 | Hang on one second.

00:53:15.000 | I forgot to--I made one mistake.

00:53:18.000 | Just a second.

00:53:23.000 | $1,250,000.

00:53:26.000 | It's hard to do it and then talk at the same time.

00:53:28.000 | $1,250,000.

00:53:39.000 | Okay, and it's running again here.

00:53:41.000 | It's going to tell us what our annual percentage rate of return is

00:53:44.000 | that we need.

00:53:51.000 | Okay, so under that scenario, all we need here is a 6.2% rate of return.

00:53:57.000 | That's all we need to earn on our investment.

00:54:01.000 | And the way that you can check that is we can just run the numbers again.

00:54:05.000 | And so what I'll do is I'll say, okay, 6.2%, we've got $100,000 starting point.

00:54:11.000 | We're going to do this for 15 years.

00:54:13.000 | We're going to earn 6.2% annual rate of return, and we're going to contribute

00:54:17.000 | $40,000 to the account every year.

00:54:21.000 | So what does that end up with?

00:54:23.000 | And at the end of 15 years, we would have $1,250,000.

00:54:27.000 | So the reason I ran that math is to show you that if you can afford to save

00:54:32.000 | that much money, you only need a 6% rate of return to hit that financial goal.

00:54:37.000 | Well, you should be able to get a 6% rate of return just with buying an index

00:54:41.000 | fund and not putting in any--and putting your money in stocks and not worrying

00:54:46.000 | about investing in biotech stocks.

00:54:49.000 | So you have the decision to say, "Do I just want to buy index funds or do I just

00:54:54.000 | want to buy real estate and make 6% and reach those goals and have a much higher

00:54:59.000 | certainty, or do I want to invest in biotech stocks?"

00:55:04.000 | And so you have to look and say, "How much rate of return do I think I could

00:55:08.000 | earn in biotech stocks and do I need to?"

00:55:10.000 | And that's what I mean by actually running a scenario because--the next

00:55:15.000 | question, do you have a guess as to what rate of return you would hope to earn

00:55:19.000 | if you were going to run your portfolio yourself and invest in biotech stocks?

00:55:24.000 | Oh, good question.

00:55:28.000 | Well, I was thinking 10% should be possible if I make sure that I spend

00:55:34.000 | enough time.

00:55:37.000 | Maybe more, but as you said, you've got to be lucky as well as knowledgeable.

00:55:43.000 | Right.

00:55:44.000 | So if you're in the 10% range, my guess is I wouldn't think it would be worth

00:55:48.000 | pursuing biotech stocks as your investment strategy if you only wanted or needed

00:55:55.000 | 10%.

00:55:57.000 | 10%, you should be able to get there with much simpler, much safer investment

00:56:03.000 | approaches versus investing in speculative biotech stocks.

00:56:08.000 | So if I were you, what I would do is I would create a plan where the majority

00:56:12.000 | of your money is going to go into well-chosen mutual funds and I would do that

00:56:19.000 | within your 401(k) and things like that.

00:56:21.000 | And I would produce--I would put something like--I would have a goal of maybe

00:56:25.000 | investing $2,000 a month or $2,500 a month into more conservative investment.

00:56:32.000 | And then I would take maybe a little bit extra, maybe $500 or $1,000 or $1,500

00:56:37.000 | a month, and I would use that money to fund my brokerage account.

00:56:41.000 | And so what you're doing there is you are having a major portfolio that's your

00:56:46.000 | conservative portfolio, and then you have a small portfolio that you're investing

00:56:51.000 | aggressively.

00:56:52.000 | And the hope is that you can make 50% rate of return or 30% or 80% by picking the

00:56:58.000 | right biotech stock, but you're not counting on that to be your whole financial

00:57:02.000 | plan and you're not putting all of your money at risk in a very speculative way.

00:57:07.000 | So that's what I would do is I would have kind of my core portfolio be a little

00:57:12.000 | bit more conservative, and then I would have the satellite portfolio--that's kind

00:57:16.000 | of one of the words that they would use, this type of approach, your core and your

00:57:19.000 | satellite.

00:57:20.000 | I'd have my satellite portfolio be much more aggressive.

00:57:22.000 | Now, you've got to pick the numbers, but knowing that you could save--if you want

00:57:27.000 | to live on $50,000 a year and knowing you can save $40,000 a year and knowing that

00:57:33.000 | you don't need that high of a rate of return to hit your financial independence

00:57:37.000 | goal, I would focus a lot of my portfolio in a conservative direction, and then I

00:57:42.000 | would put a little bit of the portfolio in the speculative direction.

00:57:46.000 | That would seem like how I would approach it.

00:57:49.000 | Well, thanks so much, Joshua.

00:57:51.000 | Actually, in my wine lab, I budget $500 of stock, which I have not invested in, but

00:58:01.000 | I'm budgeting that much money because I know how it goes in this area.

00:58:08.000 | Okay, well, that's wonderful.

00:58:10.000 | I don't want to take any more of your time, but I have a lot to think about, and

00:58:14.000 | it's perfect.

00:58:15.000 | Good.

00:58:16.000 | Good.

00:58:17.000 | Go slow and make sure that you study, study, study, study.

00:58:20.000 | Go slow.

00:58:21.000 | Don't invest in something you don't understand, and go slow and don't invest

00:58:25.000 | any money that you can't afford to lose.

00:58:27.000 | And, I mean, you're obviously very, very bright, and I think you could put

00:58:32.000 | something together very nicely for yourself.

00:58:34.000 | All right, I'll take one more question for today.

00:58:36.000 | Who wants to ask the final question?

00:58:40.000 | Hey, Joshua, I just want to follow up.

00:58:42.000 | Actually, I thought that was pretty interesting, but wasn't one major piece

00:58:45.000 | of the formula missing, like her age and how many years she was going to be

00:58:50.000 | retired?

00:58:51.000 | Yes.

00:58:52.000 | I used, just as a sample, I used the 4% rule, and so the data and the research

00:59:00.000 | behind the 4% rule is assuming a 30- or 35-year retirement, but what you find is

00:59:07.000 | that the right portfolio construction, that it can actually be basically most of

00:59:12.000 | the portfolios at a 4% distribution could last into perpetuity.

00:59:16.000 | So if you're in that 3% to 4% range, then your portfolio should be able to be

00:59:22.000 | structured to last for a long period of retirement.

00:59:26.000 | What I was trying to do with asking those numbers and keeping it simple was simply

00:59:31.000 | trying to find out, does she need a 6% rate of return, or does she need a 66%

00:59:37.000 | rate of return?

00:59:38.000 | So if she had told me, "Joshua, I actually want to spend $150,000 per year,"

00:59:43.000 | then I immediately know that my ending portfolio needs to be closer to $4

00:59:48.000 | million.

00:59:49.000 | And so if I put $4 million into the calculator, and let's do this again real

00:59:55.000 | quick, 15 years, we're going to start it with $100,000, and we're going to make

01:00:01.000 | $40,000 of contributions into it.

01:00:04.000 | Then now, if we need $4 million at the end of 15 years, we're going to, give it

01:00:09.000 | a second to run, and it's going to tell us our rate of return.

01:00:12.000 | It's going to be way, way different than 6%.

01:00:14.000 | The reason I say that is because I believe that many financial...

01:00:18.000 | Okay, so now we're at an 18% rate of return.

01:00:22.000 | So she would need an 18% rate of return every year if she wanted to live on,

01:00:27.000 | whatever I said, $150,000 a year.

01:00:29.000 | So she needs a $4 million portfolio.

01:00:31.000 | I think that's still a workable financial plan.

01:00:34.000 | But you have to then ask yourself the question and say, "Where am I going to

01:00:37.000 | get the $4 million of...

01:00:40.000 | Excuse me, where am I going to get an 18% rate of return?"

01:00:43.000 | Well, now you wipe out, "I'm not going to get it in index funds.

01:00:46.000 | I'm not going to get it in conservative, you know, mutual funds."

01:00:55.000 | So now I need to either be very, very good at biotech stock investing,

01:01:01.000 | and I would need to ask myself specifically, "Do I have these skills?

01:01:06.000 | Could I develop these skills?

01:01:08.000 | I need to put a lot of time into it, or I need to move into business."

01:01:11.000 | And I need to say, "How could I take my $100,000 that I have of capital,

01:01:15.000 | and how could I develop some sort of business that I would be able to sell

01:01:19.000 | at the end of 15 years that would be worth $4 million?"

01:01:23.000 | And business people do this all the time.

01:01:25.000 | And it might be something as simple as, you know, buying a franchise locally.

01:01:29.000 | It might be a good idea that you've developed.

01:01:31.000 | But I don't think it's out of the realm of possibility to say,

01:01:34.000 | "I'm going to accumulate $4 million over the next 15 years."

01:01:38.000 | I intend to do that, but I'm not going to do it with publicly traded stocks.

01:01:41.000 | So that's why I was just doing some rough numbers to get an idea of do we need

01:01:44.000 | 6% or 18% rate of return.

01:01:47.000 | Is that helpful?

01:01:48.000 | Mm-hmm. Yep.

01:01:50.000 | Cool. Awesome.

01:01:52.000 | All right. Well, thank you guys so much for joining me on the call today.

01:01:56.000 | I've enjoyed chatting with you all, and I will be doing these again

01:02:00.000 | through the month of November.

01:02:02.000 | I intend to change one or two of the times to try to do an evening call

01:02:05.000 | to help some other people join in, but I've enjoyed these.

01:02:09.000 | And I thank you all for calling in.

01:02:11.000 | So if you have any questions in the meantime, join us on the next call.

01:02:14.000 | Otherwise, feel free to email me, and I'll see you back on the show.

01:02:17.000 | Thank you all for coming today.

01:02:19.000 | The L.A. Kings Holiday Pack is back, the perfect gift for the hockey fan in your life.

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