RPF0307-Friday

00:00:00.000 | Friday Q&A show today, live Friday Q&A.

00:00:04.000 | These are fun. I've been enjoying these and based upon the feedback from

00:00:08.000 | y'all, the audience, y'all have been too. Basically it works like this. Got a conference

00:00:12.000 | line and I got callers there and they gave me a brief

00:00:16.000 | hint of what they want to talk about, but beyond that

00:00:20.000 | you show up, you ask questions, and we talk.

00:00:24.000 | Welcome to the Radical Personal Finance Podcast.

00:00:42.000 | My name is Joshua Sheets and I'm your host. Thank you for being with me. This is the show where we work on a rich

00:00:46.000 | life now while building financial freedom in 10 years or less.

00:00:50.000 | We'll see what comes out. A lot of aspects to that.

00:00:54.000 | But today and tomorrow are both important.

00:00:58.000 | I'm going to do my best to help these callers and vicariously help you

00:01:02.000 | get there a little quicker and more efficiently.

00:01:12.000 | I really enjoy doing these live Friday Q&A calls. They keep me on my toes

00:01:16.000 | and they're good training and good practice and get a little bit of feedback. If you would like to join

00:01:20.000 | a call like this, feel free to become a patron of the show.

00:01:24.000 | Go to radicalpersonalfinance.com/patron. That's where you will find

00:01:28.000 | all of the details about that. That'll gain you access to the scheduled time, to the

00:01:32.000 | scheduled details and the scheduled information. You can call in

00:01:36.000 | and ask me whatever you want. So at the moment as we start our recording here, there are

00:01:40.000 | two listeners on the line with questions and let me see who to

00:01:44.000 | pick first. You know what? We'll go with Jason. So Jason, welcome to the Friday

00:01:48.000 | Q&A call. Go ahead and kick us off with a question.

00:01:52.000 | Hey, thanks. Good to be here. I was curious if you could talk about the

00:01:56.000 | differences in investing regarding compounding

00:02:00.000 | interest, the famous average rate of return

00:02:04.000 | that everybody always uses in their future value formulas, and a real rate of

00:02:08.000 | return and what they are.

00:02:12.000 | Okay. So I'll try to keep this simple, but

00:02:16.000 | it's a valuable question and let me make up some

00:02:20.000 | examples here. So this is a little sales

00:02:24.000 | technique. I used to use this in talking about

00:02:28.000 | life insurance and one of the real strengths

00:02:32.000 | of whole life insurance, cash value life insurance,

00:02:36.000 | one of its real strengths is that it only goes up in

00:02:40.000 | value. Now, the weakness is how fast does it go up

00:02:44.000 | in value. The other weakness is it starts pretty small because all the expenses

00:02:48.000 | come out first. But one of the strengths is that it only goes up

00:02:52.000 | in value. It is guaranteed by an insurance company to only go up

00:02:56.000 | in value. I think that is something that we often

00:03:00.000 | don't appreciate enough and so I used to in making presentations to

00:03:04.000 | potential clients regarding life insurance, I used to demonstrate it

00:03:08.000 | with a little bit of math and this is the example I used to use. Pretend

00:03:12.000 | that we have an investment that goes

00:03:16.000 | up in value by 100% in the

00:03:20.000 | first year. Then in the

00:03:24.000 | second year, it goes up in value by 100%.

00:03:28.000 | Then in the third year,

00:03:32.000 | it goes down in value by 50%. And you ask,

00:03:36.000 | what is the rate of return that you get with that investment?

00:03:40.000 | Now, what people will often do is they will run what

00:03:44.000 | we would do and I encourage if you haven't done this before, just hit pause and run

00:03:48.000 | the math and just ask yourself. I won't stretch it out into

00:03:52.000 | the dramatic sales presentation but it is a very useful question. So if you do

00:03:56.000 | the math and you say, okay, well, it is 100, you would do 100

00:04:00.000 | plus 100, that equals 200 and then it goes down 50

00:04:04.000 | so you would subtract 50, that equals 150 and then you divide that by

00:04:08.000 | 3, you wind up with a 50% average rate of return.

00:04:12.000 | And that is a really great rate of return.

00:04:16.000 | But what people often don't do, that is the average rate of return. What people often

00:04:20.000 | ignore, however, is what is the real rate of return. And so let's pretend that

00:04:24.000 | instead of using averages, let's actually do the math of the way that I

00:04:28.000 | presented it. So you have $100 in an investment account and

00:04:32.000 | $100 goes up in value by 100%. So we do

00:04:36.000 | $100 times, let's just do it times 2, that is the simplest

00:04:40.000 | way to do it. So you wind up at the end of the first year, you have $200

00:04:44.000 | in your account. Then in the second year, if it goes up in value

00:04:48.000 | by 100%, then $200 times

00:04:52.000 | 2 doubles up and it is $400.

00:04:56.000 | And then in the third year, however, if it goes down by 50%,

00:05:00.000 | then you wind up in a situation where

00:05:04.000 | 50% decrease is down to $200. Now I can't remember what

00:05:08.000 | the numbers I used to use. I used to use an example that was very simple math for people

00:05:12.000 | to do in their head. But what it actually would show that instead

00:05:16.000 | of their money going up, it would actually go down in

00:05:20.000 | value. And that would be the real rate of return.

00:05:24.000 | So if you start to compare these, you recognize there is a

00:05:28.000 | difference. Now, this is often used by people who are going to be

00:05:32.000 | critical of rate of return calculations. And so usually how you

00:05:36.000 | hear it is to say, "If an investment goes down in value by

00:05:40.000 | 40%, it doesn't just have to go up in value by 40%,

00:05:44.000 | it's got to go up in value by 80% or whatever the inverse is. It's got to go up in value

00:05:48.000 | by 80% in order just to break even." And that's the criticism. And this

00:05:52.000 | can be a substantial criticism of volatile investments.

00:05:56.000 | Where to take it? I think it's mathematically valid. What it demonstrates

00:06:00.000 | and whatever the numbers were that I used to

00:06:04.000 | use, I can't remember exactly, but it demonstrates the value of something

00:06:08.000 | that just consistently and steadily goes up. That can be very valuable because

00:06:12.000 | if you just had an average of 5% increases per year, that can be really, really strong.

00:06:16.000 | But it also demonstrates the value

00:06:20.000 | of steady growth. But the

00:06:24.000 | issue that I have personally with it is that just because an investment

00:06:28.000 | goes down in value by 20% doesn't necessarily mean there

00:06:32.000 | was any real reason for it to go down in value by 20%. And

00:06:36.000 | you only lock in that loss if you sell. So if I own a house that

00:06:40.000 | is worth $100,000 and it goes down in value by 20%,

00:06:44.000 | I'm not all of a sudden realizing it's got to go up by 40%

00:06:48.000 | in order, and I'm all freaked out about it. No, I'm just recognizing like I still have

00:06:52.000 | the house. Yeah, it went down, but I'm not worried about it. And the next guy

00:06:56.000 | that comes along and wants to buy the house, is he just going to focus on what the change

00:07:00.000 | is from what the difference in the change is

00:07:04.000 | of what the value where it went down? Or is he going to focus on something

00:07:08.000 | else? Is he going to go on and look at what's the

00:07:12.000 | value of the house for me to live in? If it were for comparing a stock, what's the current value

00:07:16.000 | of the company, et cetera? So that's just a quick

00:07:20.000 | overview of it. Do you want to ask a more

00:07:24.000 | specific application of it, Jason? Or is that helpful just to see the difference?

00:07:28.000 | I appreciate the help in

00:07:32.000 | delineating the difference. I think the two things that I would follow

00:07:36.000 | up is that any time you run any sort of

00:07:40.000 | projection, whether it be a 401(k) or IRA or any sort of

00:07:44.000 | investment that has a requirement for a future projection for you,

00:07:48.000 | whether it be early retirement or financial independence, the

00:07:52.000 | calculations always assume an average rate of return or essentially a

00:07:56.000 | compounding interest. So I'm curious to know

00:08:00.000 | the compounding interest average rate of return, there's no -- there's an assumed

00:08:04.000 | CVA basement of how far an investment

00:08:08.000 | would reduce. It doesn't account for the losses. So I'm

00:08:12.000 | wondering how accurate, if you will,

00:08:16.000 | a future value projection

00:08:20.000 | using an average rate of return, compounding interest type of formula versus

00:08:24.000 | a real rate of return, how accurate do you think those

00:08:28.000 | CVAs are a really good way to accurately run future projections?

00:08:32.000 | Well, it does wind up being a problem, which is why

00:08:36.000 | this is most famous. And I'm not

00:08:40.000 | skillful enough on this topic to present to you

00:08:44.000 | a thought out, you know, one, two, three, here's the direct application. I would need to give

00:08:48.000 | some thought to an outline of answering this question more specifically. So

00:08:52.000 | this is just the quick answer, and it's an area where perhaps I can

00:08:56.000 | address it in a future time with a prepared show outline where I'm ready to give you the

00:09:00.000 | pros and cons. The average -- when you're comparing

00:09:04.000 | averages versus real, the

00:09:08.000 | mistake that -- you can

00:09:12.000 | overstate something, which is why when you're working with a financial planner, the math

00:09:16.000 | -- when I just use an average rate of return,

00:09:20.000 | I wouldn't use that necessarily in a projection

00:09:24.000 | when planning a retirement income scenario for a 55-year-old.

00:09:28.000 | That's why I developed things like Monte Carlo analysis.

00:09:32.000 | So Monte Carlo analysis is a statistical tool that is

00:09:36.000 | brought in to use the reality

00:09:40.000 | of the fact that returns will vary widely. They'll vary in amount.

00:09:44.000 | You'll have positive returns, negative returns. They'll vary in

00:09:48.000 | sequence. Sometimes you face a bear market in the beginning, and that

00:09:52.000 | wrecks everything. Sometimes you face a bull market. And so

00:09:56.000 | when you're planning something specific like, "Can I live on this money for the rest

00:10:00.000 | of my life?" Personally, I'm going to be much more comfortable with using a Monte

00:10:04.000 | Carlo analysis or a simulation like that and modeling whatever portfolio

00:10:08.000 | I've constructed than I am just using the average rate of return.

00:10:12.000 | But it's still useful. I mean, just an average rate of return is still

00:10:16.000 | a useful benchmark to demonstrate how the money can grow.

00:10:20.000 | If you get enough time, and if your time period

00:10:24.000 | goes out far enough, then the average rate of

00:10:28.000 | return is very meaningful. You can

00:10:32.000 | track the dollars, and you can track them through with what's the performance of an actual dollar,

00:10:36.000 | but you can't do that on the air, that type of thing. So the average

00:10:40.000 | rate of return is useful, but it's not as precise as

00:10:44.000 | you'd like it. Let me give some thought. I will write this

00:10:48.000 | topic down on my list of shows to do and maybe try to present some more

00:10:52.000 | thought-out, prepared ideas and comments

00:10:56.000 | that would be more helpful on the subject. Let's go ahead and switch

00:11:00.000 | to Kevin. Kevin, you're up next. Go ahead and

00:11:04.000 | ask a question or comment. Hey, Joshua. Thanks.

00:11:08.000 | My question deals with how do

00:11:12.000 | you approach friends and family that are making

00:11:16.000 | financial decisions that you're convinced are

00:11:20.000 | not good for them to make because you yourself have been

00:11:24.000 | in their very shoes? I guess this could apply to lots

00:11:28.000 | of areas of life, not just financial. But I guess

00:11:32.000 | how do you and your wife approach your friends and your family

00:11:36.000 | and help speak truth

00:11:40.000 | and love and good wisdom

00:11:44.000 | into them, but not be overbearing, not be

00:11:48.000 | that guy and totally turn them off to even

00:11:52.000 | hearing the good you might have to say?

00:11:56.000 | So... Big question. Sorry.

00:12:00.000 | Yeah. No. So I'll give you the honest answer.

00:12:04.000 | Very straightforward and it's very simple.

00:12:08.000 | We don't. I do not approach people and

00:12:12.000 | give them unsolicited advice. And I used to.

00:12:16.000 | But as a... Well, is there an exception? I'm sure

00:12:20.000 | there's an exception. I'm often bursting over with ideas that

00:12:24.000 | I want to tell people. Recently, I'm often just

00:12:28.000 | bursting over because I see the things that other people often don't see.

00:12:32.000 | And so, real story. Recently, a friend of mine

00:12:36.000 | came over for dinner. And this is a long-time family friend.

00:12:40.000 | We've been friendly. We know each other. We had a long relationship.

00:12:44.000 | We're not extremely close. But this friend had made some poor decisions

00:12:48.000 | and... This friend had made

00:12:52.000 | some poor decisions and had worked hard over the last couple years of building

00:12:56.000 | their life back together. But during

00:13:00.000 | the context of the conversation, I hadn't seen him in a while, I invited him over and we

00:13:04.000 | were talking. During the context of that conversation, they started to share with me some

00:13:08.000 | unsolicited... Just some details of what they were doing, how they're getting their life put back together.

00:13:12.000 | And they had

00:13:16.000 | purchased a vehicle that I

00:13:20.000 | were paying... And they had bad credit. They purchased a vehicle. It was an expensive

00:13:24.000 | vehicle. Financed it with the

00:13:28.000 | buy-here-pay-here financing and were paying a very high rate of

00:13:32.000 | interest for the purpose of building their credit. And I just

00:13:36.000 | look at that situation. I just think, "This is crazy. There's no reason for

00:13:40.000 | this. I could show you a better way." But on that topic, I

00:13:44.000 | kept my mouth shut. I didn't say anything about it. I mean, what is there to say?

00:13:48.000 | And the problem is you can't say something to somebody because

00:13:52.000 | it's a rare person who's ready and able and willing to

00:13:56.000 | admit a mistake. And if you

00:14:00.000 | demonstrate... It's kind of like an argument. I have a general rule that I will

00:14:04.000 | almost never argue with people. I almost never

00:14:08.000 | argue with friends. And the reason... Years ago, when I was a kid and I

00:14:12.000 | read "How to Win Friends and Influence People," chapter one of that book...

00:14:16.000 | Maybe it was chapter one, chapter two. The first few principles is that

00:14:20.000 | you can never win an argument because if you win an argument,

00:14:24.000 | you and I arguing subject matter A, and we win, you're going to

00:14:28.000 | feel... And I win the point. You're going to feel belittled.

00:14:32.000 | You're going to feel humbled, and that's going to wreck our relationship and our friendship.

00:14:36.000 | If you win, I've lost the argument.

00:14:40.000 | So you can't win an argument. Now, I do think there is an exception. There are some

00:14:44.000 | friends of mine who are thoughtful people that are

00:14:48.000 | able to disconnect themselves from an opinion.

00:14:52.000 | And those friends, I'll enjoy an argument back and

00:14:56.000 | forth, and we'll argue the point, but we're not emotionally invested in it.

00:15:00.000 | The problem is when you get into money, it's the same dynamic. If I

00:15:04.000 | tell somebody that they've made a mistake, they're not going to be open to that,

00:15:08.000 | and that's going to force them to admit it. So they've got to learn it themselves. So

00:15:12.000 | as a general rule, I don't give advice to people unless it's

00:15:16.000 | solicited. Now, exceptions, yes. Sometimes I'll try,

00:15:20.000 | if I really sense that somebody is actually interested, I'll try to

00:15:24.000 | allow them to ask a question.

00:15:28.000 | And if there's a way I can... Or I'll ask

00:15:32.000 | permission. Like, "Would you like some advice?

00:15:36.000 | I've thought a lot about this. Would you like some ideas?" And I did that

00:15:40.000 | with that friend. Not on the subject. I didn't actually talk to them about the car, but they were

00:15:44.000 | saying they were planning to buy a house. And I said, "Would you like some ideas on how you could do that

00:15:48.000 | in a really intelligent way?" And then I go ahead and do it from there.

00:15:52.000 | But I'm just convinced that unless somebody's asking me a question, they don't want an

00:15:56.000 | answer. And so I've never seen it work well.

00:16:00.000 | The times that I break my rules, I almost always regret it. I almost

00:16:04.000 | always wind up hurting somebody. And so I just... I have

00:16:08.000 | this general idea that, in general, I should simply

00:16:12.000 | live the way that I believe is best and allow people to

00:16:16.000 | see that. And if they want my opinion on something,

00:16:20.000 | they'll seek me out. So as a general rule, I don't give advice.

00:16:24.000 | I have people in my life who are very close to me

00:16:28.000 | that I see them making many what I would consider to be financial mistakes.

00:16:32.000 | I don't open my mouth. There are positions of

00:16:36.000 | authority. For example, if you are working with

00:16:40.000 | somebody in a counseling setting, as a

00:16:44.000 | financial advisor, if somebody has solicited my services as a financial

00:16:48.000 | advisor, now, as Carl Richards says, may have your

00:16:52.000 | permission to be professionally candid. OK, that's useful.

00:16:56.000 | If I'm working with somebody and there's a level of accountability,

00:17:00.000 | whether that's an employment situation, that's that one.

00:17:04.000 | You have to be careful. I'm not going to be involved there as far as telling someone what to do

00:17:08.000 | in an employment situation. But a good example, like in a church setting,

00:17:12.000 | where there's authority, in that situation there, I have a

00:17:16.000 | responsibility at times to engage with people even if they don't want it because I'm

00:17:20.000 | held accountable for that. But as a general rule,

00:17:24.000 | I don't give unsolicited advice.

00:17:28.000 | Frustrating, huh?

00:17:32.000 | >>Yeah, I'm humbled by that answer.

00:17:36.000 | >>It does no good. If somebody's not asking a question,

00:17:40.000 | they have no interest in your answer. And then the other flip side of it,

00:17:44.000 | if somebody doesn't ask you a question, they don't care what you have to say.

00:17:48.000 | And the other side is if somebody doesn't pay you for advice, they generally don't care what you have to say.

00:17:52.000 | They generally don't. I could give the same advice.

00:17:56.000 | This happened to me a couple weeks ago. I had an experience

00:18:00.000 | with a guy and I pushed – well, it was a couple weeks ago.

00:18:04.000 | I was up in Tennessee. And while I was in Tennessee, I stayed at an Airbnb.

00:18:08.000 | And at this Airbnb, the person

00:18:12.000 | shared with me – we were just kind of friendly, a little bit

00:18:16.000 | of chatter. Relationship opened up and they

00:18:20.000 | started talking about some career decisions that they were making. And I

00:18:24.000 | listened for a while and asked some questions. And then I asked their permission

00:18:28.000 | to say something. I said, "I know you don't know me, but would you be interested

00:18:32.000 | in some ideas?" because they were frustrated. They were stuck in their career.

00:18:36.000 | They didn't have the opportunity to progress.

00:18:40.000 | I said, "Would you be interested in a couple of ideas of how – that you

00:18:44.000 | might be able to get where you're trying to go with a little bit of work and no money?"

00:18:48.000 | because they were stuck. They didn't have any money. And they said, "Yeah, OK."

00:18:52.000 | So on that basis, I asked the question first, asked permission. That gave me a little bit.

00:18:56.000 | And I said, "I know you don't know much about me, but if I were in your shoes, here are the

00:19:00.000 | things that I would consider. I would consider doing A, B, C, D, E."

00:19:04.000 | And I gave them a whole – basically, I mean I probably pushed beyond what I should have.

00:19:08.000 | I gave them about a 20-minute discussion of how they could transition from what

00:19:12.000 | they were doing to what they wanted to be doing in about two years with

00:19:16.000 | no money out of pocket and achieve worldwide notoriety and fame.

00:19:20.000 | And at the end of it, I could tell that I had pushed past that.

00:19:24.000 | And who knows? Maybe they'll surprise me and not. But I sensed

00:19:28.000 | at the end of the discussion, I sensed that I had broken

00:19:32.000 | the relationship by pressing past what they had asked for.

00:19:36.000 | And that same content, I am building that into a course right now,

00:19:40.000 | something along the lines of how to become a noted

00:19:44.000 | expert in your field in two years or less. I don't know what scammy

00:19:48.000 | marketing title I'll come up with. But I'm building that same content

00:19:52.000 | into a course right now. And I'll sell it for – I haven't

00:19:56.000 | decided on the price yet, but I'll sell the same content packaged in a course.

00:20:00.000 | And when I sell it and somebody buys it, they'll actually do it

00:20:04.000 | and they'll be happy to do it. They'll buy it and because they're invested in the advice,

00:20:08.000 | they'll benefit from it. But the person I gave it to for free, there's

00:20:12.000 | no perceived value to it. So when you combine those two things together,

00:20:16.000 | I don't give advice. I come home and I talk to my wife and I say, "I don't want to be

00:20:20.000 | critical of that person, but I just wish they would ask me a question. I see this, this, this, this."

00:20:24.000 | I tell her and then I let it go and I wait for them to ask a question.

00:20:28.000 | So is that helpful, Kevin?

00:20:30.000 | Kevin Patrick: Yeah, that is. Yeah, I like your perspective of asking

00:20:34.000 | them for permission first. I think that's helpful.

00:20:36.000 | So –

00:20:37.000 | Paul Matzko: Yeah, I think there are some times – and I'll tell you the other exception to that.

00:20:40.000 | I think number one, if I'm going to give advice that's unsolicited, I at least need to ask

00:20:44.000 | for permission. And then number two, I do believe there are times

00:20:48.000 | when you see somebody – there are some things

00:20:52.000 | that I do with my children. There are some things that I give my child an option.

00:20:56.000 | I try to give them a choice. Would you prefer to wear the blue jeans or would you prefer to wear the khaki shorts?

00:21:00.000 | If I'm OK with both options, it's nice to give

00:21:04.000 | my child options. But if they're going to run into the street,

00:21:08.000 | I'm not giving them an option. And so I do reserve in that answer, I do

00:21:12.000 | believe we have at times a responsibility to give the difficult

00:21:16.000 | answer even when it's not solicited. Because

00:21:20.000 | we will give an account for people's –

00:21:24.000 | I will give an account for those who are in my life who are close to me. I'll give an account

00:21:28.000 | for some of their souls. And so in that context, there are things that are

00:21:32.000 | so serious that are matters of life and death, both

00:21:36.000 | physical and spiritual, that at that point in time, I feel

00:21:40.000 | a responsibility to press past. But I have – in the times

00:21:44.000 | that that's occurred, I've had to be content with the fact that this may break the

00:21:48.000 | relationship. And if it's so serious that I'm willing to break the relationship over it,

00:21:52.000 | I think there's a time to do that. But I personally have never

00:21:56.000 | found that to be the case with financial topics, only with topics that are more

00:22:00.000 | important than financial topics. So let's go on. And

00:22:04.000 | Richard, you've joined the call. What would you like to talk about today?

00:22:08.000 | Hey, Josh. Can you hear me? Yes. Go ahead. Great.

00:22:12.000 | My wife and I have been trying to decide on purchasing

00:22:16.000 | both life insurance and long-term disability insurance for ourselves.

00:22:20.000 | The only question I have, though, is how to approach that

00:22:24.000 | in conjunction with the fact that we have employer-paid plans ready and

00:22:28.000 | policies ready for both life and long-term disability.

00:22:32.000 | So it's pretty simple. Because they're in place already, you're not going to do anything with those plans.

00:22:36.000 | Let's tackle life insurance first.

00:22:40.000 | Have you calculated an appropriate amount of life insurance for you to have?

00:22:44.000 | Yes. I think we have.

00:22:48.000 | Tell me the number for you. How much life insurance do you need?

00:22:52.000 | Based on the calculation I have, it's like 1.7.

00:22:56.000 | Okay. So how much insurance do you have at your job?

00:23:00.000 | 850. Okay. And are you

00:23:04.000 | paying extra money for that?

00:23:08.000 | Very, very little, if anything.

00:23:12.000 | Okay. So if you're paying very little, I would calculate that and get some

00:23:16.000 | assuming that, assume young

00:23:20.000 | guy, young family, that type of situation.

00:23:24.000 | Yeah. I'm 38. She's 32. We have a one-year-old.

00:23:28.000 | And we'll be adding more. Cool. So you're going to be buying mainly term insurance.

00:23:32.000 | You're going to be buying a lot of term insurance. So what I would do in that situation is

00:23:36.000 | if you need 1.7, I would buy a million and a half

00:23:40.000 | of term life insurance outside of my job and I'd keep the 850

00:23:44.000 | recognizing -- and these numbers are so fuzzy because we're talking

00:23:48.000 | the difference of $3 to $4 or $5 a month. So I'm not going to worry about it

00:23:52.000 | too much. I'm going to go with how much they'll approve.

00:23:56.000 | The insurance company will take your income. At the age of 38, they'll give you

00:24:00.000 | somewhere probably around 20 times your annual earnings of total life

00:24:04.000 | insurance and they'll subtract off of it

00:24:08.000 | your work insurance. So they might give you a million or a million and a half.

00:24:12.000 | Somewhere in that range, if it's a million, if you need

00:24:16.000 | a million seven based upon the calculations, then I'll get at least a million

00:24:20.000 | outside of my job. If they'll give me a million and a half, I'll consider doing

00:24:24.000 | that and I'll calculate the amount of the insurance at

00:24:28.000 | my job, see what I'm actually paying. I'm being a

00:24:32.000 | little bit cavalier with the numbers simply because -- and it'll frustrate

00:24:36.000 | the engineers in the audience -- but the difference between having a million and a half

00:24:40.000 | or $2 million of coverage, for most people who are young and who are

00:24:44.000 | healthy, in term life insurance is relatively insignificant.

00:24:48.000 | As long as you've got at least a million outside of your job,

00:24:52.000 | if I were your life insurance agent, I would be resting comfortably

00:24:56.000 | that if you got fired and you lost your insurance and in the meantime you'd gotten sick, at least

00:25:00.000 | you got a million dollars. I can get your family through on a million dollars. It's not quite as luxurious

00:25:04.000 | as the million seven, but I can get you through on a million.

00:25:08.000 | To be honest, Josh, the interesting thing is I went

00:25:12.000 | through a formula that I found and it's the one that came up with that number. It's a number that

00:25:16.000 | seems ridiculously high to me, sitting here, to be honest.

00:25:20.000 | It's just your point. It's not so cavalier after all.

00:25:24.000 | I feel like I'm right there. Let me tell you how to affect that. How much

00:25:28.000 | do you and your family spend every month or every year?

00:25:32.000 | It's about $10,000 a month.

00:25:36.000 | Okay. So you spend about $10,000 a month.

00:25:40.000 | And you say that a million seven sounds a little bit

00:25:44.000 | high to you, right? Correct.

00:25:48.000 | Okay. So if I came to you with a check today

00:25:52.000 | and I forced you and I said, "You've got 30 seconds

00:25:56.000 | to make the option. Here is a check. You know it's good. Certified check.

00:26:00.000 | Whatever." For $1.7 million and today

00:26:04.000 | you're going to stop working and you're never going to work again for the rest of your life.

00:26:08.000 | Here's $1.7 million. Would you

00:26:12.000 | feel comfortable instantly pulling the plug on your job

00:26:16.000 | and planning for your family's future based upon

00:26:20.000 | a check for $1.7 million? Would you instantly jump at that option?

00:26:24.000 | I could never work again, you're saying? Never work again.

00:26:28.000 | No.

00:26:32.000 | I don't think I would. I think I would pass.

00:26:36.000 | Right. And I would pass too. And the reason I do that is because often

00:26:40.000 | people get – I've used the same example with clients.

00:26:44.000 | And the reason is we're not used to thinking in terms

00:26:48.000 | of $1.7 million. We're used to thinking in terms of $10,000

00:26:52.000 | a month. But $1.7 million, if

00:26:56.000 | I – at 38 years old, in the situation that you are

00:27:00.000 | in, $1.7 million would run out on you.

00:27:04.000 | Now, let's say that you died. Assume

00:27:08.000 | for a moment – I don't know what your wife's income is, etc. But what I encourage people to do

00:27:12.000 | is – again, term life insurance is cheap.

00:27:16.000 | I'll run a number here in a minute just to tell you. But what I encourage people to do

00:27:20.000 | is to say, "Pretend that you're

00:27:24.000 | going to plan for the fact that your spouse is never going to work again." Because if I

00:27:28.000 | die and leave my wife with two young kids, I don't

00:27:32.000 | want her to be thinking about, "OK. I've got five years to stay at home and then I've got to go out and figure out a job.

00:27:36.000 | And what am I suited for? And what – I want her to know she's going to be set,

00:27:40.000 | that she's going to be fine. She's going to be OK." And so I

00:27:44.000 | want to make sure that she's got that confidence. So if she wants to go

00:27:48.000 | back to work or if she wants to marry another man and she's not doing

00:27:52.000 | it because of financial pressure – and when I run the calculation of,

00:27:56.000 | "Oh, it costs me an extra $7 a month to have

00:28:00.000 | an extra few hundred thousand dollars of insurance, an extra half a million probably,"

00:28:04.000 | it brings me a lot of pleasure to know that I've squared this thing away

00:28:08.000 | really, really well. So if you wouldn't instantly jump at $1.7 million,

00:28:12.000 | then why do you think your wife would feel so comfortable

00:28:16.000 | maintaining your lifestyle? Now, the rebuttal that you should immediately make is,

00:28:20.000 | "But I'm gone." Yes, and there should be lower expenses. Yes. OK. So we'll get rid

00:28:24.000 | of one car and maybe instead of living on 10, your family is going to live on 8 or

00:28:28.000 | 7,500 or whatever. I don't want to get too bogged down with the numbers.

00:28:32.000 | Your family is not going to go – she's not going to go from 10,000 to 3,000 a month.

00:28:36.000 | So if you had told me you're spending $3,000 a month and

00:28:40.000 | that was what your family was spending, then yeah, $1.7 million would be

00:28:44.000 | fine. But if you're spending 10,000 a month,

00:28:48.000 | $1.7 million is going to be just about right.

00:28:52.000 | So I'm a little cavalier with the numbers

00:28:56.000 | simply because it's so cheap, man. And I'm telling you, do you have –

00:29:00.000 | other than the insurance that you have with your job, do you have any other life

00:29:04.000 | insurance or have you previously owned other life insurance?

00:29:08.000 | No, I have not. Only since we've had our daughter and we started having those

00:29:12.000 | conversations. What is your –

00:29:16.000 | what month and year were you born?

00:29:20.000 | December 1977. Okay. So I just pulled up

00:29:24.000 | a life insurance quoting thing here and let's just see what $1.7

00:29:28.000 | million of term life insurance is going to cost here. Let's run

00:29:32.000 | 10, 20-year term.

00:29:36.000 | I don't have the ability to run annual renewable term. You should consider it 38. You should still

00:29:40.000 | consider having some annual renewable term and

00:29:44.000 | let's run this at the best non-tobacco rates.

00:29:48.000 | We'll prove the point. Let's move on to disability. So we're talking for $1.7 million bucks

00:29:52.000 | of 10-year term life insurance, we're talking $443 a year.

00:29:56.000 | That's MetLife Mutual of Omaha, $487.

00:30:00.000 | For 20-year term, we're talking $885 a year.

00:30:04.000 | So if I were in your shoes, you're at the age – you're at the age and you should

00:30:08.000 | sit down with your insurance agent and look at some different numbers. But we're

00:30:12.000 | talking when you spend $10,000 a month, we're talking about

00:30:16.000 | for $1.7 million, $440 a year

00:30:20.000 | of cost. So it fits into your budget really nicely. But

00:30:24.000 | the piece – and that's why I asked if you had it before.

00:30:28.000 | To be clear, this sounds like an insurance – a life insurance sales technique.

00:30:32.000 | It probably is. But I don't –

00:30:36.000 | I no longer have life insurance. If this helps new listeners, I no longer

00:30:40.000 | have a license. I don't sell life insurance. I have no commission-related

00:30:44.000 | ideas in it. I just know that once

00:30:48.000 | you have life insurance, if I ask you to give it up,

00:30:52.000 | most people – not all, there are exceptions – most people don't want to give it up.

00:30:56.000 | I have $2.5 million of coverage.

00:31:00.000 | As soon as I can rebuild my income to the point where I can get more,

00:31:04.000 | I'll consider getting more just because I don't like the idea of

00:31:08.000 | it going away. And I don't like the idea of it going down.

00:31:12.000 | Let's move on to the disability insurance. I want to answer that question.

00:31:16.000 | With disability insurance, you already have coverage at work. The first thing

00:31:20.000 | you need to do – and I'm going to short-circuit this and just tell you what you need to do rather than going back

00:31:24.000 | and forth so we can handle some other questions. But the first thing you need to do is find

00:31:28.000 | out exactly what you have. So the key questions

00:31:32.000 | you want to ask yourself is how much insurance do you have?

00:31:36.000 | Number two, you need to ask yourself what is it based on? The biggest

00:31:40.000 | mistake that I have seen is people say, "Okay, I've got 60% of my income,

00:31:44.000 | but when we ask the question, we ask the HR person

00:31:48.000 | to read the policy," you find out that it's based upon your base income.

00:31:52.000 | And you have a $5,000 a month base salary, but you actually make $7,000

00:31:56.000 | a month of commissions. And your long-term disability doesn't cover that.

00:32:00.000 | So that's the situation some people are in. Some people not. You just need to ask the question,

00:32:04.000 | what is it based on? How long is it in force?

00:32:08.000 | Sometimes you'll have a really short, really bad disability

00:32:12.000 | policy. Sometimes you'll have a really long, really great one, but it only gives you coverage for

00:32:16.000 | two years or five years, something like that, instead of to age 65 or to age 70.

00:32:20.000 | How long is it in force? And then if I get the benefit, what's the benefit and is

00:32:24.000 | the benefit indexed for inflation, etc.?

00:32:28.000 | Whatever insurance, even with all those questions, those will help you to know what you have.

00:32:32.000 | But then you still need to figure out, what can I get? The reality is

00:32:36.000 | whatever you have at your job, you're going to keep on having. And so what

00:32:40.000 | the insurance agent will do is they will calculate for you what's

00:32:44.000 | available. And that'll be based upon your job. It'll be based upon

00:32:48.000 | the definition of disability that you choose. It'll be based upon that, and they'll tell you what's

00:32:52.000 | available for you. And you'll go from there. Have you already

00:32:56.000 | spoken with an insurance agent about what's available for you, or are you just at the beginning

00:33:00.000 | stages? We have. So we've been working with

00:33:04.000 | policygenius.com. I don't know if that

00:33:08.000 | counts. But yeah, we've been working with them and talking with those guys. And do they make some recommendations

00:33:12.000 | to you? They certainly have.

00:33:16.000 | Yeah, they certainly have. So for example, you're right, 60%

00:33:20.000 | is what I get through my employer. They pretty much give me the same advice you just did, finding out exactly

00:33:24.000 | what I have. And then also because of the limits on what

00:33:28.000 | insurance companies are willing to provide you with, they can get a supplemental policy on top of that

00:33:32.000 | of some sort, perhaps.

00:33:36.000 | Here's my rule. I realize

00:33:40.000 | that the way that it comes across might sound a little bit cavalier. But

00:33:44.000 | if you're not yet financially independent, I think you should have as much disability insurance

00:33:48.000 | as you can get.

00:33:52.000 | And the reason I say it so confidently is the insurance company

00:33:56.000 | will not give you too much. They won't give you more than you make, for example.

00:34:00.000 | Everything is calculated based upon your income and they won't give you more than you

00:34:04.000 | can make. There are some jobs at which you've got to – I mean,

00:34:08.000 | if you're in a very manual labor job, sometimes you're just

00:34:12.000 | forced by the reality of the premium to adjust

00:34:16.000 | it back, to pull the benefit back. I mean, I've worked with people

00:34:20.000 | who are in the trades and you start saying, "Hey, you're 55 years old

00:34:24.000 | and you're going to spend $380 a month on premiums. It's not

00:34:28.000 | worth it. You've got to adjust it significantly." But for someone like you

00:34:32.000 | who's 38 years old, young family, my advice is get as much

00:34:36.000 | as you can get because the risk/reward

00:34:40.000 | scenario, the way I look at it is simple. If you

00:34:44.000 | can't save that $100 a month into

00:34:48.000 | your retirement plan or into your kid's college plan, et cetera, there are

00:34:52.000 | always options. You can work another year.

00:34:56.000 | You can have your kid work while they're in college or whatever

00:35:00.000 | goals you have set for yourself. But if you get disabled, all of a sudden, all

00:35:04.000 | those options go away and worse, you've got to face next month's bills.

00:35:08.000 | So when I compare them very simply, I'm generally

00:35:12.000 | in the early years until you've built up income and built up

00:35:16.000 | savings and are financially independent. Insurance is the

00:35:20.000 | best bang for the buck because it guarantees the

00:35:24.000 | stuff that you can't afford to lose. I would rather have first

00:35:28.000 | before any other kind of insurance, I'd rather have disability income insurance.

00:35:32.000 | I'd rather have it before health insurance. I'd rather have it before life insurance.

00:35:36.000 | I'd rather have it before car and liability and homeowner's insurance.

00:35:40.000 | All those things are required and they're all nice, but first, I'd have disability income insurance

00:35:44.000 | because disability income insurance is what funds everything

00:35:48.000 | else. If I get sick and get cancer and have a million dollar hospital

00:35:52.000 | bill, all right, I've got to deal with it. And I can figure

00:35:56.000 | out a way to deal with it. I'll work out a deal with my creditors. I may have to declare bankruptcy.

00:36:00.000 | I don't know. I'll figure out a way to deal with that.

00:36:04.000 | But while I'm dealing with the million dollar bills, I'm also dealing

00:36:08.000 | with the fact that I can't pay my landlord

00:36:12.000 | rent. It becomes a lot more difficult to deal with the million dollars if I don't have

00:36:16.000 | $3,000 or $5,000 a month coming in while I'm disabled.

00:36:20.000 | So get your disability insurance squared away first,

00:36:24.000 | then life insurance, then you add on your health insurance,

00:36:28.000 | then you add on your car insurance and homeowner's insurance. And the order doesn't hold

00:36:32.000 | up because some of those are required and you already have some of those. But in order of priority,

00:36:36.000 | that is the most important thing.

00:36:40.000 | There's a show, and I've had the outline for a while, but I have

00:36:44.000 | a listener. And this listener is a young man. He's 26 years old. And I'm

00:36:48.000 | not saying it because it's a scare story. It's going to sound like that. I'm saying it because

00:36:52.000 | it's a real story. This is a listener of my show. And he's been very involved with the community.

00:36:56.000 | We've corresponded. He's working hard on financial independence.

00:37:00.000 | He has a lot of financial acumen. I got an email eight months ago,

00:37:04.000 | 10 months ago, something like that. And he said, "Joshua, I got bad news. I've got

00:37:08.000 | cancer." And he said, "And I didn't do what you said.

00:37:12.000 | I didn't go and get disability insurance. And am I going to be okay?" Now, we've had

00:37:16.000 | some correspondence and we went back and forth. He's doing better. He's in remission. I'm on his

00:37:20.000 | email newsletter, which is great. And so he's doing better.

00:37:24.000 | And I've been praying for him, and he's going to be okay. He's got family. He has assets. He's going to

00:37:28.000 | be okay. But the point was, is I've watched him work that way through

00:37:32.000 | and I've got the show outline. I've got the artwork. It's all done. I just haven't done it. What's it like to

00:37:36.000 | actually be, you know, how does a -- the show is titled, "How Does a

00:37:40.000 | Diagnosis of Cancer Affect Your Financial Plan?" But if you can -- it makes a

00:37:44.000 | big difference when you're going through chemo and doing all that stuff. If you can sit down

00:37:48.000 | and you know that you've got $3,500 or $4,000 a month that's going to hit your

00:37:52.000 | checking account on the first of the month every month, that helps a lot for you to focus on

00:37:56.000 | getting well. And that, as a husband and a father, that helps a lot for you to

00:38:00.000 | feel confident about fulfilling your responsibility towards your family.

00:38:04.000 | There's no stress that's not made worse by financial stress.

00:38:08.000 | So I hope that -- I know it's a little bit salesy, but that's the reality of it.

00:38:12.000 | People hear the insurance agent say it and they're like, "Ah, it's an insurance

00:38:16.000 | agent. This one's selling me insurance." The reason insurance agents are usually so

00:38:20.000 | insistent about it is because we've seen it. We've worked with clients who've

00:38:24.000 | died. We've worked with clients who were disabled. And

00:38:28.000 | when I was a life insurance agent and selling disability insurance as well,

00:38:32.000 | it was very difficult for me because I don't like to press -- I'm not a salesy

00:38:36.000 | guy. I don't like to press on people. But I

00:38:40.000 | had a professional obligation to where when I got the call,

00:38:44.000 | I had to make sure that I wasn't wondering if I'd done

00:38:48.000 | everything I could. And one of my regrets

00:38:52.000 | was that in six years of being an insurance agent, one of my regrets

00:38:56.000 | was that I never had

00:39:00.000 | a death claim, nor did I have a disability claim. And the

00:39:04.000 | regret sounds funny, but I'm glad that none of

00:39:08.000 | my clients ever died or became disabled. But

00:39:12.000 | I would talk to all these old-time insurance agents and they would say,

00:39:16.000 | "Once you have that first claim, it changes everything."

00:39:20.000 | And I'd talk with these guys who were in their 50s and their 60s and they talked about, "I've got

00:39:24.000 | 18 clients on disability claims right now," or, "I've had 24 death

00:39:28.000 | claims," et cetera. And I had the privilege of being involved with

00:39:32.000 | paying some death claims for what are called orphan clients, people that their agent

00:39:36.000 | had left or whatever. And I'd been involved with helping them in that process.

00:39:40.000 | And so I got to taste a little bit of it. But the worst I had was I had a client

00:39:44.000 | who had bought insurance policies for their kids from me

00:39:48.000 | twice. And they hadn't been able to keep them in force.

00:39:52.000 | But the first time they bought insurance for – they were in a very seasonal business, actually

00:39:56.000 | the construction business. They worked with me at first when

00:40:00.000 | times were good. They bought life insurance for mom, for dad. They bought life insurance

00:40:04.000 | for the two kids. They bought

00:40:08.000 | primarily life insurance, I think disability insurance for dad. Business fell apart.

00:40:12.000 | They had to dump all the policies. A couple years later, called me back,

00:40:16.000 | said, "Hey, we want to go ahead and get those policies put in force again." Awesome.

00:40:20.000 | I got it in force again, life insurance for dad and mom.

00:40:24.000 | And we did two little small life insurance policies for the kids. And then business got bad

00:40:28.000 | again. And they had to drop the policies. And the second time

00:40:32.000 | – it's not guilt, but the question I asked myself

00:40:36.000 | was there's always a balance between how hard do I work to get my clients to keep their policies

00:40:40.000 | because they're going to need them versus they need the money and I should just

00:40:44.000 | let them go. And it's not about me keeping my commissions. The problem was

00:40:48.000 | a while later, the timing is unclear in my mind, I found out that one of the kids

00:40:52.000 | had been murdered. And it was the worst thing

00:40:56.000 | ever because seeing them go through the grief of that

00:41:00.000 | process and not having that policy in place for the kid and knowing

00:41:04.000 | the situation – it always haunted me. I was like,

00:41:08.000 | "Did I do everything that I could?" So that's why insurance agents

00:41:12.000 | are so pushy. That's why insurance agents are so

00:41:16.000 | committed because when you've gone through that, the

00:41:20.000 | potential guilt of saying, "If I just made a call, if I just helped them save

00:41:24.000 | money somewhere, they could have kept this in force." And even though it was only, I don't know, $25,000,

00:41:28.000 | that $25,000 right now would make all the difference in the

00:41:32.000 | world. That stuff builds on you and it causes you as an insurance agent to be

00:41:36.000 | pretty emotionally committed. So

00:41:40.000 | a bit of a spiel there. Hopefully it's useful. All right. Let's

00:41:44.000 | go on. And a couple more people have called. Carl, did you

00:41:48.000 | call in with a question today?

00:41:52.000 | Something you may have – I'm sure you've addressed on your podcast.

00:41:56.000 | There was a short list of documents that one should have in order

00:42:00.000 | kind of the whole theme of the show today, how to call in in terms of

00:42:04.000 | a will and I'm sure

00:42:08.000 | there's other terminology like right to resuscitate or not. And I see there's

00:42:12.000 | four or five of them. Can you go over those, highlight those? Yeah, the big four of these.

00:42:16.000 | You want to have a will. And the will says what happens to your stuff

00:42:20.000 | when you die and it also says who do you appoint as the

00:42:24.000 | guardian for your kids. That's all that a will says.

00:42:28.000 | So that's a will. In fact,

00:42:32.000 | wills are important. I do not believe they're the most important.

00:42:36.000 | I differ with other people and they say everyone has got to have a will. No, everybody does

00:42:40.000 | not have to have a will. If you don't own property and you don't have kids,

00:42:44.000 | you don't need a will. And if you don't own property that's going

00:42:48.000 | to pass through the probate

00:42:52.000 | court. So for example, if I'm working with somebody who's 20 years

00:42:56.000 | old and they have a checking account and they have

00:43:00.000 | a 401(k) and they don't have any kids

00:43:04.000 | and they're not married and they're just going to leave everything to their parents,

00:43:08.000 | they don't need a will. They're going to die in test state and what happens

00:43:12.000 | is the 401(k) will go to the beneficiary listed on the 401(k), the checking account

00:43:16.000 | and their car will go to their parents or whatever their state's

00:43:20.000 | intestacy laws say and they don't have kids. So they don't necessarily

00:43:24.000 | have to have a will. But when you have kids or when you own property, you need a will.

00:43:28.000 | The second document is a living will and a living will

00:43:32.000 | is essentially what – it's all the end of life stuff. It says,

00:43:36.000 | "Do I want to be kept on the – what's the thing called? The ventilator. Do I want to be kept

00:43:40.000 | on life support? Do I want – what do I want at the end of my life?" That's the

00:43:44.000 | living will. The third document

00:43:48.000 | is a power of attorney and so there are two types

00:43:52.000 | of powers of attorneys, documents three and four. Third is power of attorney for financial matters.

00:43:56.000 | You're incapacitated. You're in the hospital.

00:44:00.000 | Who has control over your affairs? This is very important for people who have affairs,

00:44:04.000 | who have significant financial dealings.

00:44:08.000 | If somebody has a business and they're trying to pay the employees and they're in the

00:44:12.000 | hospital and they can't authorize payroll, they need to have a power of attorney

00:44:16.000 | in place or they need to have a system in place. It could be a springing

00:44:20.000 | power of attorney that on their incapacity, this person is authorized to do this,

00:44:24.000 | to sign the checks, to get the money out, to keep things going while they're recovering. So you need a power

00:44:28.000 | of attorney and then the healthcare – then the other form is a healthcare

00:44:32.000 | proxy, healthcare surrogate or healthcare power of attorney depending on how

00:44:36.000 | it's known in the local lingo. That's just simply authorizing somebody

00:44:40.000 | to make medical decisions on your behalf. So those are the four basic documents.

00:44:44.000 | You can add to that trusts if you have them.

00:44:48.000 | Go ahead and establish them, but that's kind of separate. Those aren't the four basic documents.

00:44:52.000 | Okay, great. One follow-up question to that,

00:44:56.000 | how good or bad are the standard

00:45:00.000 | documents one might find on like a Nolo? I think that's one of the places that

00:45:04.000 | produce this versus one customized to your situation. My thought

00:45:08.000 | is – I'm guessing that one that is customized is better, but

00:45:12.000 | in absence of anything as a placeholder, how bad are those

00:45:16.000 | Nolo type documents? So it would depend

00:45:20.000 | on probably two things, the complexity

00:45:24.000 | of one's affairs and the desire of control

00:45:28.000 | that you desire to exercise over the affairs

00:45:32.000 | when you're gone. And so recognizing that a will does two important things.

00:45:36.000 | It establishes the guardianship of your child and it takes care of your

00:45:40.000 | financial affairs. We can kind of separate these things. So

00:45:44.000 | if a couple doesn't have a

00:45:48.000 | will and if all they do is write up a piece of

00:45:52.000 | paper that says we leave all of the money to

00:45:56.000 | – I, Joshua Sheets, hereby being of sound mind because we've heard that in the movies – leave all of the

00:46:00.000 | money to my wife if I die or

00:46:04.000 | to my kids if we pre-decease it. And I assign Joe Smith

00:46:08.000 | to be the guardian for my child and I also assign

00:46:12.000 | Joe Smith to take over my financial affairs and to manage the money

00:46:16.000 | for the benefit of my kids. The fact that Joe Smith has been

00:46:20.000 | acknowledged in that document as the guardian of the kids,

00:46:24.000 | that is better than if Joe Smith is not acknowledged because it gives

00:46:28.000 | the probate judge, the court, the direction of what you're thinking.

00:46:32.000 | Now, can these things be contested? Can the judge change that and strip that person's

00:46:36.000 | rights because a family member – yes. That's all dealing

00:46:40.000 | with the court. But the fact that you've acknowledged that Joe Smith is who you want to be the guardian, that's important.

00:46:44.000 | From the perspective of financial affairs,

00:46:48.000 | financial affairs are also going to be judged similarly. If you've given an indication

00:46:52.000 | of what you want to happen to your financial affairs,

00:46:56.000 | then that's going to be sufficient.

00:47:00.000 | The way that fancier documents are valuable

00:47:04.000 | is that fancier documents are going to allow you

00:47:08.000 | to exercise more control over the money

00:47:12.000 | based upon what you believe is

00:47:16.000 | in the best interest of your family members. So if I were to leave –

00:47:20.000 | let's say that my wife and I are out on date night and we die. We're dead.

00:47:24.000 | So we leave behind money. It would be a lot of money,

00:47:28.000 | especially because there would be insurance proceeds, and I leave all of that money to my kids.

00:47:32.000 | Well, quite obviously, my two-and-a-half-year-old and seven-month-old children

00:47:36.000 | are not competent to manage that money. And so

00:47:40.000 | then the court is going to say, "Who is the person that Joshua assigned

00:47:44.000 | to manage the money?" I should have that stuff set up in a trusteeship, which

00:47:48.000 | I do. But I should have it set up with a trustee for the money

00:47:52.000 | to manage it for the benefit of the kids. But what's going to happen is that once the kids

00:47:56.000 | become adults, on their age of majority,

00:48:00.000 | they're immediately going to have access to all of the money.

00:48:04.000 | Well, if my kids inherit a couple million bucks or more

00:48:08.000 | at their 18th birthday, depending on their character, that could destroy

00:48:12.000 | them. And so what it might be wise for me to do is

00:48:16.000 | if I know that there's going to be some additional benefit there for them,

00:48:20.000 | it might be wise for me to put more safeguards in place. It might be wise for

00:48:24.000 | me to go ahead and put in place

00:48:28.000 | some things that are going to stretch it out. They're going to receive a certain

00:48:32.000 | amount for their health and maintenance and support.

00:48:36.000 | They're going to receive a certain amount at 18 for expenses. They're going to receive

00:48:40.000 | the balance of it at 30. So it's all about the control. The other type of control

00:48:44.000 | would be for a spouse. So let's say that whether it's because

00:48:48.000 | somebody is concerned about their spouse and their spouse's character or whether

00:48:52.000 | it's just out of a protection for their spouse. If you, as an example, just leave

00:48:56.000 | all of the money to your spouse if you die and then

00:49:00.000 | one, your spouse might spend it. If you know that you have a spouse who's a

00:49:04.000 | spendthrift and you need to protect them, it might be wiser to put some

00:49:08.000 | things in place so that they receive a stream of income that they can't outspend as

00:49:12.000 | compared to receiving a lump sum. Or if you're trying to protect your spouse

00:49:16.000 | from, say, a future predatory relationship, you leave $10 million

00:49:20.000 | to your spouse and all of a sudden now she falls in love

00:49:24.000 | with another man and now she's in a situation that man leaves her,

00:49:28.000 | divorces her, and now she's left with the money that

00:49:32.000 | you left for her exposed potentially to

00:49:36.000 | the other man. That's the type of situation that with good planning

00:49:40.000 | you can avoid through the use of designating a trust that's going

00:49:44.000 | to exist with certain agreements. So the whole point of having a more complicated

00:49:48.000 | will is to establish more control

00:49:52.000 | or also to do better planning. You recognize you've got some

00:49:56.000 | tax liability, whether that's accrued income taxes and you're going to do some

00:50:00.000 | intelligent tax planning or you've got some estate tax liability, etc.

00:50:04.000 | So you want to make sure that your documents are going to carefully transfer

00:50:08.000 | things in the most advantageous way possible.

00:50:12.000 | -Okay. Good. Thank you. That answers my questions.

00:50:16.000 | You're welcome. Let's see. So I think that rounded out the first

00:50:20.000 | questions. I'll take maybe just one or two more.

00:50:24.000 | Let's go back to Jason. Jason, would you like to ask another question?

00:50:28.000 | -Sure, I can. Just to

00:50:32.000 | continue in the traditional way of Q&A, see if we can get you in trouble here.

00:50:36.000 | You mentioned before that you are

00:50:40.000 | not heavily invested in the market much anymore and that you

00:50:44.000 | had some objections to the companies or

00:50:48.000 | markets for the fund that you were invested

00:50:52.000 | in. I was wondering if you wanted to elaborate on that

00:50:56.000 | any more and give us some more information

00:51:00.000 | or insight as to what objections you were speaking of.

00:51:04.000 | -Um...

00:51:08.000 | -How brave are you, my brother? -So the short answer is no, I don't particularly

00:51:12.000 | want to, but I will briefly –

00:51:16.000 | I will briefly. And just to give an example,

00:51:20.000 | and I don't – these things are not perfectly –

00:51:24.000 | I can't give a perfect intellectual defense of all of these things, so I'll just –

00:51:28.000 | if we were sitting down having a cold drink, I'll tell you what I would –

00:51:32.000 | the answer I would give. First, I do not put my

00:51:36.000 | personal conviction in this area on anybody else.

00:51:40.000 | I do not say to anybody else what they should do.

00:51:44.000 | This is purely my own personal conviction.

00:51:48.000 | And I leave any listener completely free,

00:51:52.000 | especially in this area, because I

00:51:56.000 | have not – and the reason I say that was so important in this area is that I have

00:52:00.000 | not – I sold

00:52:04.000 | stocks. I sold mutual funds. I've owned mutual funds since I was 18 up

00:52:08.000 | until, I don't know, a year or two ago, whenever I sold.

00:52:12.000 | And I've had a pretty

00:52:16.000 | clear system of

00:52:20.000 | morality for many years, and I – my conscience did

00:52:24.000 | not bother me in the past. And so I just have to acknowledge

00:52:28.000 | that this is me.

00:52:32.000 | But the older I've grown,

00:52:36.000 | I grew up with this – I would say mainstream, very

00:52:40.000 | romantic ideal of

00:52:44.000 | the US system of government and the US system of capitalism.

00:52:48.000 | I was always a capitalist. I always liked business.

00:52:52.000 | I've always – I still feel that Walmart has done more good

00:52:56.000 | for people than many mainstream charities simply because

00:53:00.000 | they've made people's lives better by having low prices,

00:53:04.000 | better stuff, low prices. And so I

00:53:08.000 | had these ideas that

00:53:12.000 | the world we lived in was somehow just. Growing up in the United States

00:53:16.000 | of America, it's very easy to gain that perspective. I had

00:53:20.000 | the idea taught to me in history that

00:53:24.000 | we only fight just wars. The United States of America, they're – we're involved

00:53:28.000 | in wars that have a moral cause. We're going to

00:53:32.000 | eliminate Hitler or we're going to fight for freedom instead of

00:53:36.000 | communism. And so I had these fairly mainstream

00:53:40.000 | perspectives. But what happened is that systematically over the last decade or so,

00:53:44.000 | I started to actually do my own homework and I realized that most of

00:53:48.000 | what I was taught in a mainstream

00:53:52.000 | educational approach was more myth than reality.

00:53:56.000 | And there were a number of things. So I've come to the conclusion

00:54:00.000 | that our global economy, specifically the US economy,

00:54:04.000 | is an economy that's built on war. I could never figure out why on

00:54:08.000 | earth does – why on earth have we been at war for decades? And it seems like

00:54:12.000 | it's one after another and after another. And the most difficult one for me

00:54:16.000 | was in 2000 – or was it 2003

00:54:20.000 | when the US invaded Iraq? And I

00:54:24.000 | was this – at the time, I would have called myself a

00:54:28.000 | Republican. And I was a very idealistic

00:54:32.000 | 18-ish year old thinking like, "Yeah, this is right. We

00:54:36.000 | got to get those terrorists." And when I was

00:54:40.000 | in college, the second time of George Bush's re-election, I thought it'd be

00:54:44.000 | fun to get involved with the – so I volunteered with the local Republican

00:54:48.000 | group and I went and knocked on doors and said, "Yeah, we're going to get George Bush

00:54:52.000 | elected." I remember how happy I was when he was elected. And then the Iraq war, I remember being

00:54:56.000 | so in favor of the Iraq war. And at the time, I

00:55:00.000 | didn't – I wasn't open to other perspectives. And

00:55:04.000 | so I kept trying to justify things as

00:55:08.000 | things went by and it just came out, "Oh, WMDs, but

00:55:12.000 | wait a second, they're not there." And then, "Wait a second, why are we doing that?

00:55:16.000 | Why are we not doing that?" And it was a very painful experience, but I ultimately came to the conclusion

00:55:20.000 | that I was bamboozled and I was completely wrong. And I said, "How could I

00:55:24.000 | be so wrong?" And so I started digging into war. I started digging into

00:55:28.000 | how was the global economy built and I've come to the conclusion that, again,

00:55:32.000 | there's a book written 50-plus years

00:55:36.000 | ago by a general and it's called War is a Racket. And his whole point at that time was that

00:55:40.000 | war is a total, total racket. And I started reading some

00:55:44.000 | of Anthony Sutton's books where he goes through and he traces all of the things that I was

00:55:48.000 | so sure of that – he traces the Soviet Union. He talks about – and

00:55:52.000 | he traced specifically the specific

00:55:56.000 | parts and the specific amount of the Soviet Union

00:56:00.000 | military infrastructure that was provided by the United States. And then I started digging through

00:56:04.000 | the history and started to study a little bit of the history of

00:56:08.000 | whether it was al-Qaeda or whether it was – we created al-Qaeda and then all of a sudden

00:56:12.000 | we're fighting them and, "Wait a second, where did ISIS come from?" And you start tracing this through and, "What happened

00:56:16.000 | in Iraq?" And it's such a muddled

00:56:20.000 | mess. But yet as I dug into it, I started to find in so many

00:56:24.000 | circumstances that it was just all based upon generating income

00:56:28.000 | for the people who control the large corporations. And so then I dug in. I said,

00:56:32.000 | "Well, how much of our military budget – how much of our money do we spend on military?"

00:56:36.000 | And you find that our economy is fueled based upon this global

00:56:40.000 | war infrastructure. And that was

00:56:44.000 | tough. That's tough. It was tough for me to admit. So

00:56:48.000 | personally, I don't feel all that good about having money put in my pocket

00:56:52.000 | that is based upon the output from a global war

00:56:56.000 | infrastructure. That's not what I want to make my money from.

00:57:00.000 | I'm OK with defense. I'm OK with

00:57:04.000 | individuals having the right to arm and defend themselves. I'm not OK with on a

00:57:08.000 | global basis – I'm not OK with that.

00:57:12.000 | So then I – so that was just

00:57:16.000 | one simple example. The reason I say with that is most people get into

00:57:20.000 | – OK, we're going to – that's why investing in socially conscious

00:57:24.000 | funds doesn't work for me. People say, "Oh, we're going to avoid

00:57:28.000 | tobacco companies," or "We're going to avoid companies that don't – that

00:57:32.000 | have unfair hiring practices in China." OK, cool.

00:57:36.000 | That's fine. But what about avoiding

00:57:40.000 | Lockheed Martin profits? I don't want to be involved in that.

00:57:44.000 | So there are other aspects as well. When I was with

00:57:48.000 | a large insurance company, I just looked at how

00:57:52.000 | capitalism works, and we all – we throw this term of crony

00:57:56.000 | capitalism out there. But it's always somebody else's company.

00:58:00.000 | As long as it's ours – as long as it's not – it's always somebody else that's

00:58:04.000 | causing the problems. And so you start to see, and it's across the board, is that every one of these

00:58:08.000 | major corporations, it's just we buy influence, and nobody in

00:58:12.000 | Washington is honest. Every company is just a matter of buying influence

00:58:16.000 | as quickly as they can. And

00:58:20.000 | step by step by step by step, it's just a matter of who can buy the most influence.

00:58:24.000 | And it's so frustrating to me that you've got full-time lobbyists working for a company.

00:58:28.000 | Where was the "Mr. Smith goes to Washington" idea that I was taught? It's

00:58:32.000 | complete baloney. So we live in this economy that's built upon whoever has

00:58:36.000 | the most money buying the most influence, and now it's

00:58:40.000 | absurd. Even the current presidential race, you've got – the people who are

00:58:44.000 | involved in it are just so utterly corrupt.

00:58:48.000 | It's laughable. Half of them have been bought off by –

00:58:52.000 | I mean – and I don't care whether it's Republicans or Democrats.

00:58:56.000 | I read – I strongly recommend – if anyone's interested, the best book

00:59:00.000 | – one of the best books I read last year was a book called Clinton Cash by Peter Schweitzer.

00:59:04.000 | And if you want to know how the Clintons got rich, it's amazing. And I wasn't around – I was

00:59:08.000 | a kid during the Clintons, so I was never around for all the old scandals. I just read this one and said, "How did

00:59:12.000 | this family go from so-called being broke when they leave office to being

00:59:16.000 | mega rich?" And you start to read it and you start to understand.

00:59:20.000 | Ah, OK, I see. And the author of that book is very

00:59:24.000 | careful. They only – he and his team, they only state precisely

00:59:28.000 | what they can prove. And same on this other side.

00:59:32.000 | Donald Trump, the man boasts about buying off politicians, but yet somehow he's supposed

00:59:36.000 | to be – it's just disgusting. So it's

00:59:40.000 | endemic. And then when you get to – so I have major

00:59:44.000 | issues with many large corporations that the fact is you just buy off whatever

00:59:48.000 | government officials and you can't bribe people in other countries, but you can bribe everyone in your own

00:59:52.000 | country. And then when you get to deeply held moral

00:59:56.000 | issues, I have a major problem

01:00:00.000 | with – I would be OK. I do not mind if – I don't think that companies

01:00:04.000 | need to make moral stands. It's up for people to make moral

01:00:08.000 | stands. I don't particularly believe that it's a – it's not

01:00:12.000 | a company's job to say this is right or this is wrong. It's the people

01:00:16.000 | that should be held accountable. And there should be – they should be held completely

01:00:20.000 | accountable for their actions as individuals. So I'm not

01:00:24.000 | saying that every company out there has to say we somehow promote these positive things.

01:00:28.000 | But what is so frustrating to me is

01:00:32.000 | when I look at the majority of the –

01:00:36.000 | when I look at the majority of large corporations,

01:00:40.000 | they function based upon what's popular

01:00:44.000 | and they take their stands based upon what's popular instead of what's based

01:00:48.000 | upon what's right. And a major eye-opening thing for

01:00:52.000 | me was when I studied the history of – when

01:00:56.000 | I dug into the history, the legal history and the history of the press

01:01:00.000 | and the promotion of homosexuality in our culture, I had never

01:01:04.000 | done any of that research. I just assumed things are kind of trundling

01:01:08.000 | along a little bit. I started to research it. I started to find it. And all of a sudden it was like,

01:01:12.000 | wow, I've seen this. I see this. And then I watch all the companies

01:01:16.000 | that get involved and line up one by one. And it's basically – if you watch

01:01:20.000 | what happened last summer with the – after the Obergefell

01:01:24.000 | decision, when every single company is going to –

01:01:28.000 | when every single company is saying, OK, we're going to change our corporate logo

01:01:32.000 | and the White House is going to have rainbow colors on it and every single

01:01:36.000 | company is going to use this as their promotion – we're going to promote

01:01:40.000 | homosexuality and the acceptance of homosexual behavior.

01:01:44.000 | That is – that's very

01:01:48.000 | difficult for me to deal with. Now, the challenge where these arguments

01:01:52.000 | usually get misheard is people often assume that

01:01:56.000 | I don't want to use companies to try to control other people's lives.

01:02:00.000 | And that's where people – this debate often goes. People say, well, you're just trying to tell other people what to do.

01:02:04.000 | No, but I don't want – I'm not going to do business with

01:02:08.000 | a company that's openly, publicly advocating

01:02:12.000 | for sin. That – I'm not going to do it and I'm

01:02:16.000 | not going to profit from it. I'm not going to be involved in it. I'm not going to make purchasing decisions.

01:02:20.000 | Now, how that should be regulated in a free society, hey,

01:02:24.000 | you know what? I'm pretty much a live and let live guy.

01:02:28.000 | I'm pretty much going to leave people alone. I'm not going to – I'm not going to advocate

01:02:32.000 | for new laws and whatnot. But what happens is that people like

01:02:36.000 | me have been – I think have pretty much been put on our heels

01:02:40.000 | more and more where it's like I'd love to just live and let live but

01:02:44.000 | now we're going to – it's not a matter of live and let live. And so at this point, it's gone so

01:02:48.000 | far. So I reached a point in time and I just said like my conscience

01:02:52.000 | would no longer permit me to do it. So

01:02:56.000 | I just – it's

01:03:00.000 | across the board. It's not just one issue. I've just come to the – I've come to the

01:03:04.000 | conclusion that the majority of the way that corporate America acts is to

01:03:08.000 | completely corrupt. It's filled with lies and

01:03:12.000 | – it's filled with lies and there's nobody – you get

01:03:16.000 | into this group think and I don't see any leaders standing there and

01:03:20.000 | saying we're willing to stand for it on a mass basis. Now, I think there

01:03:24.000 | are individuals. That's why when I sold all my mutual funds,

01:03:28.000 | I didn't do it because I wasn't willing to own stocks. I just simply did it based upon

01:03:32.000 | the fact that I am not willing for somebody else to make those decisions.

01:03:36.000 | What was the story in the Wall Street Journal that came out about the number of

01:03:40.000 | people that were – the companies and their performance that had the highest

01:03:44.000 | percentage of email addresses registered with Ashley Madison?

01:03:48.000 | It's the type of thing that – I guess it's

01:03:52.000 | instructive. It's instructive. The way that

01:03:56.000 | we act in one area of our life. An adulterer

01:04:00.000 | who breaks the bonds of their marriage

01:04:04.000 | is going to be the same type of

01:04:08.000 | person unless that person is reformed. It's the same type of person

01:04:12.000 | who's going to cheat on their taxes. It's the same type of person who's going to pledge their hand in a contract

01:04:16.000 | and follow through. I guess I've come to the point where I'm disgusted with the whole thing

01:04:20.000 | and I don't want to profit from it.

01:04:24.000 | It's a little bit easier in that I have plenty of other ways that I can invest the money, but I just

01:04:28.000 | got to the point where I cannot take it anymore and I do not want

01:04:32.000 | to earn the money from it. Now, what should be done on a social basis or anything?

01:04:36.000 | I don't have a clue. I mean I have ideas, but nothing I desire to talk about

01:04:40.000 | publicly. But that was the story. That's what happened, Jason.

01:04:44.000 | Thank you. I appreciate it.

01:04:48.000 | I have no idea how to handle these things. All I know is that we're called to be stewards

01:04:52.000 | of the money that we have.

01:04:56.000 | We're called to be stewards of the money that we have and

01:05:00.000 | money plays a role.

01:05:04.000 | Money in and of itself is an amoral

01:05:08.000 | item. There's nothing inherently moral or immoral about

01:05:12.000 | money, but I am not going to commit

01:05:16.000 | the funds that I've been entrusted to

01:05:20.000 | into things that I believe are evil.

01:05:24.000 | I'm not going to do it. Now, what are the good things to do with it?

01:05:28.000 | That's the challenge, but I'm not going to commit the things

01:05:32.000 | that I'm entrusted to to evil. So thank you all for listening to today's show.

01:05:36.000 | Man, we're getting some heavy questions. So

01:05:40.000 | hopefully they're at least thought-provoking. And thank you all for calling in

01:05:44.000 | and for listening to today's show. If you'd like to join and participate in a show

01:05:48.000 | like this in the future, I'd be happy to have you here. Feel free to become

01:05:52.000 | a patron of the show. Details of that are at RadicalPersonalFinance.com/patron.

01:05:56.000 | I'd be happy to answer any question and provide any help that I can,

01:06:00.000 | have a dialogue. If you're upset with me about something, you're welcome to do that. Then call

01:06:04.000 | and tell me. If you just want to ask a question, that'd be great. Thank you, each and every one of you

01:06:08.000 | who is listening. I consider it an honor that you would find

01:06:12.000 | value in some of the ideas that I'm

01:06:16.000 | sharing with you. The time that we have is the most precious resource that

01:06:20.000 | any of us have. It's one of the most precious resources that any of us have.

01:06:24.000 | And as we're stewards of our time, we need to invest it

01:06:28.000 | into things that

01:06:32.000 | matter. And so I hope and I trust

01:06:36.000 | that some of these ideas and some of this content has been useful to you.

01:06:40.000 | Thank you all for listening. Again, patron of the show, RadicalPersonalFinance.com/patron.

01:06:44.000 | If you have comments, questions, feel free to come by the show.

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01:06:52.000 | So if you haven't come by, if you haven't liked and connected with the show on Facebook,

01:06:56.000 | go to Facebook.com/RadicalPersonalFinance. I'm starting to do some live Facebook

01:07:00.000 | feeds of some shows. I'll probably do more of that in the future

01:07:04.000 | as well. I like to give you guys a peek behind the scenes and I'll probably do more

01:07:08.000 | little vignettes here and there. So if you haven't done that yet,

01:07:12.000 | come by the Facebook page and connect with us there. Facebook.com/RadicalPersonalFinance.

01:07:16.000 | Thanks. I'll be back with you very soon.

01:07:20.000 | (music)

01:07:24.000 | (music)

01:07:28.000 | (music)

01:07:32.000 | (music)

01:07:36.000 | (music)

01:07:40.000 | (music)

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