RPF0446-Friday_QA
00:00:00.000 | It's Friday. That means live Q&A. I've got an open phone line with one, two, three, four,
00:00:05.760 | five, six, seven callers on the line. So today's going to be busy and fast paced. Let's see
00:00:10.840 | what happens.
00:00:27.920 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:31.480 | skills, insight and encouragement you need to live a rich and meaningful life now while
00:00:36.120 | building a plan for financial freedom in 10 years or less. My name is Joshua Sheets and
00:00:39.760 | I am your host on Fridays. I do my very best to do a weekly live Q&A. Got a live phone
00:00:44.920 | line with callers. It's kind of like radio and just recorded a day in advance before
00:00:48.840 | you hear it. And we've got a diverse array of questions today. I think you'll really
00:01:00.160 | like it. These Friday Q&A shows for the last few weeks, they were a really good opportunity.
00:01:04.040 | If you wanted to ask me a question, if you wanted to ask me a question directly, you've
00:01:08.000 | heard shows in the past where one caller or two callers got the entire hour with me. So
00:01:15.560 | this was about the cheapest access to me that you were going to get. So however, with that,
00:01:23.040 | today we've got a busy full phone lines. In fact, I've got them locked and rejected about
00:01:26.480 | four or five of you. If you'd like to get on a call like this, the primary way to do
00:01:29.960 | that is to join as a patron of the show. These shows have always been open to patrons, radicalpersonalfinance.com/patron.
00:01:37.320 | However, the last few times I didn't have a ton of participation from the patrons. So
00:01:41.080 | then I extended this invitation to the email list. So if you'd like to be basically guaranteed
00:01:46.440 | to be on a show like this in the future, sign up to become a patron and/or consider joining
00:01:51.160 | the email list as well, which you can find at radicalpersonalfinance.com. A few of you
00:01:54.800 | have said it's not as obvious as you wish it were. Don't worry. We are going to take
00:02:00.600 | care of that and make it more obvious in the future. So lots of improvements around here.
00:02:05.440 | So if you'd like to join a call like this, again, go to radicalpersonalfinance.com. Let's
00:02:10.480 | get right to it. I've got one, two, three, four, five, six men and one lady. So in my
00:02:15.640 | world, ladies come first. So Ruha in Alabama, go ahead and let us know your question or
00:02:19.600 | comment please and let's see how I can serve you today.
00:02:22.160 | Great. Thanks, Joshua. So we are actually moving into a tiny home. So we're moving
00:02:30.800 | from Alabama to Louisiana and currently we live in one big home and we also bought some
00:02:38.280 | land in Alabama to park the tiny home on before deciding we were going to move down to be
00:02:43.640 | closer to family. So my question is, what should we do with the house and the land?
00:02:52.160 | The house is currently, if we sell it, it'll be worth about $20,000 less than what we paid
00:02:57.400 | for it. And that was four years ago when we bought it. And the land, I mean, we can probably
00:03:03.720 | get exactly what we bought it for, but I'm worried about closing costs and also I don't
00:03:09.160 | know how the tax situation works out.
00:03:11.400 | So the land that you own is in Tennessee or Alabama? Which one? I got confused on the
00:03:16.960 | states.
00:03:17.960 | They're both Alabama.
00:03:19.480 | Okay. But you're moving from the land and the house to other land?
00:03:24.440 | Louisiana.
00:03:25.440 | Okay.
00:03:26.440 | In Louisiana.
00:03:27.640 | Why would you not sell it? What reasons would you have for keeping it?
00:03:31.280 | Well, the land, I don't really have a reason for keeping it. I do definitely want to sell
00:03:40.640 | the land. I guess my question on that is more along the lines of what are the implications?
00:03:45.240 | Because I wouldn't sell it if it turns out that buying and selling something back to
00:03:50.480 | back is detrimental to our taxes for the year.
00:03:54.880 | Do you think that you have a profit in the land?
00:03:59.520 | In renting the land?
00:04:00.520 | No. Meaning that you said it's worth about what you paid for it, right? So you don't
00:04:03.920 | have a lot of profit here.
00:04:05.840 | Right.
00:04:07.360 | And so let's deal with them one at a time with the land. If you say you have no reason
00:04:12.640 | for keeping it and you want to sell it, then you should just simply sell it. And as far
00:04:17.360 | as the financial implications of it, the financial implications is just simply going to be how
00:04:23.560 | much gain or loss will you have from the sale. And it sounds like you're not going to have
00:04:29.440 | any gain. If it's worth about what you're going to sell it for, you're not going to
00:04:32.400 | have any gain. And your only potential loss would be any sales costs with the transaction
00:04:37.680 | costs of actually selling it, commissions and things like that.
00:04:41.440 | If you don't see any reason to own it, if the land is not particularly valuable to you,
00:04:45.480 | you don't think that it's going to appreciate measurably in price, then I think the simplest
00:04:49.920 | and easiest thing to do is just to go ahead and sell it and be free of the hassle, be
00:04:54.800 | free of the constraint, be free of the lack of minimalism dealing with a property that
00:05:00.360 | you don't really want to own, and just be free of the headache of it. Even if it loses,
00:05:04.960 | even if you lose a little bit of money, a negligible amount of money, I would see value
00:05:09.400 | in just simply having it gone so that my life is more streamlined and more simple, unless
00:05:14.520 | you have a compelling reason to own it.
00:05:18.520 | That approach is relatively simple. And because it's basically a wash, you're not going to
00:05:23.200 | have any gain or loss in the sale, then there are really almost no tax implications. It's
00:05:28.480 | just a matter of mentally getting over it. So that one seems simple. Now, the house,
00:05:32.800 | why would you choose to keep the house? What would be your argument there?
00:05:35.880 | Well, there's a lot of developments coming closer and closer to where the house is located.
00:05:43.480 | And my hope is that in a year or two, it's actually going to be worth at least what we
00:05:48.840 | paid for, if not a little bit more. So my hope there is, I believe we can rent it for
00:05:56.320 | definitely the cost of the mortgage and some extra to cover any maintenance repairs and
00:06:04.800 | things like that. So I think we can break even on renting it through a property manager
00:06:09.400 | so that covers her fees as well.
00:06:12.880 | And so I just don't have a really strong motivation to sell it because I don't need the capital
00:06:18.800 | at all.
00:06:19.800 | If you sold the property today, what do you think it would sell for?
00:06:26.040 | About $20,000 less than what we paid for it originally four years ago.
00:06:33.560 | And you've been living in the house for the last four years, right?
00:06:37.120 | Mm-hmm.
00:06:38.120 | Ballpark, what's the value of the property?
00:06:40.720 | So if we sold it today, it'd be about $285,000.
00:06:45.160 | And how much equity do you have in the property?
00:06:47.880 | The outstanding mortgage is $225,000.
00:06:52.480 | Okay. So the way to answer the question, so the scenario that you're describing here is
00:06:59.440 | I don't want to sell it for less than what I paid for it, which is an appropriate consideration.
00:07:05.080 | I don't want to sell it for less than I paid for it because you've put investment capital
00:07:08.680 | into it and you've lost some of that money.
00:07:12.660 | The way to answer the question is to calculate what your potential return is from this investment
00:07:19.180 | and compare it to your potential return from another investment.
00:07:23.300 | And so if you sold it today, you think it would sell for about $285,000.
00:07:28.180 | That means you paid $305,000 for it.
00:07:31.660 | Is that accurate?
00:07:32.660 | Yeah.
00:07:33.660 | Okay.
00:07:34.660 | And for the sake of simple radio math, I'm going to use just simply, I'm going to ignore
00:07:40.140 | the sales costs right now, but you need to redo this analysis later with what you think
00:07:44.820 | would be the actual transaction costs of the deal.
00:07:48.380 | But if you sold it today for $285,000 and you paid off the mortgage of $225,000, that
00:07:56.140 | means that you would clear $60,000 of equity.
00:07:59.020 | Again, you need to factor in transaction costs, but for radio math, I'm going to just use
00:08:03.660 | $60,000 of equity.
00:08:05.420 | The question is this, the $60,000 of equity that you have in this property, if your estimate
00:08:12.460 | is accurate, if you think that in the next year, because of the local development costs
00:08:16.900 | and because of the local changes in the market, if you think that property would increase
00:08:22.860 | in value by $20,000 such that your $60,000 of capital would increase to $80,000 of capital,
00:08:32.660 | if you think that's a good investment, then you should consider keeping it.
00:08:36.820 | If you think you can do better elsewhere, if you think you can redeploy that $60,000
00:08:41.540 | of capital into something else that's going to do better, then you should consider selling
00:08:46.540 | it.
00:08:47.900 | Because it's immaterial what you paid for the property versus what it's worth now.
00:08:53.260 | That's a sunk cost and you can't do anything about it.
00:08:56.020 | So you've got to clear that from your mind and you've got to think, "Would I rather have
00:09:00.020 | $60,000 invested in this property in Alabama, in this particular house, or would I rather
00:09:06.980 | have the $60,000 invested into something else or under some other conditions?"
00:09:12.700 | That's the question that you have to ask yourself.
00:09:14.860 | And then as you look at that, you need to also consider what the rental cost would be.
00:09:19.620 | So if you are just simply renting it out for enough to cover the mortgage and you're not
00:09:24.100 | going to be gaining any profit, then you're not getting any return on that $60,000.
00:09:28.980 | You're just covering your financing costs.
00:09:31.340 | But the way to do it is just simply to look exclusively at the equity that you have in
00:09:35.220 | the property.
00:09:36.820 | Consider what you think will happen with that house and then compare it to anything else
00:09:41.540 | that you would do with the money.
00:09:43.220 | And then out of that analysis, you should be able to make a decision properly.
00:09:46.460 | Is that helpful?
00:09:48.220 | Yes, absolutely.
00:09:49.940 | Cool.
00:09:50.940 | Thanks.
00:09:51.940 | Thank you for calling in.
00:09:53.500 | Next we are going to go to Guy in Pennsylvania.
00:09:57.100 | Guy, it's a little bit noisy, so try to be quiet here.
00:09:59.860 | And go ahead and introduce yourself.
00:10:01.140 | Ask your question.
00:10:02.140 | Let's see how I can serve you today, please.
00:10:03.140 | Good morning, Joshua.
00:10:04.140 | I appreciate you taking my call.
00:10:05.140 | I've been a listener since you interviewed on the Money Plan SOS podcast a few years
00:10:12.580 | ago.
00:10:13.580 | So I've enjoyed you ever since.
00:10:16.500 | My question today is in regards to switching to a local advisor.
00:10:22.620 | This question comes up for me because my younger brother is working with a local advisor
00:10:28.620 | who frequently contacts him and keeps him updated, asks him questions just to make sure
00:10:36.420 | that everything is going well.
00:10:39.540 | So it's clear that he's monitoring the account.
00:10:41.620 | The guy that I set mine up with when I was 27 years old right around in 2012 was a Dave
00:10:48.860 | Ramsey ELP.
00:10:49.860 | A wonderful guy.
00:10:51.620 | He came, we sat down, spent a lot of time together, and he set me up a couple of different
00:10:57.860 | accounts through Fidelity with the same, in the Dave Ramsey structure.
00:11:03.020 | So I've got five different A-share funds.
00:11:07.060 | One set of five is in a Roth IRA that is set up for long-term investing and one that's
00:11:13.340 | in an individual that is set up for short-term that I essentially use for a long-term car
00:11:19.220 | fund but I'm pulling out of it frequently when we need new vehicles.
00:11:24.740 | And then he also set me up with a C-share that I used to save up for a down payment
00:11:28.940 | on my house over a four-year span which worked out, everything has worked out really well.
00:11:35.460 | The challenge that I have is from my understanding, if I try to contact him, it takes a while,
00:11:41.860 | a long while to get any word back from him.
00:11:46.540 | So I know he's very busy driving all over the region.
00:11:54.060 | So I don't think that he's monitoring my account at all.
00:11:58.460 | To me, I feel as if he, because of being so busy, he became one of those guys that sets
00:12:05.580 | you up and then moves on and collects the commission which I find to, which I think
00:12:11.500 | is at the industry maximum.
00:12:13.620 | I think it's 5.75% for those A-shares.
00:12:19.300 | So my question to you is, and it's set up, it's an individual Fidelity account so I can
00:12:23.860 | pull it out anytime I want.
00:12:25.540 | I have complete control.
00:12:27.280 | It's not something that I have to contact him with to get the money from it or to make
00:12:33.100 | changes.
00:12:34.980 | So I don't need him other than unless I want to make structured changes.
00:12:40.500 | So my question to you is, how do I know if I should switch?
00:12:46.380 | Is there value in having a guy like my brother has that will contact him that I can go sit
00:12:51.000 | down with at his office to switch to something where I know that it's being monitored and
00:12:58.180 | I'm going to get updates on even law changes and just suggestions based on stage of life
00:13:06.540 | or can I just trust what I have and just keep putting in the money and I watch it in personal
00:13:14.820 | capital and I know what's there and what's happening for the most part.
00:13:18.740 | So I got your question.
00:13:20.460 | How much money do you have invested with this particular advisor?
00:13:24.740 | It would be right around $34,000.
00:13:28.540 | $26,000 of that is in the Roth and $8,000 is in what I call the car fund, the individual
00:13:33.900 | investments.
00:13:34.900 | Okay, so this is the most important consideration here in terms of how much money you have because
00:13:42.820 | this is what's going to drive how much service you get with a financial advisor.
00:13:48.180 | And you need to think like a business person and think about the business of giving financial
00:13:52.020 | advice.
00:13:53.020 | If you think about the business of giving financial advice, you have to recognize that
00:13:56.460 | your financial advisor is being paid based upon the revenue to their practice.
00:14:04.240 | And for the sake of simplicity, let's start with pretending that this is a fee-based account
00:14:10.100 | where the financial advisor is earning a flat fee and let's use a flat fee of about 1% which
00:14:15.980 | would be the industry standard.
00:14:18.140 | If you have a $34,000 account, then that means that on a flat fee basis of 1%, your financial
00:14:24.500 | advisor is earning $340 per year.
00:14:28.140 | Now on a $34,000 account, your fee would actually be far higher than 1% because there's no
00:14:33.900 | way for the advisor to cover the cost, to cover the cost of technology, the platforms,
00:14:38.700 | et cetera, and to do it in any measure profitably.
00:14:41.180 | Your fee with a standard personal financial advisor who works with individuals would be
00:14:46.460 | probably closer to 2% on this amount of money, 1.5%, 1.75%.
00:14:50.860 | So total revenue to that advisor's practice would be about $340 per year.
00:14:55.820 | Now in your case, because you don't have this set up in the context of a fee-based account
00:15:03.780 | but rather your account is based on commissions, the advisor received a large upfront commission
00:15:10.180 | from the sale of these mutual funds.
00:15:11.580 | As you said, let's say it was 5.75%.
00:15:15.380 | So on $34,000, pretend you invested that much money, then that would be about $1,900 of
00:15:21.620 | commissions and then they're receiving a small trail commission, what are called in the business
00:15:25.860 | of trail commissions, which is a very small amount of money on an ongoing basis.
00:15:31.100 | So they've received most of their compensation upfront.
00:15:34.420 | So here's the incentive that the advisor has and here's how I would approach the problem
00:15:40.220 | if I were you.
00:15:41.740 | Because the advisor earned an upfront commission, let's assume the best.
00:15:45.820 | It's probably a good guy.
00:15:46.940 | You said you've got good feelings from him.
00:15:48.940 | He worked hard.
00:15:49.940 | He helped you, et cetera.
00:15:51.260 | Because he earned an upfront commission, he knows that he earned that money upfront for
00:15:54.700 | not very much work.
00:15:56.180 | And so when you call, he's going to want to do a good job for you to help service your
00:16:00.980 | clients, to help you with the questions that you have.
00:16:03.260 | He's going to want to do the best for you.
00:16:05.340 | But when he's earning a small trail commission of – I can't – I mean, what, 25 basis
00:16:10.340 | points, something like that, he's only earning revenue to his practice from your accounts
00:16:14.540 | under $100 a year.
00:16:17.640 | So in terms of his actual incentive to meet with you, if he's got incentive to meet with
00:16:22.420 | you of under $100 a year versus other prospective clients that are million-dollar accounts where
00:16:28.180 | he has the potential revenue of say $10,000 a year of revenue or potentially much larger
00:16:34.420 | commissions if he's working on a commission basis, he doesn't have a lot of incentive
00:16:39.060 | to meet with you.
00:16:40.460 | So the problem is this.
00:16:42.580 | He knows that he wants to help you and he knows that he wants to do a good job for you
00:16:47.200 | because you're a client.
00:16:49.160 | But he also knows that you're not an A client.
00:16:52.220 | And so if I were coaching a financial advisor like him, the first thing that we would do
00:16:56.060 | is we would do client segmentation and you'd segment your clients into A clients, B clients,
00:17:01.820 | and C clients.
00:17:02.980 | And each advisor will have their own criteria for how they would segment their clients.
00:17:07.560 | But the criteria would involve, number one, financial considerations, how large is the
00:17:14.180 | account or how much financial potential does the advisor have, and it would also involve
00:17:21.460 | the strength of the relationship.
00:17:23.820 | I worked with clients when I was an advisor.
00:17:25.860 | I worked with clients that probably I shouldn't have spent as much time with, but I liked
00:17:30.260 | them and I like spending time with them.
00:17:32.820 | And most advisors, one of the biggest things, once you have your feet under you and you're
00:17:36.460 | confident in what you're doing, one of the great things you try to do every year is fire
00:17:41.020 | a client that you don't like because working with people who drain your energy is really,
00:17:46.300 | really exhausting.
00:17:47.300 | And so one of the good pieces of consulting and coaching advice for financial advisors
00:17:51.100 | is go through your practice at least once a year.
00:17:53.460 | And I always love Nick Murray always recommended doing it on your birthday as a birthday present
00:17:57.740 | to yourself.
00:17:58.740 | You go through your practice and you fire your most obstreperous client.
00:18:01.860 | And whoever you don't like, whoever's the biggest problem, you go ahead and send them
00:18:06.620 | away.
00:18:07.620 | So what advisors do is they segment their clients into A clients, B clients, and C clients,
00:18:11.980 | done based upon strength of relationship, current financial position, and financial
00:18:16.420 | capacity.
00:18:17.900 | Many advisors, if you are, let's say that you earn a little bit of money, but they can
00:18:22.420 | tell that you're working in a business that's going to result in a lot of income in the
00:18:26.420 | future, then they'll say, "Well, this client, they're a B plus because they don't have a
00:18:31.300 | lot of money now.
00:18:32.300 | They're not earning a lot, but they have a lot of financial capacity."
00:18:35.520 | So the problem with you is, and let's ignore the prospect of financial capacity, the problem
00:18:42.020 | that you face with this advisor is the fact that with a $34,000 of account, you're not
00:18:47.580 | an A client.
00:18:49.220 | And unless you're going to become an A client, this is probably going to continue.
00:18:53.280 | So what do you do?
00:18:54.280 | Well, if you like this guy and if he helps you with some of the information that you
00:18:58.020 | need, then you can continue to work with him, but you're going to have to be the one who
00:19:02.020 | bugs him, who reaches out to you.
00:19:04.960 | Because when an advisor segments their client base into A, B, and C, an experienced advisor
00:19:10.880 | also goes ahead and puts in place a contact plan.
00:19:14.200 | And so you reach out and you contact your best clients a certain number of times per
00:19:18.860 | year based upon whether they're in your A tranche, your B tranche, or your C tranche.
00:19:24.260 | And so your C clients will receive, let's say, your monthly newsletter.
00:19:28.140 | You sign up your C clients for your monthly newsletter, and then you have your staff go
00:19:32.380 | ahead and once a year reach out to you and see how everything's going.
00:19:37.100 | Your B clients get a monthly newsletter and they get a call from you once a year or twice
00:19:42.340 | a year.
00:19:43.340 | And your A clients get a call from you every quarter or more, and you send them and you
00:19:47.660 | set up a spreadsheet in your office and you say, "Okay, they're getting to..." and you
00:19:50.720 | plan out the number of client contacts that they're going to get per year.
00:19:54.760 | So the A clients get invited to a client appreciation event.
00:19:58.280 | They get birthday phone calls.
00:19:59.700 | They get personal notes.
00:20:00.800 | They get personal emails.
00:20:02.280 | They get personal things, and it's based upon their financial capacity.
00:20:06.200 | So that's what the advisor is doing.
00:20:08.460 | That's what they're thinking.
00:20:09.680 | Now when they're very busy, it's not that he means bad.
00:20:12.440 | He wants to do the best for you, but there's no way for it to work financially to be a
00:20:17.080 | really good thing.
00:20:19.080 | So here's what I would do if I were you.
00:20:21.440 | In order for you to get more advice, you're going to have to pay more money.
00:20:26.020 | So if you're not getting advice from this guy, then you should look at your account
00:20:30.340 | and you should look around and see is there a place that you can get a better deal.
00:20:34.600 | Thankfully in today's world, there are tons of really great independent investing options.
00:20:40.600 | And you can look at your accounts and you can say, "What are my fees?
00:20:44.360 | What are my costs?"
00:20:45.560 | And you can go and you can look at other places and try to figure out, "Can I get a better
00:20:49.580 | deal somewhere else?"
00:20:51.120 | If you're not getting the...
00:20:53.160 | What I would do is I would try, if you like this guy, I would try to ask him your questions,
00:20:57.680 | reach out to him, schedule a phone call.
00:21:00.360 | The best way to do that is probably to reach out to his staff and schedule a time with
00:21:03.560 | his staff to schedule an appointment with him because he's going to have...
00:21:08.760 | He knows he owes you a loyalty because you're a client of his and he feels bad.
00:21:14.040 | He feels bad that he hasn't served you as much as he would like to, but you're in his
00:21:18.040 | C client base.
00:21:19.320 | So you've got...
00:21:20.320 | If you're the squeaky wheel, you can get time with him and that's how I would approach it.
00:21:24.800 | If you need more financial advice, you're going to have to find some way to pay for
00:21:28.360 | it.
00:21:29.360 | With $34,000 of assets, the only way that you're going to get more focused, clear, comprehensive
00:21:35.000 | financial advice is to pay for it on an hourly basis with somebody who works with somebody
00:21:40.940 | on an hourly or package deal because you don't have enough money pulled together yet to where
00:21:45.460 | you're really going to be able to get the services of a good financial advisor.
00:21:50.440 | Does that make sense?
00:21:52.440 | Yeah, it does.
00:21:54.180 | That brings it into perspective, absolutely.
00:21:56.840 | Thank you very much.
00:21:57.840 | You're welcome.
00:21:58.840 | I'm going to give you the answer.
00:21:59.840 | It's really hard because that's the type of thing that the financial advisors face commonly
00:22:04.920 | is just this desire to do the best for everybody, but also this constraint with the numbers.
00:22:13.800 | Advisors go...
00:22:14.800 | Businesses go through this life cycle where in the beginning, they'll work with kind of
00:22:18.000 | almost anybody, but then they create this massive client base of clients that really
00:22:27.560 | they probably shouldn't be spending a lot of time with.
00:22:30.400 | One more idea that I forgot, Guy, that you can do is reach out to this advisor and see
00:22:34.240 | if he'll refer you or refer your account to a younger, more junior advisor, somebody who
00:22:40.200 | can work with you on your account who may not be as big or as busy as this other person.
00:22:47.400 | A lot of times, if you don't have a lot of money pulled together, you may be able to
00:22:51.680 | find a young and less experienced star who will give you time, give you effort, give
00:22:58.000 | you focus and energy while they're still building and developing things.
00:23:02.600 | So go ahead and see if you can find, maybe get a referral to somebody within their practice
00:23:08.000 | or reach out to one of their junior associates for help.
00:23:10.160 | I hope that helps.
00:23:11.160 | All right.
00:23:12.160 | Chuck in Atlanta.
00:23:13.160 | Let's go ahead and hear your question.
00:23:14.520 | Let's see how I can serve you today, please.
00:23:16.920 | Hello, Joshua.
00:23:17.920 | Good morning and thanks for taking my call.
00:23:21.440 | Usually I have where people come to me for financial help and I like helping like non-custodial
00:23:28.520 | parents and that kind of thing.
00:23:30.880 | And lately I've been coming across a lot of non-custodial parents who they have one bad
00:23:36.600 | relationship, have a child and that breaks up and then they have the follow-up, another
00:23:42.320 | relationship that breaks up and then they got two custody or two child support payments.
00:23:47.600 | Now usually in most states, well every state is different because it's state by state.
00:23:51.880 | It's about a third of your income for each bad relationship.
00:23:54.760 | So they have a third of their income towards the first child and then a third of the income
00:23:59.440 | might be towards the second child and then another third of their income goes towards
00:24:02.920 | taxes.
00:24:03.920 | So basically no matter how hard they work, it seems to go in a negative manner because
00:24:10.960 | child support is usually based upon a percentage of the income.
00:24:14.040 | Right?
00:24:15.040 | So they get a raise.
00:24:16.040 | It doesn't matter.
00:24:17.040 | They get a raise and so forth.
00:24:18.120 | And I've been giving them some advice what I could think of but I just wanted to bounce
00:24:22.600 | those ideas off of you as well as if you can come up with anything else like to tell them
00:24:27.000 | because the divorce rate is high, whatever it is.
00:24:31.240 | I don't know what the actual statistic is but it does seem to affect a lot of people.
00:24:36.200 | And it's a negative cycle and I want to see if I can help some of these guys change their
00:24:41.920 | finances and change their financial momentum so they could be actually a better parent
00:24:46.040 | to their kids.
00:24:48.360 | So if you're working overtime and crazy time and all that kind of stuff, then you have
00:24:52.840 | no time to spend with the kids.
00:24:54.040 | And a lot of times I've come across guys that are living in containers, living in people's
00:25:01.040 | basements and my main advice that I can give them is it's a financial game.
00:25:08.320 | They can only take child support on money you earn.
00:25:11.000 | So I say, "Okay, well, where can you go and use your social capital and say, 'Hey,
00:25:18.760 | friends and family, where you can ask for help?'"
00:25:21.840 | And some of them have been able to be living with relatives for free and some of them have
00:25:29.160 | houses and a lot of them don't.
00:25:31.440 | But the ones that have houses, I tell them, "Hey, maybe you could take on roommates and
00:25:35.440 | then defer the cost of the mortgage payments or something like that."
00:25:40.320 | And a lot of it depends upon what kind of situation they're coming in.
00:25:43.480 | Some are in their court case and some are after the court case, which after the court
00:25:48.080 | case, of course, is harder because prevention is...
00:25:51.760 | An ounce of prevention is worth a pound of cure.
00:25:55.360 | And the court sometimes take in the factors such as the distance between the non-custodian
00:26:01.880 | custodial parent and that into the child support and so forth and the cost of that.
00:26:08.680 | The only other advice I've been giving them is maybe start a business on the side and
00:26:14.600 | live in the business, place of business for a little while until you can figure out something.
00:26:19.860 | And then if they get a second job, that's even harder, reduces their time with their
00:26:30.160 | children, which is kind of counterproductive.
00:26:33.160 | With 90% of the people in jail have no father involvement, that's kind of a bad thing.
00:26:38.200 | And they got the big sticker over them of if they don't pay child support, they get
00:26:43.840 | jail time.
00:26:44.840 | If they could lose their...
00:26:45.840 | I had a truck driver that was in danger of losing his license, which is his livelihood.
00:26:52.640 | And people with passports, all that kind of crazy stuff.
00:26:56.320 | So that's kind of...
00:26:58.440 | What would you tell them to kind of...
00:27:01.160 | That would help to get them on a more positive thing?
00:27:05.160 | Because running on zero, the math, one third, one third, one third, you're left with zero.
00:27:11.320 | So I don't know what else to tell them.
00:27:15.160 | That's tough.
00:27:17.400 | My question, I'm glad you kind of shared what you tell them because that was going to be
00:27:21.600 | my next question.
00:27:22.600 | I've never really...
00:27:23.600 | I don't think I've ever given financial advice personally to someone in that situation.
00:27:28.740 | So it's a new kind of problem to me.
00:27:30.840 | And I recognize that it exists.
00:27:34.920 | It's funny, last night I was looking at a book by a lady named Helen Smith called Men
00:27:39.800 | on Strike, Why Men are Boycotting Marriage, Fatherhood and the American Dream and Why
00:27:43.740 | It Matters.
00:27:45.040 | And one of her major propositions that she puts forth is that in her opinion, men are
00:27:51.120 | mistreated in divorce courts.
00:27:53.820 | And the standards that are held on men are much higher than on women.
00:27:57.740 | And it leads to ruination for many of the men.
00:28:00.800 | And that's one of her arguments is that many men see this.
00:28:04.040 | And so they're avoiding marriage because of seeing how, in her opinion, they're unfairly
00:28:08.800 | treated by the courts.
00:28:09.800 | So I was just thinking about this just last night and wondering if that were true, wondering
00:28:13.560 | how I could learn whether I felt it were true or weren't true.
00:28:19.720 | Now this question comes this morning.
00:28:22.680 | I guess my first concern is not for the...
00:28:27.600 | Obviously the man is sitting there in front of you.
00:28:29.320 | My first concern is not for the financial well-being of the man.
00:28:35.440 | My first concern is for the financial well-being of his child or children and of his wife.
00:28:44.360 | All of this could have been avoided if he'd been able to stay there and to support his
00:28:49.320 | children in the relationship in which they were birthed.
00:28:53.580 | So I tend to be one of those who starts there.
00:28:57.180 | But I also do acknowledge that the situation is very, very difficult.
00:29:01.000 | And if you're sitting there with a guy and he's saying, "Listen, I am doing this.
00:29:05.240 | I'm doing very well.
00:29:07.120 | My children are supported.
00:29:08.720 | And what I'm trying to do here is I'm trying to figure out how to get free and how to be
00:29:16.280 | a better father because I'm not spending all my time working and all the money's not sucked
00:29:19.560 | up, then I am doing my best."
00:29:23.560 | So I guess the only advice that I could think of in that situation would be to study the
00:29:29.960 | rules of the game and figure out how it's played and then find the break in the rules.
00:29:37.500 | And I think it relates to income.
00:29:39.440 | First, it would be a very high-earning man who one-third of his income goes to taxes.
00:29:44.980 | That would be a very high-income earning person.
00:29:50.000 | A truck driver, as you said, somebody who's earning, let's just say, $60,000, $70,000,
00:29:54.200 | $80,000 a year, a third of the income is not necessarily going to go to taxes.
00:30:00.240 | So we got to look at what exactly are we talking about.
00:30:04.200 | If the child support payments – so a couple of things.
00:30:07.360 | As you well know, if you were retained to give financial advice to the husband in a
00:30:15.480 | divorce proceeding, one of the major things you want to do is you want to get as much
00:30:19.440 | of the money that – as much of the settlement that's split between alimony and child support,
00:30:26.880 | you want to get as much of the money counted as alimony versus as child support in order
00:30:32.140 | to lower the overall taxable burden.
00:30:35.020 | If a man is going through divorce proceedings and if the judge rules that he owes $1,000
00:30:42.080 | a month of alimony and $1,000 a month of child support, the $1,000 a month of alimony, the
00:30:48.960 | tax burden of that will be removed from his return and it will be added to his wife's
00:30:54.920 | return.
00:30:55.920 | So that can help with the tax planning as well.
00:30:57.600 | Now I think most divorce attorneys, if the man has good counsel, most divorce attorneys
00:31:03.000 | are aware of that and will do that.
00:31:05.040 | It's not a matter – there's going to be – when the judge is working through the
00:31:08.760 | case, they're going to decide how much goes to alimony and child support based upon the
00:31:14.440 | proper split.
00:31:15.660 | But that is important and that can be a very significant financial planning consideration
00:31:20.080 | because if we can lower the taxable income by having more of the money shifted to alimony
00:31:26.280 | payments versus shifted to child support payments, then that will be helpful for the man that
00:31:31.680 | we're giving financial advice to.
00:31:34.800 | So that's – but by the time you come into the situation, that's a little bit too late.
00:31:39.120 | Next, I think it's important to look at the term of the payments.
00:31:43.960 | So given the fact that we're talking about child support, child support is not judged
00:31:50.080 | as a lifelong commitment.
00:31:51.280 | It's generally until the child reaches the age of majority.
00:31:54.260 | So there's a difference if a man has a 15-year-old son or daughter versus if a man has a 2-year-old
00:32:00.260 | son or daughter.
00:32:01.260 | That will make a difference in the financial advice.
00:32:03.440 | So I think it's important to consider where the person is in their financial journey.
00:32:09.680 | Then if the game is played on income, I think you go to income.
00:32:13.000 | I think that instead of – if the man is going to be assessed higher child support
00:32:19.000 | payments by – based upon earning a higher income and I want to be very clear.
00:32:27.640 | First I want to make sure that he's meeting his child support obligations and I think
00:32:30.560 | we – I would assume we would be agreed on that.
00:32:32.360 | I don't want a man playing games and his child going uncared for because that would
00:32:36.760 | be immoral for him to not take care of his own children.
00:32:40.560 | So as long as his children are being cared for adequately and their needs are being covered
00:32:45.800 | and we're just doing – we're just trying to figure out how can we fix the situation
00:32:49.920 | a little bit.
00:32:50.920 | I think you lower your income partly through to reducing needs, doing things like you said
00:32:56.640 | of reducing living expenses, taking advantage of some of the social capital that you have
00:33:02.000 | to be able to lower housing costs, to be able to lower transportation costs.
00:33:06.600 | I think you approach your business and your career differently.
00:33:10.360 | Instead of pursuing earned income, you pursue equity.
00:33:15.000 | So if I'm advising a man who is – for the sake of scenario analysis here, he's
00:33:20.280 | got 13-year-old children and he's got high child support payments which would adjust
00:33:26.600 | based upon him earning a higher income and he knows that and he is adequately caring
00:33:34.040 | for his children, their needs are met, they're not suffering.
00:33:37.360 | Then in that situation, I'm going to tell him, "Build something.
00:33:39.600 | Start a business.
00:33:40.600 | Build something that's going to result in higher equity.
00:33:42.960 | Don't just pursue immediate income.
00:33:44.880 | If you need to make a career transition, transition into something that's going to
00:33:48.320 | be lower earning for the next few years and then when your child support obligations are
00:33:52.840 | going to be paid, then you'll be in a situation where your income is increasing because of
00:33:58.360 | the equity that you built."
00:33:59.820 | That can be done in building of a private business.
00:34:02.920 | For example, maybe the trucker should pursue working as an owner-operator instead of working
00:34:08.160 | as an employee.
00:34:09.980 | It can also be done in some jobs that are commission-based and that are slow to get
00:34:14.180 | started such as real estate or something like I did, life insurance sales and financial
00:34:18.720 | advice.
00:34:19.720 | The first five years of a financial advisor's career are very expensive, very low-earning
00:34:25.120 | years.
00:34:26.120 | But the balance of the career would be much higher-earning years and there's really
00:34:29.220 | not much of a way around those first five years.
00:34:32.680 | So if I'm making a career decision and I know that if I take this job that's high-paying
00:34:37.240 | over here, I'm just going to lose all that money to higher taxation and child support
00:34:41.920 | payments or if I've got the other job opportunity where I'm going to build equity and deferred
00:34:48.060 | comp, then I'm going to move in the position of equity and deferred comp.
00:34:53.040 | But Chuck, you've already said that.
00:34:54.920 | That was just me elaborating and explaining what you already said.
00:34:58.640 | I'll think about it.
00:34:59.640 | I've never really faced that situation in consultation so I've not thought a lot about
00:35:03.920 | it but I will invite any listeners who have additional ideas.
00:35:07.320 | This would be a great place for listeners to chime in.
00:35:09.680 | Come on by today's show and give us your suggestions of anything that Chuck and I are missing.
00:35:16.200 | Go ahead, Chuck.
00:35:17.200 | Well, I just really appreciate it and I really think you hit the nail on the head when I
00:35:23.280 | said start a business on the side.
00:35:26.160 | Maybe they could use the benefit of like one guy slept in his business and he wasn't realizing
00:35:32.880 | too much income from it but he had a normal job so his business was on the side and then
00:35:38.560 | he was able to defer it and then I think his kids are a majority age so then he's starting
00:35:44.720 | to reap the profit from it and then be able to do a career transition.
00:35:50.040 | So it's a delayed gratification and long-term planning which is what I try to talk to people
00:35:55.280 | about rather than the short jab that gets you in trouble.
00:35:59.720 | Yeah.
00:36:00.720 | Well, keep it up.
00:36:01.720 | I mean the biggest challenge is that the men and women with the highest divorce rates are
00:36:06.560 | usually in the lower class and they're often the ones who struggle the most with financial
00:36:11.520 | planning, the ones who struggle with business and that's kind of really sad.
00:36:16.000 | I don't know how relevant some of this is going to be but I applaud you for seeking
00:36:19.840 | to help these men and I would encourage – as again, I'm sure you'll agree.
00:36:27.960 | The primary interest here that we need to look – be careful for is to protect – we
00:36:32.600 | need to protect the innocent party and we need to protect the person who's most helpless
00:36:37.120 | and most defenseless which is the child.
00:36:40.240 | So I do appreciate your counsel to the man to say giving more money to your son or daughter
00:36:44.920 | is probably not going to materially change their life.
00:36:48.680 | But giving them the love and the care and the focus and the attention and the time and
00:36:53.160 | really seeking to care for them even though it's difficult when you're far away, that
00:36:59.040 | will make a big, big difference.
00:37:00.520 | A lot of times I agree with you.
00:37:02.880 | If I've got a 13-year-old, I'm not going to say how much more money can I – how much
00:37:07.400 | more time can I put into business.
00:37:09.120 | I might just simply say, "You know what?
00:37:10.880 | For the next few years, things are going to be tight.
00:37:13.460 | But I'm really going to do everything I can to build into the life of my son or daughter
00:37:18.360 | during this very important transition period of childhood to adulthood and I'll pick
00:37:24.520 | up my own personal financial well-being in a few years."
00:37:27.640 | I think that's important to recognize.
00:37:30.160 | All right.
00:37:31.160 | Let's go on to Matt in North Carolina.
00:37:34.320 | Matt, go ahead and let us know your question or comment and let's see how I can serve
00:37:38.960 | you today, please.
00:37:39.960 | Matt Thurston, Chief Financial Officer, Alphabet and Google
00:37:41.320 | Hey, Joshua.
00:37:42.320 | Thank you very much for the chance to be speaking to you again.
00:37:47.740 | A lot of times when I'll listen to you talk to callers, you'll just have some very kind
00:37:52.260 | of quick and good consulting ideas from a business standpoint.
00:37:56.100 | One of the things that I've been working on is organizing a branch after FinCon.
00:38:00.660 | I'm looking forward to going to that for the first time in 2017, just for some of the folks
00:38:05.620 | who've been helpful to me in my own, I guess, personal finance blogging journey.
00:38:10.940 | Certainly, as you know, you're among that crowd.
00:38:14.780 | I wanted to ask, essentially, kind of besides the meal, which will be delicious, do you
00:38:19.100 | have any special ideas to make this more interesting and valuable to the folks that I hope will
00:38:22.660 | join me?
00:38:23.660 | For example, in the case of each of the invites that I've made, I've offered folks the chance
00:38:28.100 | to bring guests or things like that, but I'm wondering if you have ideas about ways to
00:38:31.220 | go beyond that.
00:38:32.700 | And then secondly, one of the things that I'm hoping to do with this is maybe use it
00:38:38.820 | as a chance to gain some additional visibility for my blogging work.
00:38:44.260 | And in addition to what I hope will be some of my, I guess, guests who can join me, will
00:38:50.220 | be to do some giveaways of spots at that event through my website.
00:38:54.420 | So I didn't know if you had any thoughts on adding value there as well as combining kind
00:38:59.660 | of the marketing element with that thank you brunch, which is sincere.
00:39:05.660 | Right, right.
00:39:07.660 | Interesting.
00:39:08.660 | I'm kind of feeling flat-footed at the moment.
00:39:25.060 | So I'll just tell you, yeah, yeah, it's an interesting question and I want to give you
00:39:28.420 | something helpful and I appreciate your heart and even your service.
00:39:33.580 | I think that probably just from my perspective, having – I'm kind of in this in-between
00:39:40.620 | world where I'm not unknown, but I'm also not a major celebrity.
00:39:50.180 | I guess my thought is this.
00:39:53.020 | So conferences for somebody like me, and I would use that as an example because obviously
00:39:57.820 | that's the question you're asking, or other people who are in the middle tiers of a profession.
00:40:04.180 | Something like a conference can be a very exhausting experience.
00:40:09.460 | It's really, really tiring because the primary reason that I go to a conference is – or
00:40:16.860 | let me rephrase.
00:40:17.860 | The primary reason why I go to a financial conference, something like a FinCon, is to
00:40:23.060 | be available to my audience, to be accessible to my audience because the most important
00:40:30.660 | people to me are my listeners, the people who tune in.
00:40:34.460 | And I want to make sure that I do everything I can to be as available as possible.
00:40:39.700 | And it's really hard to do that on a private basis, although I try really hard.
00:40:44.540 | Even last week I had dinner with a couple of listeners who came to town.
00:40:48.180 | But at some point in time, I always have to put borders around my schedule and make sure
00:40:52.300 | that my family comes first.
00:40:54.500 | And I just have to turn off the email, and I feel bad that I can't respond to everybody,
00:40:58.700 | and I feel bad that I can't do it.
00:41:00.060 | But it's just the way it goes.
00:41:02.260 | So conferences can be very tiring and very kind of emotionally draining because it's
00:41:11.420 | constant.
00:41:12.420 | It's from breakfast through the whole day and through the evening.
00:41:16.500 | And it's also challenging because somebody who's at a conference often has a lot of
00:41:20.700 | commitments and engagements.
00:41:24.180 | If someone has a – they're speaking, they're having a meetup with their audience, their
00:41:33.340 | listeners, I try to do that.
00:41:34.340 | I try to be very accessible to my audience, have meetups or breakfasts or things like
00:41:38.420 | that.
00:41:39.420 | And so it's just challenging.
00:41:40.420 | The scheduling is really hard.
00:41:42.660 | And if you're doing podcast interviews or TV or YouTube interviews or whatever, the
00:41:47.700 | scheduling is really hard.
00:41:49.220 | So I think anything you can do to provide a little bit of a respite from that that also
00:41:54.700 | brings value is really cool.
00:41:57.100 | And probably the biggest thing that I would say, the biggest thing that would be exciting
00:42:02.340 | to me is something unique that's small, that's intimate, but that's a unique activity.
00:42:14.700 | And when you go to these meetings, it's just as simple.
00:42:16.980 | When you go to a FinCon as someone like me, a podcast host, from morning till night, it
00:42:23.060 | is – from morning till night, it's events.
00:42:26.420 | It's a breakfast thing.
00:42:27.900 | It's a lunch thing.
00:42:29.300 | PT, the founder of FinCon, does a great job of providing lots of food.
00:42:33.460 | He does a great job with that.
00:42:34.960 | So there's plenty of food available.
00:42:37.400 | In the evening, all of the companies and the vendors make offers to go to various parties
00:42:43.840 | and cocktail parties.
00:42:45.900 | There's plenty of free alcohol.
00:42:47.400 | There's plenty of all of that.
00:42:49.060 | What I look for is – and what I notice that nobody really does very well – is something
00:42:54.340 | unique.
00:42:56.180 | So get out of the cocktail circuit.
00:42:58.620 | I'm not a big drinker and I don't drink it when I'm in public and in situations like
00:43:03.140 | that.
00:43:04.140 | And it's just very exhausting.
00:43:05.940 | But if you told me, "Hey, let's go skeet shooting," or "Let's go and do this ATV
00:43:11.780 | ride," or something unique like that, to me, that would be something that would quickly
00:43:18.880 | go to the top of my list.
00:43:20.680 | So obviously, you have to balance this financially with the invitation that you make.
00:43:25.440 | But if you told me and said, "Hey, Joshua, listen, there's a skeet club," or – where
00:43:32.680 | is FinCon this year?
00:43:33.680 | Is it in – it's Texas, right?
00:43:34.680 | Dallas.
00:43:35.680 | Dallas.
00:43:36.680 | So you find some local gun dealer who has a class three license and says, "Hey, man,
00:43:44.360 | we can go shoot fully automatic rifles and they got a full auto Glock."
00:43:50.680 | I mean, there's no chance in the world I'm saying no to that.
00:43:53.160 | Now those are kind of guy things that really appeal to me.
00:43:56.560 | But that's what I would do.
00:43:57.560 | If I were in a situation like that, I would rent a room.
00:44:01.000 | Instead of doing a dinner at a hotel where it's in conflict, I would set up – and
00:44:05.280 | I might do it in the middle of the day, like a lunch because oftentimes a lunchtime thing
00:44:09.760 | – many times people like me – I used to go to all the sessions.
00:44:13.880 | But at this point in time, I get so tired and I don't go to all the sessions.
00:44:18.600 | I go to a session where I have a friend who's speaking or somebody who's maybe – I go
00:44:23.520 | to the keynotes, things like that.
00:44:24.800 | But if you look on the schedule and you pick a time that's not during a keynote and when
00:44:28.760 | there's not a lot of other presses, when there aren't a lot of other meetups, and
00:44:31.920 | you put together a small group of people who might like to know each other, which is the
00:44:34.840 | basis of connection, which you're already doing, but you try to figure out who would
00:44:38.560 | this person – who do I have in my network that I can introduce these few people?
00:44:43.000 | Then you put it on a fun activity.
00:44:44.320 | Man, that would be how I'd approach it.
00:44:47.400 | Texas, there's got to be some gun ranges or some ATV rides or something cool like that.
00:44:57.440 | To me, that would be the biggest thing.
00:44:58.920 | That would also be fun because when I go to a conference, I almost never do any kind of
00:45:04.440 | tourist things.
00:45:05.440 | I fly in and I go to the thing and I fly out.
00:45:08.200 | I just want to get home as quickly as possible.
00:45:11.040 | Scheduling a tourist event like that I think would be – that's the best I got for you.
00:45:14.400 | Yeah, cool.
00:45:15.400 | I very much appreciate the thought.
00:45:18.240 | Awesome.
00:45:19.240 | Let me know what you wind up with and we'll look forward to it.
00:45:22.040 | I think you emailed me at some point.
00:45:23.840 | I don't think I ever responded, right?
00:45:25.760 | Is that where we were?
00:45:26.760 | That's true, but I wasn't going to call you out on the air about that.
00:45:31.200 | Take a look.
00:45:32.200 | There's a second idea in there that might be of interest to you that I won't share on
00:45:37.360 | the call.
00:45:38.360 | I'll look for that.
00:45:40.800 | You got time for one more or are you two jammed up?
00:45:43.000 | Let me wait for next week.
00:45:44.560 | I want to take one more caller from another Matt in Tennessee and then call back in with
00:45:49.200 | you next week.
00:45:50.200 | All right.
00:45:51.200 | Cool.
00:45:52.200 | Thanks, Matt.
00:45:53.200 | All right.
00:45:54.200 | Let's go to another Matt or Matthew in Tennessee.
00:45:55.200 | He'll be our last caller for the day.
00:45:56.520 | Go ahead and let me know what's on your mind and let's see how I can serve you today, please.
00:46:00.200 | Hey, Joshua.
00:46:02.320 | Thanks for taking my call today.
00:46:03.920 | I actually might have to drop off after I ask the question because I've got to run to
00:46:08.280 | a meeting here, but I wanted to go ahead and ask it and I might actually have to get the
00:46:13.480 | answer on the podcast tomorrow.
00:46:15.640 | I just want to give you that heads up in case you tried to have some dialogue or something
00:46:21.640 | and you didn't get anything back.
00:46:25.200 | Just imagine that I am your financial planning client and we're having a discussion primarily
00:46:30.960 | around the investment management piece of financial planning.
00:46:34.960 | What would you say to educate me on why it's a good decision on going with DFA funds over
00:46:41.400 | like a Vanguard index fund?
00:46:43.800 | I know in previous podcasts you said that DFA does a good job of keeping hot money out
00:46:48.760 | of their funds, but what are the other advantages of going with DFA?
00:46:52.400 | Yeah, that's simple.
00:46:53.800 | DFA does a good job because DFA funds are only sold through financial advisors.
00:46:59.920 | They do a good job of keeping hot money out and that's big for them.
00:47:04.400 | They focus heavily on training financial advisors to train their clients and hot money means
00:47:10.320 | that the clients come in and go out.
00:47:14.600 | One of the major helps that a financial advisor can provide to a client is helping them to
00:47:20.080 | stay invested and that helps the fund manager to be able to do a better job when he doesn't
00:47:24.760 | have to go and sell investments all of a sudden and they can take advantage of some of the
00:47:28.280 | little things that DFA focuses on to take advantage to possibly improve their returns
00:47:34.160 | just a little bit.
00:47:35.520 | To me that's the biggest thing is that DFA does a brilliant job of bringing together
00:47:41.600 | the basic ideology of passive investing, indexing, passive investing and marries that into a
00:47:48.720 | package that the financial advisor can use and really serve their client.
00:47:53.320 | The financial advisor is not in competition with the internet and that's really helpful.
00:47:58.960 | I think that just their focus on a financial advisor, their focus on keeping costs down,
00:48:04.440 | their focus on trying to tweak some of those little investment things that they do because
00:48:08.640 | of the benefit of going through an advisor, to me that's the biggest benefit.
00:48:12.680 | Is one better than another?
00:48:14.080 | You have to read their literature and judge that.
00:48:16.520 | I can't know that but when I was looking at them I really appreciated that they were focused
00:48:21.640 | on advisors, not going direct to the client and I felt like there was a lot of value there
00:48:26.320 | that I would be able to help my clients understand.
00:48:29.440 | Got it.
00:48:32.240 | Thank you for that explanation.
00:48:35.920 | Sure.
00:48:37.400 | Anything else?
00:48:38.400 | Yeah, just real quick.
00:48:44.040 | This is more about your personal finances so feel free to divulge whatever you feel
00:48:50.800 | comfortable with.
00:48:52.920 | I know that you've been trying to build a business over the past three years and I'm
00:48:56.520 | curious what personal planning have you done to capitalize on these early years of building
00:49:02.800 | a business?
00:49:04.200 | For example, have you completed any traditional IRA conversions to Roth during low income,
00:49:09.960 | low tax years with the business or any other planning opportunities that you went through?
00:49:15.320 | I've got to decide what I'm willing to talk about publicly.
00:49:33.200 | It's so hard because I've lost so much of my own personal privacy since starting this
00:49:36.760 | show.
00:49:37.760 | It's so hard to decide how much to talk about publicly and what to do because I really hate
00:49:43.400 | to lose much more privacy.
00:49:47.440 | Here are a few things that I have done.
00:49:53.160 | In a business transition, I took a massive cut to my income.
00:49:58.360 | Yes, I have focused on taking advantage of every opportunity that has presented itself
00:50:05.880 | to me because of the massive cut to my income.
00:50:11.280 | I've focused on – I actually took some of my – I closed some of my traditional
00:50:21.040 | IRA accounts.
00:50:22.040 | I didn't do conversions.
00:50:23.040 | I actually closed some of my – just a small – one or two small ones, previous accounts
00:50:29.280 | because I have become increasingly convinced that I don't want to play the game with
00:50:35.280 | the IRS – with the US government in the IRA world.
00:50:40.080 | I haven't gone to the point of saying, "I'm never going to open one again."
00:50:43.720 | I haven't gone and said, "Oh, I'm never going to deal with this."
00:50:50.040 | But when I look more and more and more, the whole scheme of put all your money into mutual
00:50:57.320 | funds and retirement accounts, it just doesn't work well with the major benefits of investing
00:51:05.280 | for an individual.
00:51:06.560 | I think it's really wise to invest where you have an ability to compete really well.
00:51:14.120 | I'm a big guy.
00:51:15.640 | I'm 6'5" and over 300 pounds.
00:51:18.680 | I'm not going to go into a world where I'm investing with jockeys to try to ride horses.
00:51:24.480 | But I may go into a world where my size is a natural advantage.
00:51:28.880 | I see the same thing with regard to investing.
00:51:32.300 | It often feels very lonely for me because I feel like I got to take on the whole financial
00:51:37.000 | advice industry with this question.
00:51:40.120 | I often question myself of am I accurate in my understanding?
00:51:47.960 | Am I accurate in my discussion?
00:51:49.840 | It's really hard because taking some of the opinions that I've taken forces, puts me up
00:51:56.680 | against things that I previously said and talked to clients.
00:52:01.120 | But I just don't see people winning because of IRAs and mutual funds.
00:52:07.800 | I really don't.
00:52:09.840 | Not that you can't win.
00:52:11.840 | There are people in this audience who are winning.
00:52:14.140 | Not that you can't win.
00:52:15.140 | But we had the call earlier from the guy who had $34,000 in his various mutual fund accounts.
00:52:26.880 | If we were to go back, and I don't know anything more about Guy other than that fact, but my
00:52:31.840 | guess is that he's a man.
00:52:34.040 | He's got a family.
00:52:36.040 | That $34,000 is a big deal to him.
00:52:40.240 | If I were to go back and try to think what could we do with that $34,000 that would be
00:52:44.560 | more productive than buying growth stock mutual funds inside of IRAs and other accounts, I
00:52:52.000 | got to imagine at this point I could come up with a whole long list of things that I
00:52:55.560 | think would be better uses of the money.
00:52:57.880 | I really do.
00:53:00.700 | The big challenge that I face in trying to figure out how to do this is to look at it
00:53:08.260 | and say, "You got to know someone's background.
00:53:14.640 | You got to know their interests.
00:53:15.640 | Are they suited for business?
00:53:16.640 | Are they suited for entrepreneurship?"
00:53:19.680 | For me, I'm willing to say that.
00:53:21.280 | I cashed out some of my retirement accounts because I was able to get my tax burden low
00:53:25.440 | enough that the 10% penalty was lower in terms of a total effective tax rate.
00:53:31.080 | The 10% penalty was lower than what the tax rate would be in the future and I was able
00:53:35.960 | to transition some of that money from under somebody else's control to under my direct
00:53:41.720 | control.
00:53:42.920 | When I look at the business opportunities in front of me and the things that I'm concerned
00:53:46.280 | about and the things that I'm interested in, not so many of them can be done within an
00:53:52.120 | IRA.
00:53:53.120 | Not so many of them can be done within a retirement account.
00:53:59.080 | So that's a big deal to me.
00:54:02.280 | Given the fact that investing with retirement accounts, it's not the only tax break.
00:54:06.880 | It's not the only thing that you can do.
00:54:08.800 | When I look at the goals that I have, I'm finding more and more that I want the flexibility
00:54:16.760 | of business.
00:54:18.120 | The other thing that I have done is I have – I guess the other thing I'm willing to
00:54:21.680 | talk about is that I've become much more conservative as a person because of the unique
00:54:28.240 | risks and the unique risks that I face going forward that are different than some other
00:54:33.880 | people.
00:54:34.880 | I've become much more conservative.
00:54:36.600 | I think about the aggressiveness and here I'm not talking about asset allocation conservative.
00:54:42.520 | What I mean is when you look at the – how aggressive you want to be versus how conservative
00:54:46.980 | you want to be, it's really valuable to look at the whole situation.
00:54:53.240 | Because I have more business opportunities, which if I can figure out how to make them
00:55:00.000 | work, that's a big challenge.
00:55:02.800 | If I can figure out how to make them work, they have more – they have much more unbounded
00:55:08.800 | growth opportunity.
00:55:10.120 | That's caused me to be more aggressive with – sorry, more conservative with other
00:55:14.120 | areas of my life to offset that risk.
00:55:17.680 | It probably doesn't make a lot of sense if I don't give specifics but I don't
00:55:23.560 | think at this point in time that I'm willing to give any more specifics than that.
00:55:28.880 | Just to say that what you hear when I talk on the show, what you hear from me is I don't
00:55:35.520 | make anything up.
00:55:36.520 | It's all – you can hear and you can hear some of the challenges that I face and things.
00:55:42.520 | So I have sought to make intelligent financial moves all along the way based upon the unique
00:55:48.240 | situations – based upon the unique circumstances that I have, the unique advantages and benefits
00:55:53.960 | that I have.
00:55:54.960 | I have sought to do that all along the way and practice what I preach.
00:55:58.600 | Maybe in the future I'll talk more about them.
00:56:00.040 | But when you're in the middle of stuff, it's not a good time to talk about it.
00:56:03.680 | I'd rather keep my privacy.
00:56:05.880 | That all sounds very skullduggerish.
00:56:08.080 | That's it for today's show.
00:56:10.740 | Thank you all for calling in.
00:56:11.740 | Great number of callers.
00:56:12.740 | I know that I turned away about a half a dozen of you.
00:56:14.440 | Just you got to get on the line early.
00:56:16.840 | So if you'd like to participate in a call like this in the future, please join as a
00:56:21.560 | patron and also consider joining my email list at RadicalPersonalFinance.com.
00:56:26.560 | Don't forget about sending me a voicemail feedback of what you've done and the changes
00:56:32.920 | that you've made in your life based upon Radical Personal Finance over the last few
00:56:37.080 | years.
00:56:39.760 | Go ahead and send that to me at Joshua@RadicalPersonalFinance.com.
00:56:42.880 | What you do, take your phone, navigate to the voice memo function on your phone, go
00:56:47.980 | somewhere quiet and record just a quick about two or three minute discussion of what you've
00:56:58.660 | done differently because of Radical Personal Finance.
00:57:00.820 | Then email that to me, Joshua@RadicalPersonalFinance.com.
00:57:04.180 | Send me that over as an email for episode 500.
00:57:06.380 | I am going to sync all of those things together and publish it as a show just to hear other
00:57:15.380 | listeners.
00:57:16.380 | I'd love to hear that.
00:57:17.380 | Also while you're doing it, please send me a picture of you and your family if you're
00:57:20.100 | willing.
00:57:21.100 | I'd love that.
00:57:22.100 | It's not going to be published.
00:57:23.100 | It's just for me.
00:57:24.100 | I'm making just a little computer slideshow that I can look at and I look at it while
00:57:27.340 | I record my show sometimes.
00:57:28.340 | It helps me to visualize who I'm talking to so I make sure that my tone is appropriate
00:57:33.500 | and that I really can see who I'm speaking to.
00:57:35.740 | I'd love for you to do that.
00:57:36.740 | Thank you to those of you who have sent me that.
00:57:40.220 | Other announcements.
00:57:41.220 | I think that's it for today.
00:57:42.220 | Join the Patreon program, RadicalPersonalFinance.com/patreon and I'll be back with you on Monday.
00:57:58.700 | Bye.
00:58:12.100 | This show is part of the Radical Life Media network of podcasts and resources.
00:58:17.740 | Find out more at RadicalLifeMedia.com.
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