RPF0474-Human_and_Financial_Capital
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00:00:31.000 | Today's episode of Radical Personal Finance is fueled by HelloFresh, the meal kit delivery
00:00:35.300 | service that makes cooking more fun. Go to HelloFresh.com/RPF30 and save $30 off your
00:00:42.500 | first week of deliveries when you subscribe. Again, HelloFresh.com/RPF30.
00:00:49.000 | Today we tackle income. It's only fitting if I'm trying to teach a course on income
00:00:53.500 | and careers that I go ahead and share with you some key ideas, right?
00:00:58.500 | [Music]
00:01:14.500 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:01:18.000 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:01:22.500 | building a plan for financial freedom in 10 years or less. Guess what? If you're going
00:01:26.500 | to build financial freedom in 10 years or less, you're going to have to make some cash.
00:01:31.500 | The best way to do that is to simply go to work. So today, let me tell you what you're
00:01:37.000 | doing when you go to work.
00:01:38.500 | [Music]
00:01:46.500 | To begin today's episode, I want to thank you to so many of you who have written me
00:01:51.000 | after the previous episode where I talked about what's wrong with Radical Personal
00:01:54.000 | Finance, wrote me nice emails, gave me many suggestions, and said many nice things. I
00:01:58.500 | deeply appreciate hearing from everyone. If you haven't been able to respond to all
00:02:02.000 | of you yet, but thank you very much for making the time in your day to write to me because
00:02:07.500 | I fundamentally find that so valuable and so encouraging.
00:02:11.500 | And I'm excited to talk with you today about just one simple concept as it relates to your
00:02:17.500 | career and your income. One point of clarification given my recent show is I am not stopping
00:02:24.000 | teaching you for free on the podcast. My goal is to give away all my best stuff to you,
00:02:29.500 | I believe, and always leading with service, always leading with giving my best stuff.
00:02:35.000 | And so I have no intention of pulling back and doing anything else. And today, I'm
00:02:39.500 | going to prove that to you by just sharing with you one simple concept that I hope will
00:02:43.000 | be helpful. But I am doing that in the context of promoting some of my other work, some of
00:02:48.500 | my paid courses. And I think those things will serve you to bring a lot of very valuable
00:02:53.500 | concepts together in a very succinct and concise format with lots of additional depth in a
00:02:59.000 | way that's very, very relatable.
00:03:01.000 | So as we begin today's show, I want to mention to you that I have now opened the beta
00:03:05.500 | registration for the beta version of the Radical Personal Finance Guide to Career and
00:03:09.500 | Income Planning. I'll mention more details of that at the end of the show rather than
00:03:14.000 | using the valuable time here at the beginning to talk about that. But if you have any interest
00:03:17.500 | in taking my course during the special beta version, basically a 75% discount, join me
00:03:22.500 | for the beta version, go to radicalpersonalfinance.com/career and you will find those details.
00:03:28.000 | Again, radicalpersonalfinance.com/career. That will forward you through to the landing
00:03:32.000 | page. At present, I'm accepting 100 students in this course for the beta version. Don't
00:03:37.000 | worry if you get frozen out. The full thing will be released in the future. But if you'd
00:03:40.500 | like to get in on the beta version to help me develop the course and get your input,
00:03:44.000 | you can go to radicalpersonalfinance.com/career. I did a soft launch yesterday afternoon in
00:03:50.000 | the Patreon website and through the email list and those things. And 35 seats are filled
00:03:56.000 | now. So I've got room for 65 more of you who would like to come and join us,
00:04:00.000 | radicalpersonalfinance.com/career.
00:04:01.500 | But to kick it off, let's focus on a fundamental concept of wealth building. And this is the
00:04:08.500 | concept that you must anchor in your mind in order to grow over time. How do you become
00:04:18.000 | wealthy? How do you become wealthy? Well, here's the basic process. If we assume,
00:04:28.500 | as we should, that you are born with no money, no silver spoon in your mouth, no trust fund
00:04:36.500 | with your name as the beneficiary, you have nothing, no financial capital whatsoever.
00:04:43.500 | And you look at your situation, you say, "What do I have to offer?" The answer is,
00:04:49.500 | "I have my body and the output of my body. I have the things that I can do physically
00:04:58.500 | with my body and with my mind." To apply a fancy sounding economics term to that,
00:05:05.000 | we call that human capital. I have my ability to do work. I have human capital. And everybody
00:05:14.500 | has some measure of human capital. If you are human, you have the ability to create
00:05:18.500 | something that's valuable. And that can look in – I mean, there's no limit to the
00:05:23.500 | expressions that that can take. But fundamentally, what you have is you have human
00:05:27.500 | capital. You have the ability to do work. And the first thing that you have to do is
00:05:34.500 | take your human capital, your human ability, and find somebody who has work for you to
00:05:40.500 | do. And you have to go and do that work for them. So let's assume that you have a strong
00:05:48.000 | body and strong enough muscles to move a shovel. Throughout history, many millions and
00:05:53.000 | millions of men primarily have been able to move a shovel and move dirt from one place
00:05:58.000 | to another. I just finished reading this R.G. Letourneau book. He was basically the
00:06:02.500 | inventor of the bulldozer among other things and just dramatically transformed the face
00:06:09.500 | of earth-moving equipment. But he started in a day when to have a construction project,
00:06:13.500 | you needed thousands and thousands of men with shovels and then hundreds and hundreds
00:06:18.000 | of mules to move the dirt at one point. And he transformed that industry by building
00:06:23.000 | bulldozers. But let's go back to the fact that you have a shovel in your hands and
00:06:27.000 | there's a pile of dirt. Well, if somebody wants a pile of dirt moved from one side of
00:06:31.500 | the field to another, they're willing to put a shovel in your hand and pay you a certain
00:06:35.500 | amount for your work. And you do that work. At the end of the day or the end of the week,
00:06:40.500 | you get paid money. Now, the money can take various forms. It can take the form of a
00:06:46.000 | currency such as a paper script like a US dollar or Canadian dollar, an Australian dollar
00:06:51.000 | or Chinese yen or whatever the local currency happens to be in your area. But it could
00:06:57.500 | take the form of other things. You could get paid with a gold coin. You could get handed
00:07:02.500 | a prepaid credit card with a certain amount of money on it, a little card you can swipe
00:07:07.500 | in the store. You could get handed a bag of flour, a bag of corn and a bag of beans, a
00:07:14.500 | bag of sugar, hopefully, too. That money can take various forms. But the idea is that you
00:07:18.500 | need to be given something that you value and that's called financial capital. Now,
00:07:24.500 | obviously, in today's world, it's basically going to be money, currency. Now you have
00:07:31.500 | financial capital. And the question is, what do I do now with my financial capital?
00:07:37.500 | The first thing you're probably going to need to do with your financial capital is
00:07:40.500 | consume it to keep your human capital going. Throughout much of the world, the primary
00:07:48.500 | use of financial capital is to feed your body. And if you don't feed your body, then
00:07:55.500 | you lose your strength and you lose your ability to work. So that's always the first
00:08:01.500 | thing that's covered. You have to reinvest in yourself. You took your human capital,
00:08:06.500 | you did work for wages, and you take those wages and use those wages to feed your body
00:08:11.500 | so that you can go to work tomorrow. Now, once your stomach is full and you can go to
00:08:17.500 | work tomorrow, then you move forward through some of the simpler needs of life. All things
00:08:22.500 | considered, I'd rather live underneath the roof to keep the rain off than sleep out in
00:08:26.500 | the field. And so I would usually, if I didn't have a roof to sleep under, consider
00:08:31.500 | that to be a next best use of the money. I got a full tummy. I'd rather sleep in a
00:08:36.500 | field with a full tummy than under a roof with an empty tummy. So we go ahead and use
00:08:41.500 | some of that financial capital to buy a roof over our head. And this protects us.
00:08:48.500 | This protects our body. Now we sleep better. We're not awakened in the middle of the
00:08:52.500 | night by the rain beating down on our face or by the cold. So now we can work more
00:08:57.500 | effectively. And this process repeats itself. We clothe and feed and house ourselves.
00:09:03.500 | We clothe and feed and house others. But at some point, we work to create surplus.
00:09:11.500 | And as soon as we can create the first little bit of surplus, the first small amount
00:09:17.500 | of money that's not used to go to clothe and feed and house ourselves, we open up the
00:09:23.500 | opportunity of wealth building. Without financial surplus, we can never build great
00:09:32.500 | financial wealth. With financial surplus, we can start to move towards building
00:09:41.500 | financial wealth. Because once we have financial capital, then we have the ability
00:09:49.500 | to take that financial capital and invest it. Now, there are many, many ways that we
00:09:57.500 | can invest our financial capital. One of the simplest things that we can do is use it
00:10:05.500 | to hire people to do things for us that will help us to use our human capital in ways
00:10:13.500 | that are more efficient and productive. If we were all living in a very simple society
00:10:20.500 | as subsistence hunter-gatherers or subsistence farmers, we would be doing a lot of
00:10:26.500 | things for ourselves. We would be clothing ourselves by going and perhaps harvesting
00:10:32.500 | the material from the wilderness or raising the material and harvesting it from our
00:10:36.500 | animals. We would be housing ourselves by going and pulling the logs or cutting up the
00:10:41.500 | sod to build a sod house for ourselves or carving a home out of a cave in the rock or
00:10:46.500 | whatever the version is. But what we would find is that there are certain types of
00:10:52.500 | those jobs that are more suitable for us. For example, I might have large muscles and
00:10:56.500 | you might have small muscles. So I might naturally be better suited for picking up
00:11:01.500 | big rocks and stacking them up to build you a house. And you might find that with your
00:11:06.500 | nimble and delicate fingers that you're more well-suited to weave clothing for me and
00:11:10.500 | sew it together so that I can cover myself and clothe myself. And so as soon as we start
00:11:16.500 | to specialize, then we develop a specialization economy. And all of the great wealth of the
00:11:25.500 | world has been driven by having a specialized economy where we can do things that we're
00:11:30.500 | well-suited to. I deeply admire many of the ethics of, say, the back to the land movement
00:11:38.500 | or the modern homesteading movements. And I deeply admire the idea of having a deep
00:11:43.500 | and diverse skill set that can be applied to many different things. But I do not want
00:11:49.500 | to go and live in an economy that doesn't have the specialization of labor. If the economy
00:11:57.500 | that depends on each of us doing the things that we're best at or that we most want
00:12:01.500 | to do, if that were to collapse, we would all be sent immediately back to poverty and
00:12:09.500 | none of us want to go there. So in my little example, if I use my human capital and I find
00:12:15.500 | some work that I can do and then I receive wages for that capital in some way and then
00:12:19.500 | now I have some surplus, now the first step usually is for me to buy somebody else's
00:12:25.500 | goods that they've created that are going to help free me up. I may not want to spend
00:12:33.500 | all my days out chopping logs in the wilderness. Rather, I may want to buy those logs pre-chopped
00:12:39.500 | from somebody who enjoys doing that or who has better equipment to do it faster, who
00:12:43.500 | has stronger muscles to be able to split the logs more easily than I have. This is how
00:12:49.500 | the world works. And the idea is if I can buy logs from that person and use those logs
00:12:58.500 | to fuel my fireplace, now I can take that time that I was spending chopping wood and
00:13:05.500 | I can use that time in a purpose that's better suited to me. So one of the first things
00:13:13.500 | that you do is use the financial capital to make your life a little easier and a little
00:13:17.500 | bit better. And of course in our modern world, pulling back from this rather silly example,
00:13:26.500 | none of us live in this type of world, in our modern world this is what we do. We're
00:13:32.500 | just coming into it thousands of years into the advanced economy and we just assume these
00:13:38.500 | things as a matter of course. But it's fundamental, at its core we're still doing
00:13:43.500 | the same things that people have done in the past. We're using our human capital, we're
00:13:47.500 | doing work with that work, we're creating surplus, we're using that surplus to take
00:13:51.500 | care of ourselves and then to free us up. Now at some point in time we will have reached
00:14:01.500 | the place at which many of our specialized desires are satisfied and we still have surplus.
00:14:07.500 | And so the question is what do we do with that surplus now? Well the answer is we can
00:14:12.500 | use it in monetary financial investment or we can use it in business. And we'll go
00:14:20.500 | there first. But before that let me share with you a little bit about HelloFresh.
00:14:25.500 | In some ways HelloFresh is kind of a perfect example of a specialized economy, of a
00:14:30.500 | specialization of labor. Certainly if we can – we all have the ability to cook for
00:14:35.500 | ourselves, we have the ability to garden for ourselves, perhaps to go and gather food
00:14:40.500 | for ourselves. We certainly – most of us have the ability to shop for ourselves and
00:14:44.500 | to bring those groceries home and then to put them together in ways that feed our
00:14:49.500 | appetites in a way that's pleasing to us. And that's obviously what many of us do.
00:14:54.500 | We can use very specialized labor where we go out and we go into a restaurant and we
00:14:58.500 | hire somebody to cook for us. We hire a servant to cook our food for us in the form
00:15:02.500 | of a chef and perhaps a server who brings the food out from the kitchen to us. And so
00:15:07.500 | of course that's specialization of labor. But HelloFresh has been invented and brought
00:15:13.500 | into the marketplace in the last few years to provide a different form.
00:15:17.500 | The way HelloFresh works is the meal kit delivery service where they send you –
00:15:21.500 | whenever you make the order, whether it's on an auto order or whether you do it from
00:15:24.500 | time to time, they send you a box, an insulated box that shows up in the mail. And in
00:15:28.500 | that box it's full of food. And that food is not quite yet cooked nor assembled but
00:15:35.500 | it's all of the basic ingredients that have been pulled together by their team of
00:15:39.500 | chefs and nutritionists and things like that to make these really pleasing meals.
00:15:43.500 | They've just switched over to the summer menu now. So they have a summer menu, new
00:15:48.500 | and different menu items each week and they send you these ingredients in the mail.
00:15:52.500 | Then you get it at home. You open it up. You put the meat in the refrigerator and
00:15:56.500 | kind of strew things about. And then when it's time to make dinner, you pull out the
00:16:00.500 | recipe card. You grab the box for that dinner. It's all in one nice little box that
00:16:04.500 | you pull out of the refrigerator. And then you open it up and everything is perfectly
00:16:08.500 | measured in these quantities. There's a half an onion if that's what you need.
00:16:12.500 | There's a little bottle of Tabasco sauce. There's an eight-ounce cut of chicken
00:16:16.500 | breast if that's what's needed for the recipe. And you go and you make it. It's
00:16:20.500 | really fun because all of the ingredients are pre-measured. You're just going
00:16:23.500 | through the basic steps of assembling the ingredients and then cooking them and
00:16:26.500 | eating them.
00:16:28.500 | So if you have any interest in working on something like that, it takes about 30
00:16:31.500 | minutes for basically anybody to make a cooked from scratch meal. The meals come
00:16:36.500 | out to less than $10 a meal. They're really good. You can choose different
00:16:40.500 | versions. If you want a vegetarian box, you can do that. If you're a bigger
00:16:43.500 | family, you can choose a bigger box. There are all kinds of options. So check it
00:16:47.500 | out. Go to HelloFresh.com/RPF30. Again, HelloFresh.com/RPF30. Make sure to use
00:16:54.500 | that coupon code RPF30 so they know that their advertising campaign here on my
00:16:58.500 | channel is working, please. And you'll save $30 off of your initial subscription
00:17:04.500 | membership. So check it out. HelloFresh.com/RPF30. Get $30 off your first week
00:17:09.500 | of deliveries.
00:17:11.500 | For many of you, that might be a worthy thing to do with a little bit of your
00:17:15.500 | financial surplus. It frees up a little bit of time and meal planning, helps you
00:17:20.500 | eat at home, have a delicious meal at a very reasonable and competitive cost, and
00:17:25.500 | have an enjoyable process. My wife and I enjoy doing them together. It makes it
00:17:29.500 | simple and easy to cook together. So perhaps that's a date night idea for you.
00:17:34.500 | So what do you do with the surplus? Once you've taken that surplus, you've used
00:17:37.500 | it to enhance yourself, your own abilities perhaps, buy some better tools for you.
00:17:41.500 | These things are all focusing on increasing your human capital, allows you to do
00:17:45.500 | more effective work, builds off financial capital. You've clothed yourself. You've
00:17:49.500 | met your needs, but you still have surplus.
00:17:51.500 | Well, at that point in time, you move to either building a business or to becoming
00:17:57.500 | a money lender. And the difference here is how involved are you? Let's start with
00:18:01.500 | money lending. If you have surplus money, you can usually find somebody else who
00:18:06.500 | wants to use that money. Perhaps they want to use it as a merchant. They know that
00:18:12.500 | if they're over here in City A, they can go to City B and they can get a good deal
00:18:17.500 | on axes. And if they can go to City B and buy these axes, bring them back to City A,
00:18:23.500 | then they can sell these axes for a higher price and they'll capture the profit.
00:18:28.500 | The difference between the lower price they paid in City B and the higher price
00:18:31.500 | they sell for in City A. But the problem is this merchant needs money. Well, if you
00:18:37.500 | have money, you can lend them that money. And in exchange for the loan of that
00:18:41.500 | money, they can pay you rent. We call the rent of money interest. When you lend out
00:18:48.500 | your money to somebody, you rent them your money and they pay you a rental fee.
00:18:52.500 | We call that interest. If you want the use of somebody else's money, they rent
00:18:57.500 | their money to you for a certain period of time under certain conditions. And your
00:19:02.500 | rental payment that you pay is called interest. That's how money works. So if you
00:19:09.500 | lend out your money and you go into the money rental business, you have the ability
00:19:13.500 | to get a return on your money just simply because somebody else is using your money.
00:19:18.500 | And your only involvement in that is the fact that you said, "Yes, I will rent my
00:19:25.500 | money to this other person." You don't have to go with the merchant to the far-off
00:19:30.500 | city. You don't have to make sure that – should they get mules to bring the axes
00:19:35.500 | back or should they get horses or should they get camels? Those are their decisions.
00:19:39.500 | You're just in the money rental business. So in some ways, it's a little bit simpler.
00:19:45.500 | But you do, of course, always run the risk in the money rental business that the
00:19:50.500 | person to whom you rented your money may have some problems paying you your rental
00:19:56.500 | payments. So you do need to take a little bit of interest in their activities. You
00:20:01.500 | need to pay attention to what they're doing. Because if they said, "Well, I'm
00:20:06.500 | going to take horses across the desert," and you know that horses aren't going to
00:20:11.500 | make it through the desert, they need camels, you run the risk of them using your
00:20:17.500 | money to buy horses and those horses – the carcasses of those horses littering the
00:20:23.500 | desert weighed down by those axes. Got to be careful not to press my metaphor too
00:20:29.500 | far, but I hope it's helpful to you. The benefits of this approach, just simply
00:20:36.500 | renting your money out, is that you don't have a lot of involvement in the daily
00:20:39.500 | decisions. The disadvantage of this approach is you don't have a lot of ability to
00:20:45.500 | affect what happens with your money. The only choice you have is, "Do I want to rent
00:20:52.500 | or lend my money to this person or not?" But that's a financial investment. So the
00:20:58.500 | modern equivalent, of course, is we do that in the context of buying a company's
00:21:02.500 | stock. What are we doing? Well, we have a little bit of surplus money and we take
00:21:05.500 | that surplus money and we say, "Well, here's a merchant who's engaged in
00:21:09.500 | business and I want to give that merchant my money so that they can run the
00:21:13.500 | business. And what I'm expecting from them is profit." We do that in the form of a
00:21:19.500 | stock. Or we do that in the form of a bond. Let's say, for example, you buy a
00:21:23.500 | government bond, a government savings bond. Well, you're taking your money and
00:21:26.500 | you're renting it to the governmental entity under certain terms. And what you're
00:21:33.500 | hoping is in the future, that governmental entity will tax their people and return
00:21:38.500 | to you your money plus the additional rental payment of the interest. It's a bond.
00:21:46.500 | Or you could take that money down to a local bank. Now in the bank, you say, "Here,
00:21:52.500 | banker, I'm going to rent you my money. I want you to safeguard it for me and pay
00:21:57.500 | me a small rental payment in the form of an interest payment." Or if that banker
00:22:03.500 | doesn't have a good use of the money, then you may have to take your money to that
00:22:06.500 | banker and say, "Here, banker, I don't trust that I can keep this money safe in my
00:22:11.500 | house. So I want you to guard it here in your central vault and you may even pay an
00:22:16.500 | interest payment to that banker." Traditionally, banking services, you needed
00:22:19.500 | to pay for them because the service that the banker was providing was the safeguarding,
00:22:25.500 | the safekeeping of the money, the fact that it was stored in a strong box and not
00:22:29.500 | stored under your mattress where a thief could access it more easily.
00:22:33.500 | And that can happen in the future. There are negative interest – investors all around
00:22:38.500 | the world in years past have bought bonds, government bonds that had a negative
00:22:41.500 | interest rate simply because there was the perceived safety of the money. They wanted
00:22:46.500 | the money to be kept safe. That can happen here in a time when interest is very low
00:22:51.500 | and people take their money to a bank not because they're getting an interest payment
00:22:55.500 | but because they simply want their money safeguarded. All of these transactions are
00:23:01.500 | ways that you can take your surplus financial capital and invest it in a financial
00:23:08.500 | investment. Now, what is another option? Well, I'm just going to term this very
00:23:15.500 | simply "business." You may have some surplus capital and in your business as a
00:23:23.500 | pottery maker, you've sold pots and you're having this capital but as people come
00:23:28.500 | into your shop, you keep your ears open for ideas and somebody comes in and says,
00:23:32.500 | "Did you know that if we go over to the next city over, we can buy axes at $10 each
00:23:36.500 | and do you know they're selling for $15 each here in our hometown? I just wish we
00:23:40.500 | could go over there." Well, you could go into business with that person or you
00:23:44.500 | could take that idea and you could do it yourself and you could take your money and
00:23:47.500 | you could go and buy horses or camels and go and try to get those axes. That would
00:23:52.500 | be where you're going into the business yourself. You're involved in it to some
00:23:57.500 | degree. And the benefit, of course, is you don't only just get a rental payment on
00:24:02.500 | your money. You get the full benefit of the potential profit of the transaction.
00:24:07.500 | One of the challenges, of course, with this approach is now you're more involved in
00:24:11.500 | the transaction. You may be able to hire some workers who are going to go to the
00:24:15.500 | far-off city and purchase the axes to bring back. That's possible. But you might
00:24:19.500 | also need to go with them or you might need to hire and train a foreman and train
00:24:23.500 | them in the way that you want them to travel. How should they pull their camel
00:24:27.500 | train together at night to protect from marauders who would come in and try to
00:24:30.500 | steal the axes? Well, you have a system for that. So you learn that system, you
00:24:34.500 | perfect it, you train somebody, and now all of a sudden as you start to have capital
00:24:38.500 | and surplus capital, you start to send out other teams that have been trained by you
00:24:42.500 | and you develop this business system. I think by now you should grasp the idea.
00:24:49.500 | And you should grasp these basic fundamental terms that I'm using.
00:24:56.500 | This is essentially all we do. We have human capital, physical abilities, personal
00:25:04.500 | skills, unique knowledge and expertise and insight, all these things that relate to
00:25:09.500 | us. And we look for ways that we can apply those things in the marketplace. So we
00:25:16.500 | take our human capital and we look at work, work opportunities where we can work for
00:25:21.500 | somebody else. Usually that's the investment of our time, just simply that pure raw
00:25:26.500 | output in terms of wages. As we start to develop financial capital, then we can
00:25:33.500 | invest that either into a financial investment, lending the money out, renting it
00:25:37.500 | out, or investing in somebody else's venture. Or we can start to use it and develop
00:25:43.500 | our own businesses. Those are your basic options. Do I want to be involved in
00:25:49.500 | personal labor work? Do I want to be involved in a business where I'm working with
00:25:54.500 | other people and I'm putting some of my personal labor in? Or I just want to be
00:25:58.500 | purely financial transactions, be a money lender? That's it. It may be fun to think
00:26:07.500 | about it in a metaphor and it's useful to think about it in an ancient metaphor, the
00:26:12.500 | idea of just going from one town to the next, but that's all we do. You might find
00:26:17.500 | a product in China that you can buy on Alibaba and bring it home and sell it on
00:26:22.500 | Amazon in the United States. I've interviewed people here in radical personal
00:26:25.500 | finance who do that. That's just a business that you're developing, finding a
00:26:29.500 | wrinkle in the market that you think you can exploit, an inefficient market. Or you
00:26:34.500 | might go and develop your work skills and instead of digging ditches, you become a
00:26:38.500 | highly sought after physician. Well, now you can charge higher prices because of the
00:26:44.500 | specialized skill. You've invested your financial capital back into your human
00:26:47.500 | capital. You've developed this unique expertise that doesn't really lend itself
00:26:51.500 | and apply itself well to multiplication in a business, but you have this unique
00:26:55.500 | insight as a physician. Now you can command a higher wage. Or you just take your money
00:27:03.500 | and you lend it with a local money lender. Let's say that I'm in your town and I'm a
00:27:07.500 | money lender and you say, "Joshua's very good at understanding. He knows the
00:27:12.500 | merchant routes. He knows who should lend money to. And I think I trust him and his
00:27:18.500 | unique skill and expertise more than I trust my own." And so you might bring your
00:27:22.500 | money to me as a money lender and I'm the person who's interacting with the merchants
00:27:27.500 | who are going to take their camel trains and go and pick up axes and spices and fancy
00:27:32.500 | fabrics, et cetera, and bring them across the desert. Now you're depending on me for
00:27:37.500 | my investment expertise. We'll bring that forward a few centuries and what you just
00:27:41.500 | did was hired a mutual fund manager or an investment banker. Just a modern incarnation
00:27:52.500 | of these ancient roles. But it all boils down to personal work, personal labor,
00:27:58.500 | business that you're involved in, or pure, raw financial transactions where you rent
00:28:05.500 | out your money without being involved in the underlying business. Now in what we
00:28:10.500 | I'm giving you is one of the basic fundamental lessons of the Radical Personal
00:28:15.500 | Finance Guide to Career and Income Planning that I've developed for you. And in the
00:28:18.500 | course, this is all illustrated visually with nice arrows showing the flow of money.
00:28:24.500 | But hopefully you can capture it in your head with just the mental concept. All of the
00:28:28.500 | basic decisions of personal finance that we face is a question of how do we develop
00:28:33.500 | the flow and at what stage are we in our wealth building journey? So early in the
00:28:40.500 | wealth building journey, as you develop yourself, you're born with just human
00:28:45.500 | capital, no financial capital. The most reasonable and best returning investment is
00:28:50.500 | going to be to make sure your basic living expenses are covered and then to invest in
00:28:56.500 | your skill, your earning ability, and enhance that human capital because there's an
00:29:00.500 | immediate return. If you spend your evenings studying trade routes and trying to
00:29:06.500 | figure out – maybe you go down to the local tavern near the watering hole where the
00:29:13.500 | camel trains are coming through and you spend your evenings there talking to traders.
00:29:17.500 | Now you start to find out what things are selling for in a faraway land. You're
00:29:21.500 | enhancing your knowledge. Or perhaps you're working underneath somebody. You're
00:29:25.500 | working underneath a potter and you're going to spend your evenings on your own
00:29:28.500 | time and increasing your skills by making more beautiful and interesting pots that
00:29:35.500 | may command a higher wage in the marketplace for those who have surplus capital
00:29:39.500 | where they want to enhance their lifestyle around. They don't want just a basic pot
00:29:43.500 | that does the job of cooking their soup. They want a beautiful pot that looks really
00:29:47.500 | nice while they're doing it. So you spend your evenings developing that skill to make
00:29:52.500 | thinner, more graceful and elegant pots and thus you're increasing your productivity.
00:29:59.500 | Of course, you always have this choice to make. If you have wages that you've earned
00:30:03.500 | from your money, how much of those wages should be spent on a new cloak to wear to
00:30:07.500 | keep you warm at night? How much of those wages should be spent on your lodging
00:30:11.500 | versus how much of those wages should be set aside so that you can go and take your
00:30:16.500 | money down to the merchant and say, "Here, load up a camel for me so that you can
00:30:23.500 | bring back those faraway goods so that my money is going to work for me." And those
00:30:30.500 | are the decisions that we face in our modern era. There's no difference between
00:30:35.500 | saying, "I'm going to live in a cheap apartment so that I can free up more money,
00:30:39.500 | so that I can use it to start a business, buy my own camel train, or perhaps buy my
00:30:45.500 | own car so I can start a livery service instead of paying somebody else for that
00:30:50.500 | transportation, or lending the money out with the money lender, putting it in the
00:30:54.500 | bank, taking it, investing it into a company that you bought stock in at the stock
00:30:58.500 | market." It's all this basic ancient flow that has not changed through millennia in
00:31:04.500 | terms of its fundamental concept. The fundamental concepts never change. The tools
00:31:12.500 | do change. If you understand these concepts and you can look at your own life and see
00:31:20.500 | what's actually happening, it'll allow you to do a better job of making decisions,
00:31:25.500 | making the decisions that are right for you at a certain point in time. It'll allow
00:31:31.500 | you to have more confidence with your discernment. You may or may not make
00:31:36.500 | different decisions than you're making right now. How could I tell you, for example,
00:31:42.500 | that you definitely should take your surplus capital and buy a new cloak to keep you
00:31:51.500 | warm at night, or buy a new pair of sandals that have a pretty red thread running
00:31:56.500 | through them, or to tell you that you should wear your ratty old cloak that causes you
00:32:02.500 | to be cold at night and wear your ratty old sandals with a hole in the bottom, but
00:32:06.500 | you've built up calluses on the bottom of your feet so that you can take the gold
00:32:10.500 | coins that you've built up and take them down to the merchant, send them off with the
00:32:15.500 | merchant, wait a year, and see if he comes back with a profit. I can't know that for
00:32:19.500 | you. But what I can do is I can teach you the process and teach you the cost so that
00:32:25.500 | you can feel comfortable at different stages of your life, foregoing the new cloak
00:32:30.500 | and the new sandals so that you can invest the money, and then perhaps later going
00:32:37.500 | ahead and buying the new cloak and the new sandals because you don't need to invest
00:32:41.500 | the money in that way. Ultimately, all of your ability to build wealth is going to be
00:32:46.500 | driven off of your productivity with your income because it's your human capital that
00:32:51.500 | allows you to go to work to earn wages or to build a business, the same thing, but the
00:32:57.500 | simplest concept usually work to earn wages. And with those wages, then you can meet
00:33:03.500 | your own needs and produce surplus that then has a use. So if you'd like more on
00:33:08.500 | this subject, I invite you to come by and join the beta version of the inaugural
00:33:13.500 | Radical Personal Finance Guide to Career and Income Planning to lay out exactly what
00:33:18.500 | I'm doing. This course, I am – my head works in terms of a master course. In times
00:33:25.500 | future, I'll offer you short little classes and courses on different things, but my
00:33:30.500 | brain goes towards the comprehensive. That should be obvious to you by now. So I try
00:33:34.500 | to think through every little permutation and my goal is to put every little piece of
00:33:39.500 | advice that I can think of that would be useful to you into this course for you.
00:33:44.500 | And as part of the beta version, what you can do if you join my beta group is you can
00:33:49.500 | help me perfect the advice by asking the questions that you have. Just a little bit
00:33:56.500 | here, as I publish this show, I'm going to be sending out the first wave of surveys
00:34:00.500 | to the 35 listeners who have gone ahead and signed up for the beta version. Those
00:34:04.500 | surveys will be talking about all the different aspects of your life and finding out
00:34:08.500 | what those questions are and I'll be getting your feedback and you'll be helping me
00:34:11.500 | fine-tune these concepts to make sure they're the clearest of possible. So when we go
00:34:14.500 | public with the official version, then it'll be a really, really valuable resource.
00:34:19.500 | So if you're interested in joining the beta version, I got 65 seats left and you can
00:34:23.500 | do that at radicalpersonalfinance.com/career. I will keep the registration open as I
00:34:28.500 | release this show. It's Tuesday, August 8th. I will keep the registration open until
00:34:33.500 | either Sunday, August 20th or until the 100 initial seats are sold out and gone. I
00:34:42.500 | expect that to happen before Sunday, August 20th, but if not, we'll just start on
00:34:46.500 | Sunday, August 20th with however many of you decide to join. And then the classes
00:34:50.500 | will start on the week of the 21st there. So I'm looking forward to interacting
00:34:54.500 | with you. Again, radicalpersonalfinance.com/career or just go by the website, link
00:34:59.500 | on your phone right in the show notes for today's episode. Or again, you can come
00:35:03.500 | by the site and I think my developer put a little pop-up on the page. I haven't
00:35:06.500 | checked that yet, but there should be a pop-up or you'll find it in the sidebar.
00:35:09.500 | Just look for Radical Personal Finance Guide to Career and Income.
00:35:12.500 | Today, however, I hope that was an appropriate amount of selling for you.
00:35:17.500 | Today, the assignment is this. Consider the money flows in your own life.
00:35:22.500 | Consider what you're doing with your human capital, what the actual work is, the
00:35:26.500 | wages that you're earning, and then how much is going to provide to protect and to
00:35:31.500 | provide for your physical human body. How much is going to enhance your productivity
00:35:36.500 | with your physical body? And of course, for most of us, that means primarily our
00:35:40.500 | minds. I don't really work with my body in the sense that my work is with my mind
00:35:44.500 | and with my mouth. But think about how you're investing in that, how you're
00:35:49.500 | caring for that. And then think about what you're doing with that surplus. Are
00:35:52.500 | you renting out your money? Is that the right move for you to be a money renter
00:35:56.500 | and to collect those rental payments called interest? Or are you the kind of
00:36:01.500 | person who is well suited to doing the money in business? And instead of
00:36:06.500 | collecting rent payments in the form of interest, you collect profits from the
00:36:12.500 | sales of your business. That's what you're doing. That's what I'm doing. That's
00:36:15.500 | what we're all doing. So I hope that's useful to you. Any questions, feel free to
00:36:20.500 | reach out to me, Joshua@radicalpersonalfinance.com. I'm seeking to be very
00:36:23.500 | responsive on email at the moment. If you have any questions about the course,
00:36:25.500 | feel free to contact me and I'll be back with you soon. Thank you for listening.
00:36:28.500 | [Music]
00:36:42.500 | This show is part of the Radical Life Media network of podcasts and resources.
00:36:47.500 | Find out more at radicallifemedia.com.
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