RPF0570-You_Dont_Have_to_Be_Smart_to_Become_Financially_Independent...But_You_Cant_Be_Stupid_pt._4_of_5
00:00:00.000 | Welcome to Radical Personal Financial Show, dedicated to providing you with the knowledge,
00:00:04.120 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:08.080 | building a plan for financial freedom in 10 years or less.
00:00:11.000 | Today we continue our five-part series called "You Don't Have to Be Smart to Become Financially
00:00:15.340 | Independent, But You Can't Be Stupid."
00:00:18.300 | And here today, part four is called "Avoid Catastrophe."
00:00:21.640 | I've been building on my five-part framework for wealth.
00:00:24.920 | In part one, we talked about increasing your income, and I shared with you the very simple
00:00:29.360 | idea that if you're just hardworking and diligent and conscientious, you could probably earn
00:00:34.440 | enough money in the industry you're in to become financially independent.
00:00:39.520 | In part two, with regard to expenses, I talked about controlling the big expenses and just
00:00:44.920 | keeping them under control so that you'll always have more money left at the end of
00:00:50.840 | the month than month at the end of money.
00:00:54.200 | In part three, I talked about investing wisely, simply choosing a simple strategy and following
00:00:59.320 | it and not being stupid.
00:01:01.120 | And today I want to talk about avoiding catastrophe.
00:01:04.600 | Realistically, most of us won't face many catastrophes in our life, and you already
00:01:11.840 | know most of the things that you need to do to avoid those catastrophes.
00:01:17.360 | First, you need to have an emergency fund.
00:01:21.240 | Six months worth of expenses for your household is a perfect number to shoot for.
00:01:26.400 | For most households, that'll be somewhere between $10,000 to $20,000.
00:01:31.780 | If you'll just simply make sure that you have $10,000 to $20,000 always set aside in a bank
00:01:37.600 | account, in cash, in your home safe, or wherever you keep your valuable items, you can weather
00:01:44.500 | the vast majority of emergencies that happen.
00:01:48.480 | Your great aunt Sue got sick.
00:01:50.840 | You need to fly up and see her before she dies.
00:01:53.160 | You've got the money to buy the plane ticket.
00:01:55.560 | Car breaks down, needs a new radiator, you've got the money to pay the mechanic.
00:02:00.760 | Kid gets sick, you're out of work for a few days because your home taking care of your
00:02:04.760 | sick kid, you've got the money to make sure that your bills are paid.
00:02:09.300 | You lose your job, have a hard time finding another one for a couple of months, you've
00:02:14.280 | got the money to pay your mortgage payment.
00:02:17.480 | It's very simple.
00:02:19.640 | Just save some money.
00:02:21.760 | About six months worth of expenses.
00:02:23.980 | Now more is cool, less is okay, but just aim for six months of expenses and you can just
00:02:29.120 | simply pay for the vast majority of emergencies that will happen to you.
00:02:37.680 | The other types of catastrophes that most people will face are very well served by the
00:02:44.420 | insurance industry.
00:02:47.320 | There's a good chance that you might wreck your car, have some medical expenses, and
00:02:51.880 | need to buy a new car.
00:02:54.960 | There's also a very robust, very well run auto insurance business or industry, auto
00:03:02.040 | insurance industry, that is ready to serve you with a beautiful automobile insurance
00:03:07.520 | policy that will make sure that you have the money to buy a new car and to pay your medical
00:03:11.920 | expenses when you get in a car accident.
00:03:15.360 | Just get a good car insurance policy.
00:03:19.600 | There's a decent chance you're going to get sick or hurt, you're going to have some medical
00:03:25.240 | bills and you're not going to be able to work for a certain amount of time.
00:03:29.800 | Good chance of that happening.
00:03:31.960 | There is an incredibly strong health insurance industry that is dying to sell you a health
00:03:38.800 | insurance policy.
00:03:41.340 | Most of the time, you don't even have to go and look for it.
00:03:43.760 | You just have to sign up for it.
00:03:47.080 | There's a very strong disability insurance industry with all kinds of disability insurance
00:03:53.200 | agents that would love to come to your house, sit down at your kitchen table, and design
00:03:58.840 | for you a disability income insurance policy that would make sure that your family has
00:04:04.280 | money to pay your family's bills when you're sick in bed and can't earn anything.
00:04:10.960 | It doesn't cost that much.
00:04:15.480 | There's a small chance you could die and leave behind spouse, children, parents, family members
00:04:23.720 | who are depending on your income for their future.
00:04:28.600 | There is an incredibly strong and robust life insurance industry that is constantly marketing
00:04:36.080 | to you to try to get you to do one thing, to pick up the phone and call them.
00:04:44.600 | In a sense, it doesn't really matter who you call.
00:04:48.240 | You can ask the guy who's got the office down in your local bank.
00:04:52.800 | You can pick up the phone and call the 1-800 life insurance number that's advertised to
00:04:57.400 | you on the evening news.
00:04:59.740 | You can say yes to the life insurance agents who are calling you, who just got into the
00:05:04.120 | business who want to sell you a life insurance policy.
00:05:07.720 | Doesn't matter whether you buy it from the old big companies or from the multi-level
00:05:13.700 | network marketing companies or if you just buy it on the internet.
00:05:20.120 | They're all pretty decent and they all solve the problem of making sure that your family
00:05:24.080 | has money when you die.
00:05:27.520 | There's a pretty decent chance that in the next decade or two of your investment lifetime,
00:05:32.520 | the stock market's going to completely fall apart and it's going to go down by 30 to 50%.
00:05:38.960 | On average, in the average investor's lifespan, there's going to be at least one, probably
00:05:44.320 | two 50% declines in the value of your stocks.
00:05:48.560 | On average, every few years, there's going to be a 15 to 20% decline.
00:05:53.280 | Once a decade, there's going to be a 30, 40% decline.
00:05:57.120 | You can go look up the actual numbers, but the point is to expect them.
00:06:02.240 | Guess what, there is an incredibly robust body of research and academic study that has
00:06:10.360 | been applied to this problem of how you can protect yourself against falling stock prices.
00:06:18.480 | It's called diversification.
00:06:22.680 | There are hundreds and hundreds and hundreds of people who would love to tell you about
00:06:27.040 | that.
00:06:28.520 | But really, just go down to your library, pick up a money magazine type of thing, or
00:06:34.360 | pick up a book, read it and do what it says, and diversify your portfolio.
00:06:40.240 | There's a good chance your house will at some point in time be beat on by a hurricane or
00:06:46.960 | threatened by a wildfire or broken apart in an earthquake or have its roof ripped off
00:06:51.040 | in a tornado.
00:06:53.120 | There's a decent chance your hot water heater is going to leak and flood your basement.
00:06:58.040 | There's a decent chance someone's going to slip and fall on your front step.
00:07:02.280 | But the cool thing is the home insurance industry has figured out how to protect from these
00:07:08.280 | problems.
00:07:09.280 | And if you just talk to somebody who works there and just do what they say, you'll probably
00:07:13.960 | be in pretty good shape.
00:07:19.680 | There's a decent chance that at some point in time, your spouse is going to decide that
00:07:26.080 | they're out of here.
00:07:29.000 | Now that'll wreck your financial life.
00:07:32.760 | But you know what's a pretty cool thing?
00:07:34.240 | At some point in time, they said yes to you.
00:07:38.400 | And you weren't all that great, but they still said yes.
00:07:43.720 | If you just simply care for them, love them, respect them, pay attention to them, and tell
00:07:51.580 | them about those things, and if you work on your marriage, spend a little time together,
00:07:58.320 | there's a decent chance you can avoid that divorce court.
00:08:04.840 | There's a decent chance that your children are going to face some really strong influences
00:08:11.400 | in their life.
00:08:15.360 | And those influences may seek to cause them harm, may seek to work evil in their life
00:08:21.600 | and not good.
00:08:23.600 | But you know what?
00:08:26.920 | Most parents feel about like you do.
00:08:30.300 | Not sure what to do all the time.
00:08:33.560 | But realistically, it's pretty simple.
00:08:38.440 | Discipline your children, teach them self-discipline and character, spend time with them, and be
00:08:45.340 | the parent.
00:08:47.120 | Be involved and be the parent.
00:08:48.980 | Not the friend, be the parent.
00:08:50.760 | And if you'll do that, you could probably turn out pretty decent children who won't
00:08:55.160 | put you through extraordinary grief.
00:08:58.680 | Friend, these things are simple.
00:09:05.060 | You don't have to be all that smart to do anything that I just said.
00:09:09.800 | You just can't be stupid.
00:09:14.260 | You can't be stupid and say, "I'm not going to die."
00:09:18.780 | You can't be stupid and say, "I'm not going to get hurt."
00:09:23.240 | You can't be stupid and say, "She'll always be there."
00:09:28.040 | You can't be stupid and say, "Son, another time."
00:09:34.460 | Just listen to a country song, listen to almost any genre of music, and just commit yourself
00:09:42.060 | to not being stupid.
00:09:45.700 | If you'll do that, you can avoid most of those major catastrophes that affect so many people.
00:09:53.580 | You don't have to be that smart to be financially independent, but you can't ignore the things
00:10:03.000 | that you need to do and expect to avoid catastrophe.
00:10:07.780 | All of these examples that I've given you are ordinary examples of catastrophes that
00:10:14.660 | we face and ways that we provide for them.
00:10:20.960 | The vast majority of catastrophes could be avoided by most of those things that I just
00:10:26.980 | said, and you already know it.
00:10:31.340 | So don't look for the smart answer, don't look for the really incredible hotshot idea.
00:10:38.260 | Just focus on doing the things that you already know to do.
00:10:44.540 | Thank you for listening.
00:10:45.540 | You've honored me with your time and attention, and I'm grateful for that.
00:10:49.740 | And I hope that I've effectively served you today with some ideas and strategies and tactics
00:10:54.560 | and techniques and tools that will help move you towards your goals.
00:10:59.300 | Before you go, three simple requests.
00:11:01.780 | One, if there's an idea that's been helpful to you in today's show, make a plan to take
00:11:07.460 | action on it.
00:11:09.500 | Listening does lead to learning, but learning in and of itself doesn't automatically lead
00:11:14.900 | to a life change.
00:11:17.240 | It's action that leads to a life change.
00:11:21.220 | So take action.
00:11:22.900 | Two, take something that was helpful to you in today's show and share it with somebody
00:11:28.540 | that you care about.
00:11:30.140 | I'm depending on you to be a co-laborer with me in helping me to propagate the message
00:11:37.320 | that I'm seeking to share.
00:11:39.780 | That helps the person that you are engaging with, and it also helps you because teaching
00:11:45.620 | others is one of the most effective ways for you to learn and for you to cement your learning.
00:11:52.420 | Three, if there's an idea that's been specifically helpful to you, and if you're gaining financial
00:11:57.740 | benefit from Radical Personal Finance, I'd be grateful if you'd consider paying me for
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00:12:26.940 | results in your life, I'd be grateful for your financial support at radicalpersonalfinance.com/patron.
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