RPF0610-Friday

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00:00:30.240 | Today on Radical Personal Finance, it's live Q&A.

00:00:33.240 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,

00:00:52.440 | skills, insight, and encouragement you need to live a rich and meaningful life now,

00:00:56.680 | while building a plan for financial freedom in 10 years or less.

00:01:00.040 | My name is Joshua, I am your host, and today we do live Q&A.

00:01:03.600 | And in general, these shows are supposed to be scheduled for Friday, but...

00:01:06.960 | Wait about 10 seconds for the music to catch up,

00:01:09.480 | and I'll have a special announcement of how you can join me next week.

00:01:12.520 | I have restricted these shows to patrons of the show.

00:01:24.600 | That helps me to meter the calls that come in just a little bit.

00:01:27.640 | So I open these Friday Q&A shows up to everybody who supports the show

00:01:30.920 | at radicalpersonalfinance.com/patron.

00:01:33.320 | But obviously, as I have been traveling,

00:01:35.000 | one of the challenges has been figuring out how to record these shows,

00:01:37.160 | and that is entirely my fault.

00:01:38.720 | I have done my best, but unfortunately, I haven't been able to keep to a strict weekly show.

00:01:42.880 | Sorry, a strict weekly schedule.

00:01:44.720 | And so this coming week, which will be the week of...

00:01:48.640 | December 17th?

00:01:49.880 | Monday, Tuesday, Wednesday, Thursday, and Friday, each day this coming week,

00:01:54.160 | I will be releasing a live Q&A show.

00:01:57.520 | So I'm going to give you instructions on how you can join that show.

00:02:00.600 | Let me rephrase that.

00:02:01.480 | I'm going to be recording a live Q&A show.

00:02:03.440 | I will not necessarily release them five in a row.

00:02:05.600 | I have a number of other shows that I want to get to next week,

00:02:08.040 | but I will be recording them live each day,

00:02:10.520 | and then we'll be releasing them over the next couple of weeks.

00:02:12.880 | So if you would like to join for a Friday Q&A show,

00:02:16.760 | and if you are not a patron of the show,

00:02:19.480 | this will be your opportunity to join me for a total of potentially five shows.

00:02:23.800 | So here are the instructions.

00:02:25.160 | Each day, Monday, Tuesday, Wednesday, Thursday, and Friday,

00:02:27.920 | starting on the 17th, December 17th,

00:02:31.960 | you can join me at noon Eastern time at 561-440-7362.

00:02:38.120 | That's what you need.

00:02:38.680 | Call in at 12 noon Eastern time at 561-440-7362.

00:02:44.600 | Each day from December 17th through whatever that Friday is,

00:02:47.960 | I would say, I guess the December 22nd.

00:02:49.720 | 561-440-7362.

00:02:52.400 | That will be your best chance if you'd like to join me for a Q&A show.

00:02:55.320 | And then in the future, then this will, of course,

00:02:57.280 | revert back to patrons only as all of the callers on today's show are.

00:03:01.240 | So I'd love for you to join me for that special series of Q&A shows.

00:03:03.440 | You can call up and talk to me about anything that you would like,

00:03:06.200 | any question, any comment, anything related to current topics on the show.

00:03:10.440 | Feel free to join in and call in for those series of shows,

00:03:13.960 | and your question will be released on the show.

00:03:16.480 | We begin with Anne in Maryland.

00:03:17.680 | Anne, welcome to the show.

00:03:18.480 | How can I serve you today?

00:03:21.400 | Thank you, Joshua.

00:03:22.560 | I really enjoyed your asset protection for the immortals series.

00:03:28.400 | And I also want to say that I bought both of your courses for credit card

00:03:33.640 | and then for career income.

00:03:36.440 | And I really like them.

00:03:37.720 | And so I just want to pass three ideas for the courses.

00:03:41.240 | I think if you had a course on asset protection with a little bit more

00:03:45.200 | detail of maybe with links to different states, maybe with some ideas.

00:03:49.080 | It doesn't need to be extensive, but some people who can click on the links

00:03:52.680 | and go and find the information.

00:03:54.880 | And then maybe also an insurance course.

00:03:57.240 | I personally have a question about that today.

00:04:01.560 | But I am sure there are many people who have no idea about life and disability

00:04:05.920 | insurances and introduction to basics and where to start and dig deeper

00:04:11.960 | would be great.

00:04:12.640 | And on trust, I hear you talk a lot about trust.

00:04:16.160 | I know about their existence, but I wouldn't know where to start with those.

00:04:20.960 | So these are just ideas to add to, I'm sure, your very long list of ideas

00:04:25.440 | for courses for you.

00:04:27.760 | So I have two questions, actually two topics and quite quick questions on each.

00:04:34.200 | So the first topic is on asset protection.

00:04:38.000 | And I have three questions.

00:04:39.440 | And I can repeat them if you forget which one.

00:04:42.840 | So it so happens that I and my husband move quite frequently

00:04:49.600 | compared to the majority of people.

00:04:51.520 | So I keep an eye on the state and different states.

00:04:53.920 | Sometimes we have a choice of a state.

00:04:55.560 | Sometimes we don't.

00:04:56.800 | But what I would like to confirm with you first

00:04:58.800 | is whether in general, if you move from one state to another,

00:05:04.400 | you're essentially starting over with the asset protection plan

00:05:08.400 | unless that the new state is very similar to the previous one

00:05:15.640 | in terms of asset protection rules.

00:05:18.080 | Is that your understanding?

00:05:19.880 | Yeah, in a way.

00:05:20.880 | And so that's a difficult question because it would involve

00:05:24.440 | a number of different factors.

00:05:26.040 | And if your estate and your affairs are very significant,

00:05:32.440 | that would be one where you would want to get specific legal counsel.

00:05:36.040 | I'll give you what my understanding is

00:05:37.600 | of kind of the broad picture.

00:05:39.000 | But that's one where you would want to get specific legal counsel

00:05:42.320 | as it relates to your state because there are a couple

00:05:46.120 | of important issues involved.

00:05:48.240 | Just to be clear, I'm not a lawyer.

00:05:50.480 | I'm very interested in law.

00:05:52.120 | But I do not consider myself a lawyer.

00:05:54.120 | I just consider myself a little bit more

00:05:55.800 | capable than most people of reading books by lawyers

00:05:58.640 | and then interpreting them into a little bit more

00:06:01.080 | of a practical situation.

00:06:02.360 | But I get stuff wrong.

00:06:03.280 | And so if I bungle the stuff in today's show,

00:06:06.080 | then go and speak to a lawyer.

00:06:08.680 | So the first thing that you want to be clear on

00:06:10.640 | is what is your domicile?

00:06:12.520 | What is the state where you are domiciled?

00:06:15.200 | And depending on how your affairs are set up

00:06:17.720 | and what your actual moves look like, then you

00:06:23.320 | have to figure out how the law will apply to your situation.

00:06:26.800 | Now, often when this type of planning comes in,

00:06:30.920 | you look at where your assets are located.

00:06:33.640 | So the best example, down here in Florida,

00:06:35.520 | we have a lot of people from the Northeast

00:06:37.880 | who moved down and retired down here.

00:06:39.920 | So from New York, New Jersey, all

00:06:42.080 | of the Northeastern states.

00:06:44.160 | But frequently what people will do

00:06:46.000 | is they will retain some of their property in the Northeast.

00:06:49.440 | And they'll also start to acquire property in Florida.

00:06:53.120 | Now, one of the big benefits of Florida

00:06:54.720 | is, of course, the lack of a state income tax.

00:06:56.800 | And so many people want to change their residence

00:06:59.360 | to Florida, but they don't want to get rid of their estate

00:07:01.880 | in New York.

00:07:02.520 | They want to keep their nice house in Connecticut or New

00:07:06.280 | York.

00:07:06.840 | They want to keep their affairs there,

00:07:08.360 | but they also want to switch their state down to Florida

00:07:10.960 | so they can escape the state income tax.

00:07:13.720 | In addition, when planning for estate taxes--

00:07:16.440 | and this has really minimized a lot in the last few years--

00:07:19.480 | what most people don't recognize is how burdensome estate taxes

00:07:23.560 | used to be.

00:07:24.060 | It used to be that if you had an estate as small as several

00:07:27.680 | hundreds of thousands of dollars at one point,

00:07:30.000 | then anything above-- any value of property

00:07:33.280 | that you owned above those several hundreds of thousands

00:07:35.660 | of dollars was subject to an estate tax rate of perhaps 50%

00:07:39.160 | of the assets.

00:07:40.160 | And so that brought many, many thousands--

00:07:42.560 | hundreds of thousands, perhaps millions of people--

00:07:45.000 | in under the purview of estate tax planning.

00:07:47.400 | And that was a real challenge for people

00:07:49.200 | because they weren't used to thinking about it.

00:07:51.880 | Whereas now, with a $5.5 million estate tax exemption

00:07:55.320 | amount for any individual, $11 million for married couples,

00:07:59.720 | there's a much smaller percentage

00:08:01.120 | of the population that has to think about estate taxes.

00:08:04.000 | So the reason I say that is if you can imagine for a moment

00:08:07.920 | when you had a house in New York state and a house in Florida

00:08:11.960 | and then some additional business

00:08:13.880 | interests, some additional investments,

00:08:16.320 | you would find yourself with a very mixed up situation.

00:08:20.400 | And you would probably find yourself paying estate taxes

00:08:23.160 | in the state of New York and then also in Florida.

00:08:25.720 | And if you can imagine you had $10 million of assets

00:08:28.920 | and you had even a $1 million exemption amount,

00:08:32.120 | the estate taxes on those $9 million

00:08:33.640 | were very significant, even the state level estate taxes.

00:08:38.840 | So one of your biggest issues is how

00:08:40.800 | do you establish your domicile?

00:08:42.220 | How do you move your domicile?

00:08:43.880 | And you may still be taxed on the value of the estate

00:08:46.800 | in New York.

00:08:50.440 | But if you can keep your New York estate subject solely

00:08:54.160 | down to the amount of property that you own in New York

00:08:56.840 | and the rest of your estate can be moved to Florida,

00:08:59.040 | then that's going to be successful.

00:09:00.480 | But now we have to ask the question,

00:09:01.940 | how do you establish domicile in a state?

00:09:04.280 | And here, every state is different

00:09:06.040 | in terms of what they allow and what they don't allow.

00:09:08.360 | So the worst state, from my understanding,

00:09:10.160 | is the state of California.

00:09:11.560 | If you spend almost any time in the state of California,

00:09:14.520 | the state of California wants to get their claws into you,

00:09:16.980 | their taxing claws with income taxes

00:09:19.160 | and then whatever other taxes are applicable to you.

00:09:21.840 | And so you can't just-- if you live in California

00:09:24.120 | and you want to say, I'm going to move to Nevada,

00:09:26.160 | you can't just move and buy a house in Nevada

00:09:28.680 | and think that that fixes everything.

00:09:30.160 | You have to systematically cut off

00:09:33.040 | all or most of your ties from California

00:09:39.480 | and move those ties over to the state of Nevada.

00:09:42.920 | So one of the most valuable things

00:09:45.480 | that you can do in your analysis is look at your assets

00:09:48.640 | and try to think about where those assets are located.

00:09:51.400 | And each state you move to, you'll

00:09:53.120 | need to figure out if you should move assets

00:09:55.520 | or if you shouldn't and what your actual situation is.

00:09:58.360 | Now, it may be possible for you to establish

00:10:00.840 | your domicile in one place and to keep

00:10:03.560 | that domicile in that one place, even if you're not specifically

00:10:07.720 | living there all the time.

00:10:09.200 | If your travel and your movement is more short-term in basis,

00:10:13.560 | perhaps you're just moving for a short-term contract,

00:10:16.960 | six months here, six months there.

00:10:18.720 | In that case, I think you can make a very good case

00:10:20.840 | that you can just simply set up your domicile

00:10:23.200 | in one specific place and then make sure

00:10:25.640 | that you adjust your lifestyle in a way that remains clearly

00:10:30.280 | your domicile.

00:10:31.320 | So for example, if I ever had to do anything

00:10:34.000 | in the state of California, I would work very diligently

00:10:37.280 | to completely stay out of the state

00:10:40.320 | and keep everything possible out of the state.

00:10:43.000 | So I would make sure--

00:10:45.160 | and just to be clear, this is a little bit of a muddled area

00:10:48.680 | because it's not just one factor.

00:10:50.600 | You can't have a Nevada driver's license

00:10:54.160 | and register to vote in Nevada, but then

00:10:56.400 | have California bank accounts, a California house that you own.

00:11:00.120 | All your vehicles are registered in California.

00:11:02.560 | Your banking statements go to California.

00:11:05.480 | You go to doctor's appointments in California.

00:11:07.400 | You go to church in California.

00:11:08.800 | You can't say, OK, well, then I'm not a California resident.

00:11:13.040 | You would clearly lose that case.

00:11:14.400 | You are, in that case, a California resident.

00:11:16.880 | But if you have all of your affairs established

00:11:20.480 | in one particular place, you have a house in Nevada--

00:11:24.800 | and I'm just using that because it's the most--

00:11:26.800 | California is the strongest in terms

00:11:30.320 | of their pursuit of taxation.

00:11:31.920 | And you have the very clear line between California and Nevada

00:11:35.240 | in terms of a very clear difference of legal system.

00:11:38.600 | So if you have a house in Nevada,

00:11:41.220 | if you have a driver's license in Nevada,

00:11:43.240 | if you register to vote in Nevada,

00:11:45.040 | if all your vehicles are registered in Nevada,

00:11:47.600 | if all of your banking records are sent to your billing

00:11:50.880 | addresses in Nevada, if all of your bank accounts

00:11:53.720 | are with Nevada banks, if you go to visit doctors and dentists

00:11:58.040 | and to professional business organizations in Nevada,

00:12:01.400 | if you volunteer locally in Nevada,

00:12:04.000 | if you're part of a church in Nevada,

00:12:05.520 | if you go to your country club in Nevada,

00:12:09.280 | if everything you do is in Nevada,

00:12:12.080 | but then on occasion you travel to California,

00:12:16.280 | then California cannot make the claim

00:12:19.400 | that all of your assets are subject to their tax system.

00:12:25.040 | Now, they can make the claim that any income that you earn

00:12:27.560 | in the state of California will be California-sourced income,

00:12:30.640 | and you would owe California income tax on that basis.

00:12:33.800 | Now, back to your situation.

00:12:35.480 | What I would pursue if I were you

00:12:37.080 | is I would look carefully at my affairs,

00:12:39.400 | and I would look to see if I could establish my domicile

00:12:42.600 | in one place in a state that I know,

00:12:45.120 | and then simply treat my moves or my traveling contracts

00:12:51.680 | as temporary contracts.

00:12:53.600 | So the last five months, I've been traveling

00:12:56.680 | around the United States with my family, but I didn't move.

00:13:00.680 | Everything is in Florida, so my Florida will under Florida law

00:13:04.240 | is still in force.

00:13:05.200 | All of my trusts under Florida law are all still in force,

00:13:08.520 | and I intentionally am going to be very careful and clear

00:13:11.520 | about not setting up a domicile or not even giving indication

00:13:15.360 | of moving somewhere outside of Florida

00:13:17.840 | because that would systematically change

00:13:19.560 | everything in my affairs.

00:13:21.360 | So that's my advice to you is look to see if you can do that.

00:13:25.960 | If you can't do that, if you're actually

00:13:28.320 | moving every three years, and if you're not

00:13:31.480 | willing to establish your affairs in one state,

00:13:34.240 | work with a bank in one state, spend your time in one state,

00:13:37.520 | and establish that state as your clear domicile,

00:13:40.200 | and rather you're just going to simply move,

00:13:42.080 | then yes, every three years when you move states,

00:13:44.560 | you would need to take a careful look at what accounts are

00:13:47.200 | protected or not protected.

00:13:49.040 | You would need to update your will

00:13:50.680 | and make sure that if you have anything fancy or special,

00:13:53.480 | you would need to make sure that it's

00:13:55.080 | valid under the laws of that state.

00:13:56.880 | And so in that case, if that's your situation,

00:13:59.920 | your only answer is to simplify your affairs.

00:14:02.960 | So that-- well, not your only answer,

00:14:04.760 | but my recommendation would be to simplify your affairs

00:14:07.560 | and focus on planning that would be applicable in all states.

00:14:10.360 | So for example, in the series that we did,

00:14:12.280 | I made it clear that 401(k) accounts or other qualified

00:14:15.160 | plans are protected from an asset protection

00:14:18.200 | standpoint in every state because that's

00:14:21.000 | governed under federal law.

00:14:22.840 | Now, your IRA depends on state law.

00:14:26.400 | Your life insurance protection depends on state law.

00:14:28.800 | But you would be well-suited to carefully focus

00:14:31.720 | on your planning that would be protected in every state.

00:14:35.520 | And then when we move to things like trusts,

00:14:38.040 | for example, domestic asset protection trusts

00:14:41.560 | are increasing in popularity.

00:14:43.440 | But my understanding of--

00:14:45.840 | for clear, asset protections trust

00:14:47.560 | that's built and governed under the law of several United

00:14:51.040 | States.

00:14:51.540 | The problem with domestic asset protection trusts

00:14:54.520 | is in general, there's no US law that

00:14:56.880 | protects a self-settled trust from the claims creditors,

00:14:59.680 | which is what a domestic asset protection trust is.

00:15:03.200 | Now, there are, I think, about 13 states--

00:15:05.640 | I could be wrong on that number, but I

00:15:07.220 | think about 13 states whose laws have been updated and reflected

00:15:11.240 | to say, hey, we're going to protect a self-settled trust

00:15:15.600 | based upon this specific law that has

00:15:17.880 | been passed in about 13 states.

00:15:19.520 | But there's a debate that happens among attorneys,

00:15:21.560 | whether, number one, whether it's accurate,

00:15:23.440 | or whether that only protects the assets that

00:15:26.360 | are held in those 13 states.

00:15:28.040 | So if you live in one of those states

00:15:29.840 | and you have all of your assets in one of those states,

00:15:32.120 | and if your trust is in that state, then maybe it works.

00:15:34.680 | But in your case, that kind of thing doesn't work.

00:15:36.760 | So then if you need a trust, you need

00:15:38.340 | to look at something that's completely

00:15:40.200 | outside of US jurisdiction.

00:15:41.560 | You would go offshore with your trust,

00:15:43.140 | and you would set up an offshore trust, which

00:15:45.360 | would be applicable under each state,

00:15:47.800 | because you're completely removing those assets

00:15:49.800 | from outside from US jurisdiction.

00:15:52.680 | So that was an extensive answer, but did

00:15:54.440 | that get at the heart of your question

00:15:56.000 | and give you some thoughts to consider?

00:15:59.080 | - Yes, absolutely.

00:16:00.040 | I think that's extremely valuable.

00:16:02.120 | I just have a couple of comments.

00:16:04.160 | When I started to research my state and the states

00:16:07.280 | that I know I may move to, and I noticed

00:16:11.520 | that laws change in state.

00:16:16.320 | And I have a question for you.

00:16:18.960 | From your research and experience,

00:16:22.120 | how frequently do you see laws change in each state?

00:16:26.960 | It seems like you may have a plan for asset protection.

00:16:30.520 | You may stay in the state of Florida,

00:16:32.400 | for example, in your case, but in any other state

00:16:35.000 | for another person's case.

00:16:36.640 | And then let's say in five years, they change law,

00:16:39.400 | and now it's completely different.

00:16:41.480 | How frequent is it that the laws change,

00:16:43.880 | and maybe to the detriment of asset protection situation?

00:16:50.280 | - I'm not knowledgeable enough to give a specific answer

00:16:53.320 | to that, and so let me give you a couple of different ways

00:16:56.960 | to think about it from my observation.

00:16:59.960 | In general, it seems that there will

00:17:02.920 | be a culture in a specific state that is reflected

00:17:07.800 | in the laws of that state.

00:17:09.360 | And unless there's something happening culturally

00:17:11.920 | in the state that's going to change that,

00:17:15.960 | then the laws are going to follow along

00:17:18.400 | a systematic legal theory.

00:17:19.680 | So I'm most familiar with Florida law,

00:17:22.000 | so let me speak to that.

00:17:23.440 | In Florida, in the Florida Constitution,

00:17:26.520 | there is a culture of protection of assets

00:17:29.560 | that has been codified.

00:17:31.400 | It's codified in the Florida Constitution.

00:17:33.520 | The Homestead Exemption example, it's

00:17:36.800 | codified in the Constitution.

00:17:39.040 | And that culture is then reflected

00:17:41.200 | in the interpretations of the courts of that law.

00:17:44.640 | So an example would be the most famous thing

00:17:47.640 | about the Florida Homestead Exemption

00:17:50.160 | is what I've mentioned on the show several times,

00:17:52.160 | that even if you buy a Florida homestead

00:17:54.720 | with fraudulent intent, then you are still protected

00:17:59.080 | under the state of Florida.

00:18:00.240 | Well, that specific law was based upon a case

00:18:03.400 | that was heard before the US Supreme Court,

00:18:06.280 | and that case was interpreted based upon the codified law

00:18:10.280 | in the Constitution.

00:18:11.280 | So the US Supreme Court studied the case.

00:18:13.360 | The facts of the case very clearly indicated

00:18:15.400 | that somebody had purchased real estate

00:18:17.520 | with the intent to defraud their creditors,

00:18:19.880 | but they interpreted the Florida Constitution

00:18:23.760 | under the intent, or what they interpreted

00:18:26.160 | as to be the intent of the legislators,

00:18:28.360 | which was to provide virtually an absolute protection

00:18:31.880 | for a Florida homestead with the exception of the exceptions

00:18:36.880 | that are specifically listed in the Florida Constitution.

00:18:40.800 | Now, that law is not going to change anytime soon.

00:18:44.200 | It's constitutional, and it's been interpreted,

00:18:46.880 | the precedents have been set in the common law rulings

00:18:50.120 | of the various courts.

00:18:51.640 | And all of the precedents in the state of Florida

00:18:54.400 | that would be drawn on for most asset protection lawsuits

00:18:58.720 | basically are on the favor of protecting the assets.

00:19:01.960 | The same thing happened when Florida looked

00:19:03.920 | at the protection for retirement accounts.

00:19:06.440 | So there was this big question of, are IRAs and Roth IRAs

00:19:10.560 | protected from the claims of creditors?

00:19:12.520 | And perhaps a Florida attorney would,

00:19:15.400 | I think I'm right in this understanding,

00:19:17.920 | but what happened was the case went forward with it,

00:19:21.680 | and it was starting to be interpreted by the courts,

00:19:24.240 | but the Florida legislature actually came along

00:19:26.300 | and clarified the issue and said,

00:19:27.760 | yes, we protect IRAs and Roth IRAs

00:19:30.600 | because that's in line with the philosophy of this state.

00:19:33.300 | Now, let's flip it around and pick on a different state.

00:19:35.680 | A different state will have a very different culture

00:19:39.520 | of protection of those assets,

00:19:42.760 | and you can't change that culture overnight.

00:19:45.960 | So a state like California has an entrenched culture

00:19:50.960 | of taxation and of minimal protections for assets.

00:19:56.840 | So California doesn't allow tenancy by the entirety.

00:20:00.680 | So all of the titling,

00:20:01.680 | which we haven't talked about in the series yet,

00:20:03.400 | is not available.

00:20:04.680 | Tenancy by the entirety protections

00:20:05.880 | is not available in California.

00:20:07.040 | It is in Florida.

00:20:08.240 | California has a very limited homestead exemption,

00:20:11.480 | 50 to 50 or $75,000 for a single person or family,

00:20:15.960 | up to $150,000 if somebody's older.

00:20:18.400 | That's very different than the unlimited protections

00:20:20.440 | in Texas and Florida.

00:20:21.660 | California doesn't protect IRA assets.

00:20:23.640 | California doesn't protect Roth IRA assets.

00:20:26.380 | California doesn't protect life insurance cash values

00:20:29.940 | beyond about $10,000 for an individual,

00:20:32.320 | $20,000 for a couple.

00:20:34.020 | You can go on.

00:20:34.860 | California doesn't protect college savings plans

00:20:38.880 | like a state like Florida does.

00:20:40.320 | So you can foil those states.

00:20:42.160 | You can compare them one to the other,

00:20:43.760 | and you can see there is a very entrenched culture

00:20:46.380 | in one state versus another state.

00:20:48.760 | Now, the specific application of the law will change

00:20:52.160 | as more court rulings are found,

00:20:54.200 | as a particular technique is tested in a court.

00:20:57.000 | But the general culture of a state,

00:20:59.880 | the general legal culture and the precedent,

00:21:02.360 | the common law precedent for each state

00:21:04.480 | is unlikely to change very much.

00:21:07.040 | So my answer is, in general,

00:21:10.520 | the specifics of the law might change a little bit.

00:21:14.080 | One type of trust may be defeated in court,

00:21:16.300 | and so the attorneys would stop using that type of trust

00:21:18.600 | to move somewhere else.

00:21:19.640 | But the general theory will hold true

00:21:22.800 | in a long series of cases,

00:21:25.480 | depending on the culture of a state.

00:21:27.080 | And the same thing applies internationally, by the way.

00:21:29.800 | Exactly the same thing applies internationally.

00:21:31.500 | So there are many jurisdictions

00:21:34.560 | that are used very favorably for different perspectives,

00:21:38.160 | whether it's banking or tax planning

00:21:41.120 | or asset protection planning,

00:21:43.680 | and a jurisdiction sets up its laws in a certain way,

00:21:47.120 | and then an attorney analyzes those laws

00:21:49.040 | and says, "These laws are favorable,"

00:21:50.600 | and that jurisdiction then continues

00:21:53.100 | over a long period of time to maintain that same culture.

00:21:56.520 | So from that perspective, it's fairly stable.

00:22:04.200 | - That's very clear.

00:22:05.520 | Now I know where to go and look and have an idea.

00:22:08.800 | Two very quick questions.

00:22:10.360 | I also noticed that sometimes it says

00:22:13.980 | that a state opted out of federal statutes and regulations.

00:22:18.800 | I understand there is lots of nuances there, probably,

00:22:24.320 | but is it possible that the state will say,

00:22:28.120 | "Well, we don't care that federal laws

00:22:31.760 | protect 401(k)s, we will opt out"?

00:22:34.600 | - It's not that way.

00:22:36.120 | So specifically, in each state,

00:22:38.960 | a state has to decide what laws it's going to use

00:22:43.280 | in its state to govern bankruptcy,

00:22:46.120 | and they have a choice.

00:22:48.400 | They can just adopt the federal bankruptcy code,

00:22:51.420 | the federal bankruptcy exemptions, and many states do that.

00:22:54.760 | So you can read the federal code,

00:22:57.280 | and you can look, and some states will say,

00:22:59.000 | "We'll just go along with the federal code."

00:23:01.400 | Or the state can adopt a different state-specific code.

00:23:06.160 | So that's what Florida has done,

00:23:07.840 | is they have adopted their own specific code.

00:23:09.960 | Now, here, there's a difference between bankruptcy law

00:23:12.800 | and asset protection law.

00:23:14.320 | They are close together, so that's why I recommend

00:23:17.600 | you can study the bankruptcy exemptions

00:23:19.840 | and understand a little bit about asset protection,

00:23:21.700 | but they are not equivalent.

00:23:23.480 | But it doesn't mean that a state can willy-nilly just say,

00:23:26.020 | "Hey, that's it, we're gonna change our laws."

00:23:28.320 | That process happens slowly.

00:23:30.260 | It's just simply a matter of, has the state chosen

00:23:33.280 | to perfectly mirror and simply adopt

00:23:36.540 | the federal bankruptcy code, or have they chosen

00:23:39.440 | to institute their own version of that?

00:23:41.540 | Now, remember, bankruptcy court is federal,

00:23:44.480 | and so it's not clear to me at the moment.

00:23:47.280 | I'm not competent enough to explain

00:23:50.140 | all of the legal theory there.

00:23:51.240 | That would be a question for a bankruptcy attorney.

00:23:53.600 | But that's what's happening.

00:23:58.160 | So it's not just that a state is saying,

00:23:59.500 | "Oh, we're gonna just change this one thing willy-nilly."

00:24:02.000 | You can trust the stability of whether a state

00:24:05.400 | has opted in or opted out, and you can trust that state

00:24:08.560 | to be fairly stable going forward.

00:24:10.260 | - And I don't wanna take more of your time.

00:24:14.780 | Just to confirm, I'm reading that 403(b) and 457,

00:24:19.780 | well, 457, I don't know, but I assume it's the same,

00:24:22.060 | but I'm reading it as 403(b) is under the state regulation,

00:24:27.060 | not federal.

00:24:29.240 | If that's what you're reading, I don't know.

00:24:33.040 | - I think I saw it either on the IRS website

00:24:37.000 | or somewhere on the federal website,

00:24:39.840 | and I was surprised 'cause I usually treat 401(k)s

00:24:42.960 | and 403(b)s quite similar.

00:24:45.200 | I know they're a little bit different,

00:24:46.580 | but in general, similar.

00:24:48.160 | And then I saw that academic institutions

00:24:52.560 | that provide 403(b)s are not protected by federal law.

00:24:58.000 | But I can double check.

00:24:59.840 | - I'm not, I can't answer that question

00:25:02.960 | on the top of my head without specifically looking at it

00:25:05.240 | in research.

00:25:06.080 | I didn't prepare that in my preparation

00:25:07.920 | for the Asset Protection Series,

00:25:09.360 | so I would personally need to research that to answer it.

00:25:12.220 | But I would just say the best thing is, yes, read,

00:25:15.880 | but the most important thing is to get advice

00:25:18.120 | on your specific situation from your specific state.

00:25:21.320 | Because even if a certain account type is protected

00:25:27.040 | in some way or not protected in some way,

00:25:29.600 | a good attorney who's familiar with your state law

00:25:32.800 | will know how to get the maximum protection

00:25:35.360 | for each particular account type.

00:25:37.320 | And that's beyond my ability to interpret state by state.

00:25:41.680 | And I'm gonna put you on hold and come back to you

00:25:43.920 | if we have time at the end,

00:25:45.500 | but let's get some other callers and then we'll come back

00:25:47.240 | 'cause I know you had another line of questions

00:25:49.120 | that you wanted to pursue,

00:25:49.980 | but we'll move on here for a moment.

00:25:51.760 | We go down to Nathan in Florida.

00:25:53.080 | Welcome to the show.

00:25:53.920 | How can I serve you today, Nathan?

00:25:55.880 | - Hi, good afternoon.

00:25:57.520 | So I wanted to thank you for all these long format podcasts

00:26:02.520 | you came out with over the previous few years.

00:26:05.760 | I recently finished my medical training in Chicago

00:26:09.760 | and I had a long commute for a multi-medical school

00:26:12.320 | in residency, so you really helped me

00:26:14.840 | sort through a lot of financial life issues

00:26:17.400 | during that commute.

00:26:18.400 | So recently, my family and I moved from Chicago

00:26:23.320 | down to central Florida and we have a one-year-old now.

00:26:27.600 | So I've been going through a lot of your podcasts

00:26:29.440 | about your educational philosophy

00:26:32.560 | and how it's changed over the years.

00:26:34.480 | And one of the other things that I recently

00:26:36.240 | was your podcast in 1999 about your vision

00:26:39.640 | and plans for your child's primary and secondary education.

00:26:42.840 | And I believe that was published more than four years ago.

00:26:46.760 | So I'm just wondering how your thoughts have changed

00:26:48.560 | over the past four years.

00:26:50.880 | - What a good question.

00:26:52.880 | So what I try to do in any kind of public comment

00:26:57.880 | is provide a little bit of creative fodder

00:27:01.120 | of ideas that individual parents can consider

00:27:05.160 | that might be different than the mainstream.

00:27:07.080 | And I don't publicly advocate for one certain approach

00:27:10.280 | versus another, because that would violate

00:27:12.240 | what I think is important, which is a personalized approach

00:27:15.160 | that's appropriate for each child.

00:27:17.800 | The only thing I'm rather vociferous about

00:27:21.200 | is simply opting out of the government system,

00:27:24.240 | which is almost by definition,

00:27:26.360 | with the exception of the teachers

00:27:27.600 | who try to individualize it,

00:27:29.480 | tries to fit children into one specific system

00:27:34.480 | that doesn't serve most children.

00:27:37.080 | The most cognitively capable children

00:27:38.960 | seem to do well in that system,

00:27:40.520 | but it doesn't serve most children.

00:27:42.400 | So in my own personal life,

00:27:44.760 | I also have recognized and experienced,

00:27:48.720 | and I don't talk much about this stuff publicly

00:27:51.440 | 'cause my show is not an education podcast,

00:27:53.440 | but you have to look at the individual situation

00:27:57.280 | in your life, the individual skills, interests,

00:28:00.920 | abilities that you have,

00:28:02.160 | the financial capabilities that you have,

00:28:04.120 | and then compare that to the specific child.

00:28:06.120 | And the most important thing is to expect in time

00:28:11.120 | that things will change.

00:28:13.200 | So I'll give you an example of something

00:28:15.240 | that has changed for me.

00:28:17.680 | I did a show a long time ago

00:28:19.320 | where I talked about the teach your baby to read proponents.

00:28:23.760 | And there are a number of authors

00:28:27.360 | who are very focused on teaching babies

00:28:29.160 | who are not yet verbal to read

00:28:32.120 | and at a very extremely young age.

00:28:34.920 | Now, I've read a number of books

00:28:36.160 | and it's important to note

00:28:37.000 | that it's a very controversial subject.

00:28:38.960 | Many people think, hey, this is all bunk.

00:28:43.960 | I don't think it's bunk,

00:28:46.320 | but I recognize that it's a controversial thing.

00:28:48.680 | But it was very attractive to me at that time,

00:28:51.000 | especially when my wife and I had one child.

00:28:53.120 | Well, we have more than one child now.

00:28:55.640 | And so our family circumstances have changed.

00:28:57.920 | So even if I wanted to engage

00:29:00.360 | in the teach your baby to read philosophy,

00:29:02.680 | we're no longer capable of doing it

00:29:04.520 | without that being a controlling factor in our life

00:29:07.320 | or without my wife and I

00:29:08.520 | being extraordinarily motivated and dedicated, and we're not.

00:29:11.680 | I haven't seen any very convincing evidence

00:29:14.360 | that that's the most important thing.

00:29:16.200 | So I've changed on that perspective.

00:29:19.240 | I've changed my opinion

00:29:22.040 | just simply due to life circumstances.

00:29:23.760 | And I'm leading with this because first,

00:29:25.920 | it's the thing I worry most about.

00:29:27.680 | As a public commentator,

00:29:30.840 | which is, I guess at this point, it's not particularly new,

00:29:33.680 | but I've chosen to try to be clear

00:29:36.000 | and to make clear statements.

00:29:37.340 | But when you do that,

00:29:38.180 | you run the risk of being misunderstood.

00:29:39.840 | And I have just made the decision

00:29:42.120 | to hope that my audience is mature enough

00:29:44.160 | to make personal application to their own life.

00:29:46.920 | But there are times in your life

00:29:48.360 | where you will have to change.

00:29:50.080 | So for example, even though I'm extraordinarily dogmatic

00:29:53.720 | against government education systems,

00:29:56.880 | that doesn't mean that I couldn't create scenarios

00:29:59.400 | in my life or that I haven't been in scenarios

00:30:01.160 | with other people where the best thing to do

00:30:03.440 | is to put your children into the government schools.

00:30:06.280 | I've been in government schools.

00:30:08.320 | When I was younger, my sister died.

00:30:10.440 | And one of the things that happened

00:30:12.600 | after the death of my sister,

00:30:14.760 | she had an epileptic seizure

00:30:16.840 | when she was a teenager and died.

00:30:18.440 | One of the things that happened

00:30:19.500 | is I was put into a government school for a time.

00:30:21.720 | Now, I look at that

00:30:22.760 | and it was exactly the right thing to do at the time.

00:30:24.960 | And I can imagine many circumstances

00:30:26.640 | in which that's the best thing to do.

00:30:28.360 | So I think it's important that parents always keep in mind

00:30:32.920 | that we're looking to see what is happening,

00:30:35.800 | what are the results?

00:30:36.760 | And those results need to be,

00:30:38.360 | what are the results for the child?

00:30:40.440 | And those results need to be,

00:30:41.640 | what are the results for the parents?

00:30:43.640 | Because no matter if you have the perfect system

00:30:47.020 | that you think is the world's greatest educational system,

00:30:51.160 | but if it destroys your family life

00:30:53.360 | or it destroys the child's life, it's not.

00:30:55.200 | It's not the perfect system for you.

00:30:57.240 | So the normal course of action

00:30:59.280 | from most people who are engaging with their children

00:31:01.800 | and who are working with them

00:31:03.120 | is they'll choose some place to start,

00:31:05.240 | something that interests them,

00:31:07.080 | and then that's philosophy will change.

00:31:09.640 | My eldest at this point in time

00:31:11.540 | is just in the kindergarten type years.

00:31:14.760 | Now he's academically substantially ahead

00:31:17.200 | of perhaps some of his peers, but he's behind others.

00:31:20.920 | But it doesn't matter because my job

00:31:22.760 | is to look and to see what's working for him.

00:31:24.960 | And even in our recent travels, in the beginning of that,

00:31:27.880 | we focused on academics,

00:31:29.120 | but then it came a point on our trip

00:31:30.600 | where the academics just weren't working.

00:31:32.440 | They weren't working for the child

00:31:33.600 | and they weren't working for my wife.

00:31:35.880 | And so we just canceled, canceled all of it

00:31:38.040 | and said, that's it for now, we're not going to do it.

00:31:40.520 | And that's the ability, the precious gift

00:31:45.520 | that parents have when they take control

00:31:48.260 | is they can look to see what's working,

00:31:50.540 | they can change things based upon

00:31:52.940 | what's working with the child.

00:31:53.900 | So I'll tell you right now my working philosophy,

00:31:56.780 | which is your question,

00:31:57.620 | but I feel like I should add that preamble,

00:32:00.020 | especially when I bring such,

00:32:01.900 | for a time I aired such dogmatic presentations

00:32:04.560 | like John Taylor Gatto's work and things like that.

00:32:07.140 | It's important to always listen to what somebody says,

00:32:09.300 | consider it, but then interpret it for your own situation.

00:32:12.100 | So here are a few things that I believe are important.

00:32:14.680 | Number one, I believe that academics are important

00:32:19.680 | if a child, especially for a child

00:32:21.920 | who is cognitively capable,

00:32:23.780 | a child who has a high cognitive ability,

00:32:26.020 | I believe that academics are important.

00:32:28.620 | In our modern society,

00:32:30.340 | academics are an important part

00:32:33.300 | of functioning well within the society.

00:32:37.940 | The priests and priestesses in our society

00:32:40.300 | are all in the academy and in the extensions of the academy.

00:32:44.340 | And so it's important to recognize

00:32:46.420 | that if you're going to be a person of influence,

00:32:49.340 | you're going to at least have to figure out

00:32:51.060 | how to work within that system of academics.

00:32:53.500 | And I see no reason to not encourage a child

00:32:57.020 | who is capable to function well

00:33:00.420 | at a high point in academics.

00:33:02.560 | For me, it's also very important to note

00:33:04.540 | that academics, in my opinion, are not ultimate.

00:33:07.660 | There are a lot of academics who see themselves

00:33:11.540 | as God's gift to mankind or the magical,

00:33:16.100 | let's use a non-theistic interpretation,

00:33:19.220 | an accidental mixture of organic material

00:33:24.220 | that has come together that has created

00:33:28.620 | an accidental gift to mankind of knowledge and insight.

00:33:32.780 | There are many academics who believe that that's ultimate,

00:33:35.340 | and I don't see it as ultimate.

00:33:36.740 | I don't think that that's ultimately important.

00:33:38.700 | And so it seems to me that that should be reflected

00:33:40.820 | in the lives of our children.

00:33:42.400 | With an excessive focus on academics,

00:33:44.600 | it's easy to create very boring children

00:33:47.220 | who simply come out and they look like everyone else,

00:33:51.460 | and they don't have much depth or much interest

00:33:53.580 | or much texture to their lives.

00:33:55.020 | And so I look at character development

00:33:57.180 | as being very important.

00:33:59.380 | That's the cornerstone of success

00:34:02.220 | is character development, in my opinion.

00:34:04.300 | And academics can be used as a tool in that,

00:34:06.660 | but it's not necessarily the most effective tool.

00:34:09.060 | In addition, then, I look at education.

00:34:11.700 | I say education needs to involve good social training

00:34:16.060 | so that a child can work effectively in the society.

00:34:18.900 | And then education needs to involve good business training.

00:34:22.060 | And so those are kind of a few basic themes.

00:34:24.520 | And at the moment, what I look at,

00:34:27.580 | I'm torn between an extreme focus on academics,

00:34:32.060 | like I'm the kind of person as an extremist,

00:34:34.780 | I'm the kind of person who would be

00:34:36.620 | in the direction of saying,

00:34:37.660 | we've got to be academically excellent in everything.

00:34:40.260 | So I run in that bent,

00:34:42.000 | but then I look at the arguments of the unschoolers

00:34:45.060 | and the people who talk about

00:34:46.800 | the importance of natural interest,

00:34:48.460 | and I find those arguments persuasive as well.

00:34:51.120 | And so at the moment, my operating philosophy is

00:34:54.580 | you can focus on just a simple core discipline

00:34:57.700 | of excellence in reading, writing, and arithmetic,

00:35:01.700 | and then everything else can basically fit in

00:35:05.460 | based upon the interests of the child.

00:35:07.980 | And then what I like the idea of is,

00:35:10.700 | arithmetic is interesting because it's its own language,

00:35:13.380 | it's its own discipline.

00:35:14.620 | And although there is application to everything in life,

00:35:16.940 | it's one of those things that

00:35:18.580 | I don't see how it can be learned

00:35:19.900 | except by consistent effort.

00:35:21.460 | And so to me, that seems the best point

00:35:23.360 | for character development.

00:35:24.820 | But reading and writing are skills that can be developed

00:35:27.780 | with a careful focus on the child's particular interests.

00:35:30.380 | And so the reading, I think a child needs to read

00:35:33.340 | a comprehensive library that has been developed

00:35:38.340 | with good attention on all of the areas that are important,

00:35:41.820 | but then the outlets for writing can be customized

00:35:43.940 | to the child based upon their interest

00:35:45.380 | to maintain a high degree of interest.

00:35:47.180 | So that's my current philosophy,

00:35:49.420 | and my wife and I are just working through it

00:35:51.620 | and constantly analyzing it to see,

00:35:54.980 | is this working well,

00:35:56.700 | and is this working well in the life of the child?

00:35:58.920 | To me, the biggest thing is that academics in childhood

00:36:03.080 | should not be all consuming,

00:36:05.140 | neither should play or simply,

00:36:08.040 | and by play, let me differentiate between creative play

00:36:12.860 | and a kind of stultifying mindless entertainment.

00:36:16.600 | So I don't like the idea,

00:36:18.800 | you go to the Asian model and school children in Singapore,

00:36:21.700 | I don't think it's good for children

00:36:22.940 | to spend 10 hours a day just doing academics.

00:36:25.800 | So to me, it seems like a good fit

00:36:28.080 | is to have a few hours a day, perhaps two, three, four,

00:36:31.900 | but hopefully no more than four

00:36:33.420 | of hard, strong, focused academics,

00:36:35.740 | and then the rest of the time

00:36:37.000 | be filled with many diverse experiences,

00:36:39.260 | many diverse exposures, diverse work,

00:36:41.740 | diverse business activities, diverse individual pursuits,

00:36:44.580 | diverse hobbies, et cetera,

00:36:45.940 | and that seems to me to be the best philosophy

00:36:48.800 | to create a comprehensive whole person

00:36:51.740 | who does do well in academics,

00:36:53.460 | but also maintains their diverse interests.

00:36:57.300 | So that's my current approach.

00:36:59.160 | - I know, very interesting,

00:37:02.220 | seeing your small thought out and all your plans

00:37:05.300 | and the way you present them to your children.

00:37:07.900 | I really appreciate it.

00:37:09.260 | I've come across most of Mr. Gatto's work so far,

00:37:13.620 | and I don't think there was a podcast

00:37:15.460 | that presented some of his work as well.

00:37:18.700 | I was wondering what other books have influenced you

00:37:21.220 | in this regard, just off the top of your head?

00:37:23.900 | - So if I were to cite,

00:37:28.900 | the opinions of being anti-compulsory education,

00:37:38.940 | being anti-government schooling,

00:37:40.860 | is largely influenced by Gatto and R.J. Rushduni

00:37:45.380 | with his book, "The Messianic Character

00:37:46.780 | of American Education."

00:37:48.580 | And Gatto makes the historical argument,

00:37:51.700 | kind of tracing through the historical threads

00:37:53.680 | based upon his research as a teacher.

00:37:55.660 | Rushduni makes the religious arguments

00:37:59.580 | and basically advances the concept and the idea

00:38:04.340 | that the educational, the compulsory schooling problem

00:38:08.620 | or process is a religious ideal,

00:38:11.580 | which has meant that by schooling,

00:38:13.260 | you can bring salvation to an individual.

00:38:16.420 | And that's the cultural control,

00:38:21.140 | and that's what's been most successful

00:38:22.660 | in the United States of America.

00:38:23.500 | So he makes the religious argument,

00:38:25.660 | which I'm very sensitive to,

00:38:27.300 | because I see religion as the underpinning of culture.

00:38:30.260 | Culture, I think as Rushduni's comment,

00:38:32.780 | he says, "Culture is simply religion externalized."

00:38:35.460 | I think that's a valid way of looking at

00:38:37.460 | and understanding the culture.

00:38:39.860 | Now, so those two things have been inspirational

00:38:43.180 | in the kind of just that anti-government school perspective.

00:38:48.180 | I'm currently reading another one right now,

00:38:51.380 | a book right now called "Crimes of the Educators."

00:38:53.660 | And I always feel it's very hard for me.

00:38:56.140 | I don't like to sound like a conspiracy theorist,

00:38:59.700 | and it's very hard to avoid that sometimes

00:39:02.780 | when you read people like Gatto

00:39:03.980 | and you start to see the primary source material.

00:39:06.740 | And what I find maddening is to try to figure out

00:39:09.860 | how do you interpret what somebody wrote 70, 80,

00:39:13.140 | 100 years ago into the modern age?

00:39:15.520 | I don't know the answers to those.

00:39:17.820 | So those would be just two things

00:39:18.940 | for anybody who's interested in the history of it.

00:39:22.860 | Fast forward to what philosophy is of interest.

00:39:27.500 | I don't have a lot of resources.

00:39:28.900 | The person that my wife and I have found most inspirational

00:39:32.540 | has been Charlotte Mason.

00:39:33.800 | There's a large movement in the philosophy of...

00:39:38.620 | So Charlotte Mason was a British teacher

00:39:40.980 | back at the turn of the 20th century,

00:39:42.620 | and she developed this series of schools

00:39:44.140 | that seemed to have some really wonderful results

00:39:45.980 | in the lives of her children.

00:39:47.300 | And what most interests and attracts me

00:39:49.740 | is that she had the concept of education

00:39:52.380 | that involves a whole person.

00:39:55.240 | If I were to try to articulate something

00:39:56.660 | that a philosopher I think is very important to me,

00:39:59.020 | it's that, it's that we need to educate a whole person.

00:40:02.580 | And you can't, so you can't disconnect

00:40:05.120 | the education of virtue from the education in mathematics.

00:40:10.120 | And you can't disconnect mathematics

00:40:12.900 | from the philosophy of religion.

00:40:14.580 | There is a religion, the religious philosophy

00:40:17.020 | that underpins mathematics.

00:40:18.420 | There is a religious philosophy that underpins history.

00:40:20.740 | And so if you try to disconnect these things,

00:40:22.900 | then you wind up with a disconnected person

00:40:25.340 | that doesn't see how these things go together.

00:40:26.940 | And so I found Charlotte Mason very inspirational

00:40:29.940 | from her concept of a whole person, whole person education.

00:40:33.700 | The problem with Charlotte Mason is her books

00:40:35.700 | are somewhat meandering and hard to read.

00:40:38.420 | It's a different writing style.

00:40:40.000 | And so perhaps the best Charlotte Mason teacher right now

00:40:44.820 | is, what's her name?

00:40:47.420 | I've forgotten her name, but the leading writer

00:40:50.140 | behind Simply Charlotte Mason.

00:40:51.780 | She does a wonderful job.

00:40:53.300 | I've spoken with her.

00:40:54.820 | She does a good job of articulating more clearly

00:40:57.620 | many of Charlotte Mason's philosophies.

00:40:59.120 | And that has been most inspirational to me.

00:41:01.600 | Now, the problem I have with Charlotte Mason

00:41:03.980 | and kind of the Charlotte Mason philosophy

00:41:05.780 | is it's very teacher intensive.

00:41:08.220 | And the intensiveness of the interaction

00:41:13.620 | between the teacher, the educator,

00:41:15.820 | usually the parent, most normally the mother,

00:41:18.740 | it's so intensive that I wonder if it can actually be done.

00:41:22.460 | Sonia, her name escaped me again.

00:41:24.820 | Her name is Sonia something or other.

00:41:26.940 | It's so intensive that it's hard for me to see

00:41:29.580 | how is that practical?

00:41:30.620 | And so then I read kind of the unschoolers,

00:41:32.980 | the interest-directed learning, and I see, wait a second,

00:41:36.060 | there's really something here,

00:41:37.140 | because the only thing that I remember from my education

00:41:40.220 | are the things that I was interested in.

00:41:41.820 | I passed so many classes that I wasn't interested in,

00:41:44.420 | and I don't remember everything.

00:41:46.140 | And so I personally kind of bring those two things together.

00:41:50.620 | And then finally, I'll give you one comment.

00:41:52.740 | I have not yet found an inspirational educational

00:41:56.740 | philosopher who has grappled with the realities

00:42:00.420 | of the modern world.

00:42:01.580 | And the question is this, how do you educate a child

00:42:05.580 | in a world where any fact is accessible

00:42:09.900 | or any piece of data is accessible with,

00:42:13.020 | okay, Google or whatever Google's name, Alexa,

00:42:15.420 | no, that's not, anyway, Siri, Alexa, Google,

00:42:17.900 | tell me when did the War of 1812 start?

00:42:22.300 | That's a totally different world than ever before.

00:42:24.820 | And so the most important thing I see

00:42:27.020 | is to try to teach children analysis,

00:42:31.740 | the ability to bring these things together.

00:42:33.260 | And obviously that can't be done

00:42:34.340 | in the primary school years.

00:42:36.420 | But what seems to be missing is a connect,

00:42:39.220 | in my observation of many people,

00:42:40.820 | is a connected, coherent worldview,

00:42:42.660 | a thing that brings these things together

00:42:44.580 | in a way that makes sense.

00:42:45.620 | And so I don't have any better results for you.

00:42:47.460 | It's a reading project that I need to do

00:42:49.020 | in the next couple of years,

00:42:50.220 | because I've been occupied with other things.

00:42:52.460 | But of course, now with a child heading into those,

00:42:55.220 | primary school is straightforward.

00:42:56.560 | But once you get past primary school into secondary school,

00:42:58.940 | I'm not quite sure what to do.

00:43:00.640 | - Thank you so much for sharing.

00:43:04.740 | - My pleasure.

00:43:05.580 | And just be, the reason I started

00:43:08.140 | with what I said in the beginning,

00:43:09.100 | just simply to recognize that things are gonna change

00:43:11.040 | is because you don't have to fit into one,

00:43:14.580 | just one philosophy.

00:43:15.740 | You don't have to pick one thing

00:43:17.020 | and then have it be from time to time.

00:43:18.580 | If you try Charlotte Mason and it works for you, great.

00:43:21.540 | You put your kid in a Montessori school and it works,

00:43:24.140 | try that.

00:43:25.220 | Then you go and you try classical conversations, try that.

00:43:29.780 | You will change over time.

00:43:31.500 | And that's the most important thing.

00:43:33.220 | Look at what's working for your child,

00:43:35.300 | for you, for your wife, look at what's working

00:43:37.780 | and don't be scared to change it if it's not working.

00:43:40.100 | Chris in Kentucky, welcome to the show.

00:43:41.260 | How can I serve you today?

00:43:42.580 | - Thanks so much for taking my call.

00:43:45.380 | - My pleasure.

00:43:46.540 | - My overarching question is how do you set

00:43:49.420 | financial priorities and plan well

00:43:51.900 | when you have an income that fluctuates?

00:43:54.360 | So I quit my job about six months ago

00:43:57.500 | to start my own freelance animation business.

00:44:00.440 | We shortly after found out that my wife was pregnant.

00:44:04.580 | So a lot of change in a very, very short amount of time.

00:44:08.120 | Business has done really well this year

00:44:10.740 | and I think I should have about $20,000 in cash reserves

00:44:15.740 | at the end of the year.

00:44:17.260 | It's just kind of in the business.

00:44:18.920 | So my basic, the way I've basically been conducting

00:44:22.300 | my business is I've been saving 50% of my business income

00:44:25.940 | to cover taxes and business expenses

00:44:28.560 | and then taking the additional 50%

00:44:30.540 | as like a personal income for our family.

00:44:33.700 | So basically I'm trying to figure out,

00:44:36.820 | I feel a little bit confused as to what I should be

00:44:39.740 | investing in just because of the unknown nature

00:44:42.660 | of my future income, some changes, new baby,

00:44:46.380 | and then also just life goals.

00:44:49.060 | We initially were really gung ho

00:44:52.180 | about paying off our house quickly,

00:44:54.480 | but we also have some additional house projects

00:44:59.420 | and wanna invest for retirement.

00:45:01.460 | So I think I'm at this, a lot of change

00:45:04.220 | in the last six months, have some additional cash at hand

00:45:08.660 | and trying to figure out how do I set

00:45:11.900 | those financial priorities when I'm unsure

00:45:14.700 | that I'm gonna get X amount of income

00:45:17.820 | every month moving forward.

00:45:20.080 | - Is your wife currently pregnant

00:45:21.780 | or has your baby already been born?

00:45:23.660 | - She's currently pregnant.

00:45:26.540 | - So first, my experience and my observation

00:45:30.280 | and my recommendation to you is

00:45:33.420 | when you are expecting a baby,

00:45:35.980 | I would encourage you to essentially hit pause

00:45:39.580 | on any big decisions.

00:45:41.460 | And there are a couple of reasons for that.

00:45:43.660 | This is your first child, is that correct?

00:45:46.460 | - So we have a foster child who we likely will adopt

00:45:49.780 | in the next year or so, but yeah,

00:45:51.780 | this will be our first biological child.

00:45:53.500 | - Okay, great.

00:45:54.420 | So, and that's also if you are fostering

00:45:57.540 | and looking towards adoption, that's also

00:46:00.300 | kind of the same advice applies.

00:46:02.900 | Let me just focus on pregnancy and you can extrapolate

00:46:06.620 | to fostering leading to adoption.

00:46:09.760 | With pregnancy and with childbirth,

00:46:13.880 | the future becomes significantly uncertain.

00:46:17.980 | The first thing that can happen is your goals will change.

00:46:21.780 | Your understanding of life will change.

00:46:24.120 | Not necessarily immediately with a new baby,

00:46:27.500 | although certainly when you are first holding your new baby

00:46:30.780 | and looking at that child and just kind of staring

00:46:35.420 | at that life and holding those little fingers

00:46:38.580 | and just marveling at the incredible creation

00:46:43.580 | that is a tiny little baby,

00:46:45.180 | there's something deeply impactful about that.

00:46:47.620 | It changes your view on the world in a really special way

00:46:51.380 | that's hard to articulate.

00:46:53.280 | So that's obvious, but it also changes your goals,

00:46:56.260 | your understanding, it changes the things

00:46:58.420 | that you can or can't do, and it changes your lifestyle.

00:47:02.340 | There's no way around the fact that children

00:47:04.800 | will dramatically change your lifestyle.

00:47:07.380 | And so, simple examples.

00:47:10.380 | Prior to having children, perhaps your financial goal

00:47:13.420 | was we want to go to Europe and backpack around Europe.

00:47:17.500 | Well, you can backpack with children around Europe.

00:47:19.520 | You absolutely can do that.

00:47:21.340 | But what might happen is you look at it and say,

00:47:23.260 | I don't really want to backpack with a child this age.

00:47:25.620 | I want to wait a little bit.

00:47:26.720 | And so that goal will change.

00:47:28.060 | Or you'll look at your house and you say,

00:47:30.620 | previously, this particular thing about our house

00:47:33.260 | wasn't very important, but now this is more important.

00:47:36.300 | Our house is not fenced.

00:47:38.020 | But now, with a little toddler running around,

00:47:40.600 | we'd like to be able to let them go out in the backyard,

00:47:42.420 | and so now we're gonna go ahead

00:47:43.540 | and spend the $10,000 on the fence.

00:47:45.660 | And I want to encourage you that that is normal,

00:47:48.400 | and that's right.

00:47:49.540 | That's absolutely appropriate,

00:47:52.220 | and it's appropriate for you to spend money

00:47:54.700 | on your children, because they're an important part

00:47:56.900 | of your life.

00:47:57.780 | But it does mean that things will change in your planning.

00:48:00.460 | Now, most of those are longer term.

00:48:01.940 | A new baby, you can put a new baby

00:48:03.700 | in a little cardboard box in the broom closet.

00:48:06.440 | Make sure that there's ventilation, of course.

00:48:08.020 | But babies don't need that much stuff.

00:48:10.180 | Now, if it's your first baby,

00:48:11.460 | most likely your house is bursting with baby gear.

00:48:14.660 | By the time you get to your third or fourth,

00:48:16.580 | you'll probably just have two or three little baby things,

00:48:19.700 | and by then you've dispensed with most of the gear.

00:48:21.660 | So when they're little, they don't require much.

00:48:24.140 | The easy, you know, when they're little,

00:48:25.420 | you can take them backpacking very easily.

00:48:27.140 | It's when they're three that it becomes more challenging.

00:48:30.140 | A bigger thing to be careful of

00:48:31.740 | is you don't know how the childbirth will go.

00:48:34.700 | And I think it's important to be prepared for that.

00:48:37.820 | So first, you don't know how the childbirth will go

00:48:40.100 | for your baby and for your wife.

00:48:42.060 | You may have a premature birth,

00:48:43.620 | and a premature birth will completely

00:48:45.500 | turn your world upside down.

00:48:47.460 | If your baby is in a NICU,

00:48:49.900 | and you're trying to also care for your wife,

00:48:53.080 | then you're not gonna be working much.

00:48:55.220 | And so every bit of cash that's available to you

00:48:57.380 | will be helpful.

00:48:58.800 | If you wind up, and perhaps something happens

00:49:02.580 | that your wife or your baby needs ongoing care,

00:49:04.980 | every bit of cash is going to be helpful.

00:49:07.800 | Your wife might experience

00:49:09.300 | something like postpartum depression.

00:49:11.420 | And so all of a sudden,

00:49:13.060 | you were, your wife was, you know,

00:49:16.340 | physically and mentally healthy,

00:49:17.900 | but all of a sudden, she is experiencing depression.

00:49:20.580 | And now you as a husband have to figure out

00:49:23.300 | how do I love her and help her through this?

00:49:25.540 | And it's hard for you to be as focused on work.

00:49:28.260 | And so because of all of these unknowns,

00:49:30.060 | I think that whenever you're expecting a baby,

00:49:32.080 | the best course of action is basically

00:49:33.900 | hit pause on all your big decisions.

00:49:36.180 | Unless there's something that you're pretty confident about,

00:49:38.660 | we wanna move, we're gonna go ahead and move,

00:49:40.800 | hit pause on a lot of those things,

00:49:43.220 | or at least hit pause on big financial things.

00:49:46.660 | You know, we've done all kinds of crazy stuff.

00:49:48.500 | We moved houses when we had, I think, a two-week-old baby.

00:49:51.780 | So, you know, we've done some of those things,

00:49:54.340 | but in general, the philosophy is just kind of pause

00:49:57.320 | and wait to see how things go.

00:49:59.040 | Once the baby's born, baby's doing well,

00:50:01.520 | mama's doing well, you can pick things up

00:50:03.620 | and renegotiate going forward.

00:50:06.480 | So that's my general advice, is it's okay to pause.

00:50:11.140 | One of the things I hope,

00:50:12.540 | one of the messages I hope to bring to people

00:50:15.020 | is to recognize that it's okay

00:50:16.740 | to just pause and let time pass.

00:50:19.380 | You don't always have to freak out

00:50:20.680 | about every dollar's gotta be invested today,

00:50:22.940 | or every decision's gotta be made today.

00:50:24.700 | It's fine to just pause and let life pass,

00:50:27.340 | and then you'll make a better decision going forward.

00:50:29.660 | Now, practically, what does that mean practically?

00:50:32.240 | Well, if you might be very careful

00:50:36.260 | about putting money where you can't get it.

00:50:37.900 | Now, depending on if you're gonna make things

00:50:39.780 | like retirement account investments,

00:50:42.400 | you're dealing with an end of the year deadline,

00:50:45.780 | if you're gonna participate in that,

00:50:46.980 | you might choose to participate in something

00:50:48.520 | like a Roth IRA, where you are gonna go ahead and make that,

00:50:53.260 | but you can take the money out.

00:50:54.420 | Or if your baby's expected before the tax filing deadline,

00:50:57.300 | you might just wait until next year to make the contribution.

00:51:00.300 | If you're dealing with a business retirement plan,

00:51:03.340 | you might do it, but you might just be careful

00:51:05.580 | about other things.

00:51:06.960 | And so I would say, when you're expecting a baby,

00:51:09.820 | just pause, and the same thing with adoption expenses.

00:51:12.020 | You don't know what the adoption expenses

00:51:13.380 | ultimately are gonna be.

00:51:14.760 | You don't know how long the process

00:51:16.100 | ultimately is going to be.

00:51:17.720 | Depending on your method of adoption and fostering,

00:51:21.060 | maybe you might have house modifications that are required.

00:51:23.800 | You might need to consider what's best

00:51:26.160 | in the best interest of the child.

00:51:28.200 | You might need to build, a baby is easy in a small house,

00:51:31.300 | but if you have a foster baby and a little baby,

00:51:33.740 | you might need a bigger place.

00:51:34.820 | And so I would say, just basically pause.

00:51:38.660 | And then now I'll go back to your question

00:51:41.300 | of fluctuating income,

00:51:42.540 | which was the core of your question.

00:51:43.820 | Before I do, is that,

00:51:45.820 | any clarifying questions that you wanna ask about that?

00:51:48.920 | - No, I think that helps a lot.

00:51:50.220 | I think basically where I was at is,

00:51:52.780 | I think you hit the nail on the head.

00:51:53.860 | Basically, I had this additional income

00:51:57.260 | that I wasn't expecting, and I kind of feel like,

00:51:59.500 | man, I really, I should be doing something with it.

00:52:01.980 | I'm pretty new to investing.

00:52:03.740 | I've, over the last six months,

00:52:05.460 | been listening to your podcast a lot,

00:52:07.060 | been trying to figure out some other, yeah,

00:52:10.500 | things with investment

00:52:11.700 | and just being prudent with my finances.

00:52:13.880 | So I think the overall comment about just hitting pause

00:52:18.100 | might be totally the right thing

00:52:21.980 | with that extra money that we'll have.

00:52:25.360 | I think maybe an additional follow-up is,

00:52:28.580 | I do have a Roth IRA.

00:52:30.540 | I just opened a Roth IRA for my wife.

00:52:33.620 | So that was definitely an option,

00:52:35.420 | but also does not reduce our taxable income.

00:52:39.160 | So I also have additionally set up a SEP IRA

00:52:42.700 | with the potential of funding that

00:52:46.180 | after the calendar year,

00:52:48.420 | when we know what's gonna happen with the baby,

00:52:50.460 | 'cause she's due in February.

00:52:52.300 | And then also, as far as I know,

00:52:54.840 | I can contribute to a SEP IRA

00:52:57.180 | up until I file for my taxes in 2019.

00:53:00.780 | So anyway, that's kind of where my head's at.

00:53:02.660 | So I think that was good.

00:53:03.740 | And then, yeah, I would love to hear your input

00:53:06.540 | about the income fluctuations.

00:53:09.420 | - You are exactly correct.

00:53:11.020 | A SEP IRA is a perfect solution for you,

00:53:13.260 | especially if your baby is expected in February.

00:53:16.180 | You can try to get as much tax prep done in January

00:53:20.340 | in terms of your own expenses.

00:53:22.440 | Perhaps you'll be waiting on 10 and 99s and such,

00:53:24.400 | but try to get your own accounts in order in January

00:53:26.220 | before the baby is expected.

00:53:27.660 | Take February off, take March off,

00:53:29.580 | and then in the beginning of April,

00:53:30.940 | go ahead and finalize your tax returns.

00:53:32.620 | And by then, you should have a better understanding

00:53:35.420 | of how mom is doing, how the baby is doing, et cetera.

00:53:38.740 | And then you could comfortably at that point in time

00:53:41.040 | make your SEP IRA contributions

00:53:42.780 | and make your Roth IRA contributions at that time.

00:53:44.820 | So practically, tactically,

00:53:46.320 | I think that's an appropriate solution.

00:53:48.260 | Now, let's talk about irregular income.

00:53:50.700 | The hardest financial problem

00:53:52.980 | that I don't know the great answer for

00:53:55.060 | is living on an irregular income.

00:53:57.620 | And I have extensive experience in this

00:54:00.340 | because since about 2008,

00:54:01.940 | I have lived on an irregular income.

00:54:04.140 | And I was always a personal finance buff,

00:54:06.420 | a personal finance nerd,

00:54:07.900 | and I thought, oh, it's going to be easy

00:54:09.820 | to live on an irregular income.

00:54:11.020 | And I found that it's very, very difficult,

00:54:14.180 | extraordinarily difficult to live on an irregular income

00:54:17.180 | because most of the comments about things like budgeting

00:54:20.460 | just totally go out the window.

00:54:22.060 | If you have a stable salary,

00:54:24.020 | budgeting is fairly straightforward,

00:54:26.300 | and especially budgeting between needs and wants

00:54:30.460 | or luxury spending is fairly straightforward.

00:54:33.080 | Let's say you sit down

00:54:34.060 | and you have a monthly income of $6,000 a month,

00:54:37.500 | and you make your savings decisions first,

00:54:39.400 | your giving decisions,

00:54:40.320 | you decide how much you're going to save and give.

00:54:41.860 | And let's say you net out,

00:54:43.220 | that you say, okay, we're going to spend $3,500 a month.

00:54:46.020 | Well, you look at your expenses,

00:54:47.660 | you figure out how much we're going to spend on housing.

00:54:50.540 | And then you say,

00:54:51.380 | well, let's assign a fun money budget of $100 a month,

00:54:54.860 | let's assign an eating out budget of $300 per month.

00:54:58.300 | So then when the decision comes of, should I eat out?

00:55:01.180 | Then you simply look in your budget account,

00:55:03.460 | be it an envelope, your wallet,

00:55:05.580 | a digital accounting of some kind,

00:55:08.380 | and you say, oh, look,

00:55:09.220 | we got $300 or $200 left in our eating out account,

00:55:12.140 | let's go out.

00:55:12.980 | And then when you're trying to decide,

00:55:14.340 | do we go to the fancy place or do we go to the cheap place?

00:55:17.240 | You can just simply go based upon what you feel like doing

00:55:20.580 | at the time,

00:55:21.540 | based upon how much money is left in that account.

00:55:24.020 | Now, fast forward,

00:55:25.100 | you get a check from a client for $15,000 on January 1.

00:55:30.100 | And on January 25,

00:55:32.740 | you and your wife are looking at each other and saying,

00:55:34.460 | you know what, we'd like to go out to eat.

00:55:36.540 | Question, how much money do you spend going out to eat?

00:55:40.020 | Do you decide you're going to go out to eat right then?

00:55:42.940 | Or do you decide that you are going to go

00:55:45.020 | to the expensive place or the cheap place?

00:55:46.540 | It's a very difficult question to answer.

00:55:49.180 | And all of the budgeting systems that I've heard

00:55:52.660 | and have tried, they've not really ever worked.

00:55:56.060 | For example, one of the pieces of suggestions,

00:55:58.100 | which I think is a beautiful suggestion,

00:56:00.580 | is set up enough money in a savings account

00:56:03.020 | and then pay yourself a salary every month

00:56:04.740 | that you can live on.

00:56:07.020 | So if you have business income,

00:56:08.800 | put it in your business account

00:56:09.820 | and then go ahead and pay yourself that salary of 6,000

00:56:12.020 | or 3,500 a month or whatever is appropriate.

00:56:14.980 | And then make sure that that account is always there.

00:56:17.100 | Well, that's true.

00:56:18.540 | But the problem is as a business owner,

00:56:20.380 | you often have big opportunities for investing

00:56:23.180 | in your business and you're also making those decisions.

00:56:26.620 | So you look down and you say, all right,

00:56:28.820 | I've got enough money here in this account

00:56:30.820 | to pay three months of salary.

00:56:32.580 | But there's a conference here that I'd like to go to

00:56:34.740 | and I think my total expenses for that

00:56:36.180 | are going to be $2,000.

00:56:37.660 | Or maybe I should hire somebody to help me

00:56:39.740 | and that's going to change it.

00:56:40.860 | And so it's just basically an ongoing battle

00:56:43.580 | and it's very difficult to know the answer to it.

00:56:45.820 | So I don't have a great solution.

00:56:47.700 | I'll give you just my suggestions.

00:56:49.020 | Number one, don't borrow money.

00:56:51.700 | Every time I borrowed money, I got in trouble

00:56:54.660 | because I would overspend with borrowed money.

00:56:57.580 | So don't borrow money.

00:56:58.700 | Make sure that you're paying with the money

00:57:01.940 | that you actually have.

00:57:03.420 | Number two, spend cash.

00:57:05.980 | And one of the ways that I've always done that

00:57:07.660 | is make a distribution into your wallet and spend cash.

00:57:11.300 | And then keep your bank accounts fairly static

00:57:14.460 | and then make distributions into cash

00:57:16.220 | and use that to moderate your spending.

00:57:18.380 | And so even today, I don't have a beautiful system

00:57:21.220 | in my own personal budgeting.

00:57:22.420 | I kind of just look at my wallet and say,

00:57:23.760 | is there a lot of money here or not?

00:57:25.460 | And how close are we to the end of the month

00:57:27.260 | and how is the money coming in

00:57:28.900 | and the money going out, et cetera.

00:57:30.700 | And, but simply by focusing on the numbers in the account,

00:57:34.060 | the cash in the wallet,

00:57:34.940 | where I'm very conscious of every decision,

00:57:36.820 | I can usually with my gut,

00:57:38.500 | just make a big enough, a good enough decision

00:57:41.220 | in terms of sticking to around a spending level

00:57:45.380 | that it seems appropriate.

00:57:46.580 | It feels like I'm not being excessive,

00:57:48.940 | but not being, you know, miserably cheap.

00:57:52.000 | Now, the big thing is keep a list of investments

00:57:55.660 | in your business that you think will help you.

00:57:58.340 | If you're building a new business,

00:57:59.580 | your best investment opportunities

00:58:01.020 | are gonna be in your business.

00:58:02.340 | Now they may be in employees, they may be in technology,

00:58:05.660 | they may be in tools, they may be in connections,

00:58:08.500 | they may be in a myriad of things

00:58:11.580 | that are related to your business,

00:58:13.080 | but don't go investing in other people's businesses

00:58:16.560 | until you've fully maximized

00:58:18.380 | all of the opportunity for your own.

00:58:20.220 | And in that case, what you should do is start to think,

00:58:23.460 | how could I invest productively in my business

00:58:25.740 | and keep a list of those things?

00:58:27.260 | Because most likely what you will need to do

00:58:29.620 | is spend most of your profit reinvesting in your business

00:58:32.420 | over the next few years,

00:58:33.820 | keep your family expenses as modest as possible

00:58:36.860 | and as modest as necessary to be comfortable,

00:58:39.580 | but invest all that money back into your business

00:58:41.300 | until you turn it into a self-sustaining cash cow,

00:58:45.380 | a vehicle, and those are gonna be big dollars, usually.

00:58:50.120 | When you sign up to bring on an employee or an assistant

00:58:53.760 | or some kind of a salesperson or a customer service person,

00:58:58.440 | then you start to, all of a sudden, $20,000,

00:59:02.040 | if you're paying $2,000 a month,

00:59:03.640 | $20,000 doesn't go so far.

00:59:05.480 | When you're buying investments in software

00:59:09.180 | or tools, materials, that $20,000 goes away

00:59:11.920 | much more quickly than you're accustomed to

00:59:13.360 | in your personal life.

00:59:14.600 | So that was perhaps a wordy way of saying,

00:59:17.140 | I don't have a perfect system,

00:59:18.880 | but you'll start to get in the rhythm and the groove

00:59:21.440 | of knowing how reliable and predictive your cashflow is

00:59:25.000 | and stack up money and stack up resources.

00:59:27.660 | The best thing that my wife and I have always done

00:59:30.120 | is stack up money and stack up resources.

00:59:32.460 | And it sounds silly, but there were times

00:59:34.640 | in your regular income over the last more than a decade,

00:59:38.680 | or I guess a decade, the last decade,

00:59:40.560 | there were times at which I would go months

00:59:42.280 | without any income, and there were times

00:59:44.000 | at which I would have massive income put together.

00:59:46.320 | And one of the reasons I started the practice,

00:59:50.800 | in addition to just it being a smart practice,

00:59:52.820 | but one of the reasons I started the practice

00:59:54.780 | of stockpiling the normal things of life,

00:59:58.200 | keeping extra food on hand, having extra toilet paper,

01:00:01.700 | and those kinds of things, buying when they're cheap,

01:00:04.160 | is because when you have all those resources,

01:00:06.800 | you can pick and choose without,

01:00:09.160 | because there's an abundance of resources around.

01:00:11.480 | So this month, if you just hired a new assistant,

01:00:14.760 | you just bought a new computer,

01:00:16.400 | and you just decided that you're gonna go

01:00:18.320 | to this conference that is expensive to get to

01:00:20.880 | and expensive to buy, but it's gonna give you access

01:00:22.780 | to the right network, you can go

01:00:25.520 | and you still have plenty of food in your pantry

01:00:28.000 | where you're not feeling pinched there.

01:00:30.380 | But I don't have a good solution.

01:00:32.400 | I've looked for one.

01:00:33.520 | That's the best I've come up with by experience.

01:00:35.920 | - Yeah, that's helpful.

01:00:39.160 | I have one additional question if we have time.

01:00:41.360 | - Go ahead.

01:00:42.640 | - So how do you, and this is a hard question too,

01:00:46.080 | but how do you personally balance

01:00:49.240 | having that stockpile of cash

01:00:51.880 | and also potentially making big personal investments

01:00:56.880 | in things that you know are gonna help your lifestyle

01:01:00.680 | or just things that you need to do?

01:01:02.440 | To give you an example,

01:01:03.480 | we bought our house a year and a half ago.

01:01:06.600 | We found out probably about six months after we bought it

01:01:10.320 | that there were serious structural issues

01:01:13.240 | with the back addition of our house,

01:01:15.200 | which basically means it wasn't built on a concrete slab,

01:01:18.960 | all kinds of issues.

01:01:19.800 | Anyway, eventually we're gonna have to tear it down

01:01:21.840 | and rebuild it.

01:01:22.680 | We've gotten some estimates that say,

01:01:25.160 | it's gonna cost us 45,000 to $60,000

01:01:29.080 | to tear it down and rebuild it

01:01:31.360 | in the way that we would want to.

01:01:33.680 | So I think that, and for us,

01:01:35.520 | that seems like a project that's probably

01:01:37.240 | three to five years out.

01:01:38.760 | And all the questions obviously come up of,

01:01:41.000 | should we even do it?

01:01:41.980 | It's $150,000 house, so it's like,

01:01:44.920 | we're probably not gonna get that money back,

01:01:46.880 | but from a lifestyle perspective,

01:01:49.120 | should we do it or not?

01:01:50.440 | So I guess my question is,

01:01:51.880 | how do you balance that when the stockpiling cash versus,

01:01:56.880 | like stockpiling cash in your business

01:01:59.480 | versus withdrawing that cash to do something

01:02:02.880 | that's gonna be meaningful to your life or just necessary?

01:02:05.780 | - It's a hard question.

01:02:07.800 | I would say the simple answer

01:02:08.920 | is talk with your wife about it,

01:02:10.880 | because you are balancing multiple interests.

01:02:14.280 | So having the house work beautifully

01:02:17.760 | is probably going and be exactly

01:02:19.800 | what you would dream of it being

01:02:21.120 | is probably gonna be very important to her,

01:02:22.720 | or at least more important to her than you.

01:02:24.800 | And having your business be incredibly productive

01:02:27.620 | is probably gonna be more important to you

01:02:29.560 | than it is to her.

01:02:30.840 | And so you're gonna have to talk it through together

01:02:34.000 | and come to an understanding together

01:02:37.000 | of what's best for us as an integrated marital unit.

01:02:41.240 | And in general, I would say,

01:02:43.540 | start by investing in things that make money,

01:02:45.840 | and especially start when you're young.

01:02:48.600 | So one of the best things you can do

01:02:52.000 | is defer your consumption as long as you possibly can.

01:02:56.260 | It's fairly easy when you're young

01:02:58.560 | and you have little babies

01:02:59.640 | that are easy to stick into a small corner,

01:03:01.400 | and it's fairly easy to maintain the habits

01:03:04.280 | of frugality and going without

01:03:07.240 | that have gotten you to an initial place in life.

01:03:10.240 | Nobody walks into a college student's dorm room and says,

01:03:12.960 | oh, you've got furniture here made from cinder blocks

01:03:15.240 | and such, what's wrong with you?

01:03:17.200 | It's normal for that life stage.

01:03:19.460 | So it's fairly easy for you at the beginning of life

01:03:22.280 | to put up with things,

01:03:24.700 | because all your friends are doing exactly the same thing.

01:03:27.220 | It's a little harder when you're 45 years old

01:03:29.560 | and your children are 12 years old, 15 years old.

01:03:33.040 | It's a little harder for you at that point

01:03:35.080 | to have things look not as nice as they would like to be.

01:03:38.880 | And it's a little bit,

01:03:40.120 | just emotionally a little bit more difficult.

01:03:42.360 | So logically, start with the business,

01:03:44.480 | because the house expenses are just simply

01:03:47.960 | a pure consumption item, it's a pure luxury item,

01:03:51.680 | whereas the business will make money.

01:03:53.240 | And one of the best just simple things is,

01:03:55.680 | if you have a goal,

01:03:57.480 | figure out how you make an investment in the business,

01:04:00.200 | pay for it.

01:04:01.600 | Instead of going and buying a car, simple example.

01:04:05.440 | I've never understood why people go and buy cars

01:04:07.920 | and then put payments on them,

01:04:10.000 | especially if they have money.

01:04:11.400 | So if you wanna buy a $30,000 car,

01:04:13.480 | don't go and spend the money on a $30,000 car,

01:04:15.660 | because then when the car is used up, all the money is gone.

01:04:18.080 | Go invest the $30,000

01:04:19.520 | and figure out how to make it give you $300 a month.

01:04:22.440 | And then if you have to get a $30,000 car loan,

01:04:25.760 | pay for it with $300 a month,

01:04:27.280 | at the end of it, when the car is dead,

01:04:28.480 | you'll still have the money.

01:04:29.360 | So do the same thing with your business.

01:04:31.520 | Invest in your business, make it very profitable,

01:04:34.320 | make it run itself, make it efficient,

01:04:36.440 | make it profitable, make it productive.

01:04:38.860 | Stack up lots of money.

01:04:40.400 | And then in a few years,

01:04:41.840 | you'll start to grasp a little bit more

01:04:43.640 | of what should change.

01:04:45.000 | What you think is perfect for you today

01:04:47.280 | will change in the next few years.

01:04:49.520 | And so I would say,

01:04:51.600 | I don't have a philosophy beyond,

01:04:54.160 | invest in your business,

01:04:55.820 | make it produce money for you significantly.

01:04:59.880 | And then you'll have what you need

01:05:02.560 | to move on to the personal consumption.

01:05:05.720 | We'll go now to the state of Washington.

01:05:07.080 | Welcome to the show.

01:05:07.920 | How can I serve you today?

01:05:09.000 | - Hi, first of all,

01:05:12.000 | just wanna say thank you, Joshua,

01:05:13.240 | for all you do.

01:05:14.080 | Your podcast is an excellent source of information.

01:05:17.160 | The credit card is fantastic.

01:05:18.440 | If anyone listening who hasn't got it yet

01:05:20.760 | should definitely get it.

01:05:21.960 | I've already made my money back on it.

01:05:23.520 | So thank you for producing such great quality.

01:05:25.880 | - Thank you.

01:05:26.840 | I wanted to ask you more on the business side

01:05:31.760 | of radical personal finance.

01:05:34.600 | I have just a side business

01:05:36.040 | that I started a few years ago,

01:05:37.760 | but did pretty well doing affiliate marketing.

01:05:40.240 | And when the,

01:05:43.940 | maybe three months ago,

01:05:46.440 | the affiliate links that I used,

01:05:49.360 | Apple ended their affiliate program for apps.

01:05:53.140 | And so the main revenue source is gone.

01:05:56.560 | And I'm trying to convert that

01:05:57.760 | to kind of a membership model using Patreon.

01:06:00.960 | Advice you could give having run Patreon campaigns

01:06:06.120 | and done it fairly successfully.

01:06:07.760 | I know it's not 100% of where you want,

01:06:10.000 | but you've done well with that.

01:06:11.520 | I was wondering what advice you could give to me

01:06:13.920 | of what you did or what you do differently,

01:06:16.040 | or what you might suggest in converting an audience

01:06:19.520 | from an affiliate model over to a paid membership model.

01:06:26.520 | - So you currently have a content-driven platform

01:06:31.360 | and you have people reading your things, listening to you.

01:06:35.120 | You currently have an audience, is that correct?

01:06:38.400 | - That's correct.

01:06:39.240 | So I can share a little bit more detail.

01:06:41.720 | So I find basically apps that have gone on sale

01:06:45.240 | as well as movies.

01:06:46.920 | There's hundreds of those that go on sale each day,

01:06:49.480 | and most are junk.

01:06:50.320 | And so I'm curating out just the best that my audience,

01:06:53.020 | that I publish those online.

01:06:56.660 | So I have an audience, about 1,300 people follow me

01:07:00.940 | across the internet and the different places

01:07:02.460 | that I publish.

01:07:03.340 | And I've got, I think, 10 people

01:07:07.100 | who've actually become paid members on Patreon.

01:07:10.460 | - Right.

01:07:11.740 | So I am not particularly bullish on Patreon.

01:07:15.860 | And it's not that Patreon can't help people,

01:07:20.860 | but I think it's best suited for a certain specific type

01:07:24.580 | of creator.

01:07:26.620 | And it's best suited for a creator whose content

01:07:30.980 | or product doesn't, is either entertainment-driven,

01:07:35.980 | such as music, or is ideological,

01:07:41.180 | such as a certain political ideology, et cetera.

01:07:48.020 | But I'm not particularly bullish on Patreon,

01:07:50.900 | even though with my own experience,

01:07:52.940 | and I'll explain for you why.

01:07:57.300 | I worked very hard to, it's ironic that you are a patron,

01:08:02.300 | that's how you got access to this call.

01:08:04.380 | And here we are, we are dissing on Patreon.

01:08:07.620 | But I wanna answer the question

01:08:08.820 | in as clear a way as possible.

01:08:10.540 | I love the topic of, or the concept of crowdfunding.

01:08:16.940 | I love the concept of democratization of ideas.

01:08:20.980 | I love the concept of individual people

01:08:23.260 | being able to support others.

01:08:25.340 | I'm very enthusiastic about those philosophies.

01:08:29.020 | And that was why for an extended period of time,

01:08:32.460 | I really hammered hard on Patreon to try to see

01:08:36.940 | if I could fulfill kind of that ideological interest

01:08:40.700 | that I have to say, is it possible to build a business

01:08:44.220 | exclusively based upon serving your customers?

01:08:47.220 | And my answer is yes, it is possible.

01:08:50.220 | The problem is it's not nearly as profitable

01:08:53.380 | as other potential opportunities.

01:08:58.100 | And so if there's, so earlier in the call,

01:09:00.580 | at the very beginning of the call,

01:09:01.940 | Anne was saying how much she had benefited

01:09:04.340 | from my course, both of my courses that I've released.

01:09:08.580 | And you made some very nice comments

01:09:10.980 | about how much you'd benefited

01:09:12.220 | from the course that I released.

01:09:14.340 | And so those comments unsolicited by me

01:09:19.020 | demonstrate that for someone like me,

01:09:21.580 | there's a much better opportunity for me

01:09:23.820 | to serve specific needs effectively

01:09:27.420 | and to provide content or value.

01:09:29.140 | Now I'm dealing in a space of money

01:09:31.260 | where even as Anne's recommendations,

01:09:33.100 | she recommended a course on insurance,

01:09:35.580 | a course on asset protection, a course on trusts.

01:09:38.100 | That's effectively what I'm doing.

01:09:39.380 | And that's, by the way,

01:09:41.180 | that's my business model going forward.

01:09:43.540 | Because I wanna focus on creating

01:09:45.380 | the highest quality things that will serve people

01:09:48.260 | in specific situations.

01:09:49.820 | And there's a natural model between someone like me

01:09:52.500 | selling financial information to interested people

01:09:55.700 | that may not exist if I were creating a podcast

01:09:58.340 | on political punditry or religious philosophizing

01:10:02.300 | or playing music, guitar music for somebody.

01:10:06.180 | Those things don't have that natural outlet that this has.

01:10:09.980 | But yet the profitability of my creating courses

01:10:14.180 | and is so much higher than Patreon

01:10:18.940 | that it's foolish of me to focus on Patreon

01:10:22.860 | to the detriment of courses.

01:10:25.860 | I have never seen, I created,

01:10:27.940 | I gave a speech at FinCon, I guess it was 17 last year

01:10:32.140 | at the Financial Bloggers Conference FinCon.

01:10:34.940 | And it was on Patreon.

01:10:36.180 | And basically I had a bunch of my fellow podcasters.

01:10:39.700 | And basically my answer to them was,

01:10:41.820 | if you have anything that's more suitable

01:10:45.300 | to your business platform, don't do Patreon.

01:10:47.940 | I have never had more than,

01:10:50.140 | I've always been had far less than 1%

01:10:52.300 | of my listening audience support the show.

01:10:54.700 | Which I don't begrudge, just to be clear,

01:10:56.420 | I'm not bitter about this.

01:10:57.260 | But just in practical analysis,

01:10:59.060 | I've never had more than 1% of the audience

01:11:01.460 | support the show.

01:11:02.980 | And I've not found a single platform

01:11:05.060 | that ever has more than 1% of the audience support the show.

01:11:08.300 | Now I'm deeply grateful, so grateful

01:11:10.460 | to the 1% of the audience that supports the show.

01:11:13.300 | I don't wanna minimize that.

01:11:16.020 | But you can't build an ongoing business on 1%,

01:11:20.860 | unless there's a very high dollar amount involved.

01:11:24.100 | And in even my own Patreon earnings,

01:11:27.220 | the way that I have structured Patreon,

01:11:29.980 | the most profitable component of Patreon

01:11:33.060 | has not just been in direct support,

01:11:34.820 | it's been when I've been able to offer additional value.

01:11:37.020 | One point I had a small type of,

01:11:40.660 | basically mastermind type of call

01:11:42.460 | that was very successful for a time.

01:11:45.860 | I offer access to these Q&A shows.

01:11:47.620 | That's the biggest draw for people,

01:11:49.300 | is to access these Q&A shows.

01:11:50.980 | And so those people who value those things

01:11:53.620 | pay a higher amount.

01:11:54.940 | But if I were trying to eat exclusively on Patreon,

01:11:58.100 | I couldn't do it.

01:11:59.220 | The other problem with Patreon is it puts your,

01:12:02.060 | puts your,

01:12:05.020 | your livelihood in the hands of another person

01:12:08.940 | who doesn't really care specifically about you.

01:12:11.940 | Now, Patreon has had some significant things that happened.

01:12:16.940 | There was a couple of years ago,

01:12:18.940 | there was a right-wing political commentator

01:12:22.500 | named Lauren Southern, who's a provocateur on the right.

01:12:25.980 | And she had a very successful Patreon account at that time.

01:12:30.940 | And she did an event over in Europe

01:12:35.740 | where she went out on a boat and was basically talking to,

01:12:39.500 | and I didn't watch the video,

01:12:41.300 | but allegedly harassing migrants,

01:12:44.700 | Syrian and other African migrants into Italy.

01:12:48.260 | And when Patreon saw that video,

01:12:50.460 | they canceled her Patreon account.

01:12:53.740 | And they completely deleted it and canceled it.

01:12:56.260 | Now, I get very concerned about that

01:12:58.100 | because one of my real concerns right now

01:13:00.420 | is censorship, that there is an ideological press

01:13:03.780 | towards additional censorship,

01:13:04.980 | especially in the United States of America.

01:13:06.580 | And so if you don't conform to the orthodoxy of the day,

01:13:09.940 | there's a strong press towards censorship,

01:13:12.140 | and that's only heated up.

01:13:13.380 | Without going into too many examples,

01:13:16.780 | I wanna stay focused on Patreon,

01:13:17.860 | but it's become so strong that there's this concept

01:13:22.260 | that we've gotta weed out the heretics.

01:13:24.180 | So Patreon, I listened to an interview

01:13:26.780 | that Jack Conte gave to a conservative commentator

01:13:31.140 | named Jordan Rubin, who interviewed him,

01:13:34.340 | because Jordan Rubin has built a very successful platform

01:13:39.020 | built on Patreon, where he uses Patreon

01:13:41.460 | and supports a video talk show,

01:13:43.860 | and it's been very successful.

01:13:46.020 | And Jack Conte promised, he said,

01:13:48.420 | "We are not filtering people

01:13:50.260 | "for their ideological commentary.

01:13:52.180 | "We're not filtering, we're not gonna do this.

01:13:54.860 | "We're not gonna do it."

01:13:56.580 | And so I was very concerned,

01:13:59.140 | but I said, "I'm gonna believe Jack Conte.

01:14:01.020 | "Maybe he's right.

01:14:02.980 | "He sounds like an authentic, sincere guy.

01:14:05.500 | "He's committed to people being able to use his platform."

01:14:08.940 | Well, a little bit, about four or five months ago,

01:14:12.820 | there is a researcher and an academic named Robert Spencer.

01:14:17.180 | And Robert Spencer is an expert on Muslim theology

01:14:22.180 | and specifically jihad.

01:14:24.780 | Now, he's a controversial figure

01:14:26.460 | because he has strong-winded,

01:14:28.820 | very strong perspectives on Islam

01:14:31.660 | and the integration of Islam with violent jihad.

01:14:34.900 | So Robert Spencer created a Patreon account

01:14:38.060 | that was instantly, very quickly funded.

01:14:40.660 | But Robert Spencer, and by the way,

01:14:42.500 | Robert Spencer is a very impressive person

01:14:44.700 | in terms of his academic knowledge.

01:14:46.620 | There is a legitimate debate to be had

01:14:48.580 | with his interpretation of certain facts,

01:14:51.340 | but he's a very impressive person.

01:14:52.820 | He was, for many years,

01:14:55.260 | with the Department of Homeland Security

01:14:56.940 | and many national governments,

01:14:58.020 | he was a consultant on, specifically on Islam

01:15:01.580 | for the US government.

01:15:03.220 | So he's not a lightweight.

01:15:05.780 | He's absolutely not lightweight.

01:15:07.540 | He started a Patreon account,

01:15:08.900 | and what happened was, within a couple of days,

01:15:11.420 | he was banned from the platform.

01:15:13.060 | But Patreon's defense of it is they said,

01:15:15.740 | "We're not going to, we didn't ban him,

01:15:17.620 | "but MasterCard banned him.

01:15:19.100 | "MasterCard didn't wanna do business with him

01:15:21.540 | "because he's viewed as an anti-Islamic person,

01:15:24.460 | "and because of that,

01:15:25.740 | "because MasterCard won't do business with him,

01:15:27.580 | "and Patreon uses MasterCard to fund their pledges,

01:15:32.580 | "because of that, he's not allowed on our platform."

01:15:38.300 | Now, the accusations that they made against him

01:15:41.420 | were, in my opinion, in my research, completely unfounded.

01:15:45.660 | And this is the problem that we face,

01:15:47.420 | especially with companies like Patreon.

01:15:49.140 | And it's been more and more.

01:15:50.340 | There've been other figures as well,

01:15:51.340 | but this was the most high-profile.

01:15:52.540 | Now, I reached out to Patreon.

01:15:53.740 | I asked for a comment.

01:15:56.340 | I never received personal comment.

01:15:58.420 | I am not sure if they've publicly commented on it,

01:16:01.260 | but I've absolutely lost any confidence in Patreon

01:16:04.100 | because they are going the way

01:16:06.460 | that many other large brands have gone.

01:16:09.940 | And the problem is not simple.

01:16:12.220 | It's not as simple as saying,

01:16:14.180 | "Well, there should be freedom of speech."

01:16:16.260 | Obviously, there is a component,

01:16:19.220 | and this is where people like me who support,

01:16:23.140 | I support the right of discrimination.

01:16:25.260 | I believe that you should be allowed to discriminate

01:16:27.700 | for any reason that you want against anybody.

01:16:30.180 | Now, obviously, that's illegal in current law,

01:16:32.220 | but ideologically, philosophically,

01:16:34.540 | I support the right of discrimination.

01:16:36.260 | So I support the right of Patreon

01:16:38.660 | to discriminate against anyone they want to

01:16:40.340 | for any reason they want to,

01:16:41.460 | and they don't have to give accountability to me.

01:16:42.900 | That's an unpopular view in most of the world,

01:16:45.460 | but that's my personal opinion.

01:16:47.180 | But the problem is there's such an intense groupthink

01:16:49.860 | that's happening around these platforms,

01:16:51.340 | and if you give your brand over to one of these platforms,

01:16:55.060 | you run the risk of them basically squeezing you

01:16:58.020 | and cutting you off in a moment,

01:16:59.660 | and I consider that an unacceptable risk.

01:17:02.060 | The same thing has happened with platforms

01:17:04.180 | that went over and used Facebook.

01:17:06.140 | I consider Facebook to be entirely untrustworthy

01:17:08.740 | at this point.

01:17:09.660 | You cannot trust a company like Facebook

01:17:12.340 | because every time they come out with something,

01:17:14.580 | every time they've come out with a tool,

01:17:16.460 | they create this tool, they use it,

01:17:18.620 | and they try to incentivize people to come and use the tool

01:17:21.620 | so people say, "Okay, I'm gonna take you at your value.

01:17:24.460 | "I'm gonna believe that you're acting in good faith,

01:17:26.100 | "and I'm gonna use your tool.

01:17:27.060 | "I'm gonna build an audience on my Facebook page.

01:17:29.940 | "I'm gonna build an audience with your Facebook tools."

01:17:32.180 | And so they invest in it, and they invest in it,

01:17:34.700 | and then all of a sudden, Facebook decides,

01:17:36.420 | "Okay, now we're gonna start charging you."

01:17:37.820 | And it goes all the way back to charging for views

01:17:39.860 | on a Facebook page.

01:17:41.460 | You look at the debacle with journalism

01:17:43.700 | of how they basically destroy the online journalism setup.

01:17:48.100 | Unfortunately, so you cannot trust them

01:17:51.340 | to behave in good faith.

01:17:53.420 | And so all of these platforms, if you're going,

01:17:56.060 | in my opinion, if you're going to have interaction

01:17:58.900 | with a platform, with a provider,

01:18:00.900 | first of all, you have to be very, very suspicious of them,

01:18:04.500 | and you have to ask, "What's the business model,

01:18:06.740 | "and how am I gonna actually do this?"

01:18:08.460 | I don't trust people that I don't pay.

01:18:10.500 | That's the current thing.

01:18:11.860 | If I'm not paying you for your services,

01:18:14.460 | I'm not going to trust you.

01:18:16.020 | So I'm not gonna trust Facebook.

01:18:17.540 | I'm not gonna trust Patreon.

01:18:18.780 | If I'm not paying for a specific service,

01:18:21.220 | I'm not going to trust it.

01:18:22.420 | And then the second thing is you have to think about,

01:18:24.460 | "How do I protect myself if this particular company

01:18:27.780 | "decides they don't wanna do it?"

01:18:28.980 | Now, if you're doing apps, you're not involved

01:18:31.460 | in the cultural wars of today.

01:18:33.020 | You're not talking about-- - No, I'm not.

01:18:35.220 | - This is far away from you.

01:18:36.780 | And so you say, "Well, I could just kind of skate along."

01:18:40.460 | Well, yes, maybe, but those are my concerns with it.

01:18:44.100 | So with Patreon specifically, number one,

01:18:46.060 | you can expect a very, very low level of participation,

01:18:50.740 | very low level of participation.

01:18:52.540 | And with that low level of participation,

01:18:54.940 | unless you have a massive audience,

01:19:00.700 | 100,000 people that are listening to you

01:19:04.340 | means 1,000 people supporting you on Patreon.

01:19:06.500 | That's great.

01:19:07.340 | But if you have 150 people supporting you,

01:19:09.860 | then that means one or two people

01:19:12.140 | supporting your Patreon page.

01:19:13.420 | So you have to have a massive audience

01:19:15.300 | because you're going to get

01:19:16.140 | a very low level of participation.

01:19:17.300 | Number two, you're putting the future of your business

01:19:19.940 | in the hands of an entity that has proven

01:19:22.740 | that they will take action if they agree

01:19:24.900 | or disagree with you.

01:19:26.340 | Now, I think Patreon is better than Facebook, right?

01:19:29.340 | But the problem is all of the press,

01:19:32.100 | the movement is in the direction

01:19:34.580 | of the companies are supposed to make

01:19:36.980 | ideological discriminatory positions

01:19:40.220 | because that's what's right,

01:19:41.660 | 'cause we're on the right side of history kind of thing.

01:19:43.340 | And so even in your own personal life,

01:19:45.260 | if you have a website related to app development,

01:19:48.700 | but you hold personal opinions and positions

01:19:53.140 | that are not the orthodoxy of the day,

01:19:54.860 | you run the risk of having your business shut down.

01:19:57.620 | And I think that's an unacceptable risk.

01:19:59.580 | So with a few exceptions,

01:20:02.060 | the people that I think are,

01:20:03.820 | and the exceptions are,

01:20:05.020 | if you don't have a natural normal outlet for services

01:20:09.380 | or for your own products, then Patreon can work.

01:20:12.300 | I support a couple of Patreon creators.

01:20:14.620 | One of my favorite,

01:20:15.900 | there's a guy named Andrew St. Pierre White,

01:20:17.620 | who's a four-wheel drive enthusiast.

01:20:19.860 | He creates these wonderful four-wheel drive videos

01:20:23.140 | of overlanding, et cetera.

01:20:24.380 | He's very good.

01:20:25.700 | And that's really the only natural outlet for him

01:20:28.740 | is crowdfunding.

01:20:29.620 | And he does such a good job with it.

01:20:30.980 | I love his stuff.

01:20:31.820 | I support him on Patreon.

01:20:33.420 | Or if you support somebody ideologically,

01:20:36.940 | you pick somebody and they're a political provocateur

01:20:41.020 | or they're a preacher of some kind,

01:20:43.100 | or they're an artist,

01:20:44.900 | then in that case, I think Patreon's a really good fit.

01:20:46.940 | But in general, it should be basically

01:20:49.900 | the last thing on your list

01:20:51.740 | because you have a very low profit,

01:20:53.420 | you have low participation.

01:20:54.900 | So unless you can't find

01:20:56.420 | any other superior monetization model,

01:20:59.060 | I discourage you from Patreon.

01:21:02.540 | Was that clear enough?

01:21:03.700 | (laughing)

01:21:05.140 | - That's very clear.

01:21:06.420 | That's very clear.

01:21:07.340 | There's some good thoughts on that.

01:21:09.140 | There used to be fantastic alignment to monetization

01:21:14.420 | 'cause I'm providing apps.

01:21:15.700 | - Exactly.

01:21:16.540 | - I've added the revenue and I'm just dying

01:21:19.140 | because Apple ended that program.

01:21:21.100 | So need to explore other options.

01:21:23.700 | So this is good thoughts on Patreon,

01:21:26.420 | especially that 1% number is a really great reference point

01:21:29.060 | for me to have and think through.

01:21:31.020 | - Do the research.

01:21:32.100 | - I researched that before I ever started a Patreon account.

01:21:35.180 | I hoped that based upon my, at that time,

01:21:38.140 | my demonstrated commitment to my audience

01:21:40.900 | to produce massive amounts of what I did my very best

01:21:44.460 | to make high quality, massive amounts of content.

01:21:47.140 | I said, if there's ever a content creator

01:21:50.220 | who can get higher than this number,

01:21:52.420 | I think I could do it

01:21:53.580 | because I've demonstrated my value already to my audience.

01:21:57.860 | And at that point in time,

01:22:02.020 | so at that point in time,

01:22:03.380 | I thought maybe I could get higher, but I did the research.

01:22:06.940 | I looked at all the big brands on Patreon.

01:22:09.060 | I looked at their audience size with YouTube subscribers

01:22:11.660 | and I came to the presumption it's gonna be a small number,

01:22:14.620 | but I gave it everything I had and I came to the conclusion,

01:22:18.220 | we're just not really wired or accustomed

01:22:21.020 | to specifically crowdfunding something

01:22:25.820 | unless we have a strong connection with it

01:22:28.180 | or unless we're getting specific value.

01:22:29.580 | That's why I focused on political provocateurs

01:22:32.620 | or political ideological teachers of some kind.

01:22:35.500 | Those are great people for a platform like Patreon

01:22:39.180 | because there's not really a natural other way to do it

01:22:42.940 | other than to support that philosophy.

01:22:45.980 | And so if you support a left-wing ideology,

01:22:47.980 | a right-wing ideology, a no-wing ideology,

01:22:50.540 | and if you can find your person

01:22:52.100 | who's preaching your gospel, then you can support them

01:22:54.820 | and you'll be happy that they're doing well.

01:22:59.020 | But if you don't have that,

01:23:00.700 | then you're not gonna do the same thing.

01:23:03.060 | And in general, I think there are better ways.

01:23:06.520 | So hopefully that helps.

01:23:09.700 | And in the future, just for clarity,

01:23:11.780 | I guess I don't have to do it.

01:23:12.620 | It's hard for me, I don't wanna discount Patreon

01:23:14.300 | because I deeply appreciate everyone

01:23:16.300 | who supports me on the show.

01:23:17.700 | But in the future, I think I'm probably going

01:23:21.060 | to cancel my Patreon account 'cause I don't love

01:23:25.460 | to do business with people who are not,

01:23:29.420 | I don't love to do business with companies like that

01:23:31.100 | and I've lost trust in them.

01:23:32.460 | I thought when I heard Jack's interview with Jordan Rubin,

01:23:36.420 | I said, "Okay, well, I can understand

01:23:38.340 | "why they made the decisions they made,

01:23:39.660 | "but the Robert Spencer thing really bothered me."

01:23:44.020 | And so we'll see what happens in the future.

01:23:47.280 | But first, I'm still working on the thing.

01:23:50.140 | I misspoke a moment ago.

01:23:50.980 | I said, number one, if you have a position

01:23:52.980 | where people wanna support you, or number two,

01:23:54.320 | if you could have great bonuses,

01:23:56.320 | the most helpful thing to me of Patreon,

01:24:03.140 | or the thing that's helped the most people support me

01:24:05.020 | is this Q&A call we're on right now.

01:24:06.740 | And that has turned out to be the best bonus

01:24:08.660 | that I could come up with that has been effective

01:24:11.260 | at building a Patreon campaign.

01:24:12.420 | So if you can create great bonuses,

01:24:14.660 | which involve some measure of service,

01:24:17.020 | maybe it's you providing specific consulting services

01:24:19.620 | to your customers in some way,

01:24:21.860 | and you can market it on the Patreon platform,

01:24:24.180 | then I think you can use it.

01:24:27.560 | All right, last caller of the day.

01:24:29.120 | Wow, what a Q&A show.

01:24:30.320 | We go now to Alabama.

01:24:31.240 | Welcome to the show.

01:24:32.080 | How can I serve you today?

01:24:34.080 | - Hey, Josh, my name's Brian.

01:24:35.160 | I was calling because I'm interested

01:24:37.120 | in evaluating new healthcare options for our 2019 plan.

01:24:42.120 | We run a small company with five employees,

01:24:45.040 | including my wife and me.

01:24:47.000 | We currently pay roughly between 25 and $28,000 a year

01:24:52.480 | to our local monopoly insurance provider.

01:24:54.960 | My wife is a little scared about doing any type of HSA

01:24:59.820 | or medical sharing program.

01:25:01.860 | And I'm trying to, I'm wondering if there's a middle ground.

01:25:05.140 | So as the company director of these finances,

01:25:07.900 | I'm trying to figure out,

01:25:08.760 | is there a way to administer a savings account

01:25:13.260 | where we could take the savings

01:25:14.860 | that we would normally pay to the insurance provider

01:25:18.420 | and keep them in a form of asset

01:25:22.080 | that we could pay out to the,

01:25:24.980 | like a MediShare or an HSA scenario

01:25:29.300 | for the benefit of the employees that are here.

01:25:33.060 | So if theoretically we could save $15,000 a year

01:25:36.900 | using a MediShare type program,

01:25:39.620 | would it be possible to let that money stay in the company

01:25:43.120 | and then have the company pay

01:25:44.260 | those personal medical expenses

01:25:46.900 | rather than just prepaying for the possibility

01:25:49.460 | of needing medical treatment?

01:25:52.360 | - What an interesting question.

01:25:54.840 | So I need to start with my disclaimer.

01:25:59.440 | I have not worked in group medical insurance

01:26:03.620 | in almost a decade.

01:26:05.640 | I spent a little bit of time in that marketplace,

01:26:08.160 | but things have changed so much.

01:26:09.920 | When the Affordable Care Act was passed,

01:26:12.360 | I completely got out of the business

01:26:13.840 | and I said, there's no reason for me

01:26:14.800 | to deal in this world anymore.

01:26:16.280 | And I never really sold much group insurance

01:26:19.360 | and so I am not your best resource,

01:26:24.140 | but I'll try to point you in the right direction

01:26:25.900 | by at least asking a couple of hopefully helpful questions.

01:26:28.340 | So to be clear,

01:26:29.720 | you currently have a mainstream health insurance program,

01:26:34.160 | right?

01:26:35.000 | - Mm-hmm, that's correct.

01:26:36.320 | - And the two things that you mentioned,

01:26:38.900 | you said starting potentially an HSA,

01:26:41.760 | a healthcare sharing account,

01:26:44.440 | or you mentioned the idea of moving

01:26:46.600 | to a Christian ministry approach,

01:26:50.200 | like a MediShare, the medical sharing plan.

01:26:52.840 | Those are two very different things.

01:26:54.200 | So you could just simply add an HSA account

01:26:57.680 | onto your current plans,

01:26:59.040 | if your current plans offer you

01:27:00.480 | a high deductible health plan,

01:27:02.160 | for you to move to a medical sharing plan

01:27:04.040 | using a Christian healthcare sharing ministry,

01:27:06.120 | that would be a very different move and a very big move.

01:27:08.760 | So those are two big different questions on it.

01:27:13.760 | Is there any reason why you think

01:27:15.320 | you shouldn't just go ahead and add the HSA?

01:27:17.240 | Is there any downside to the HSA?

01:27:18.960 | - It looks like maximum deductions

01:27:23.800 | and maximum out-of-pocket expenses

01:27:26.240 | would be fairly similar within a rounding error

01:27:29.400 | of what we currently pay versus the worst case scenario

01:27:32.640 | for paying the HSA premium

01:27:34.200 | and then paying the maximum amount of out-of-pocket expense.

01:27:37.800 | So there isn't a huge downside there

01:27:39.960 | in that particular case.

01:27:41.720 | And then of course you have the added value

01:27:43.600 | of hopefully growing assets in an HSA plan.

01:27:46.880 | What we were hoping to do though,

01:27:49.520 | is even with that very different option

01:27:52.480 | than the medical sharing program,

01:27:54.400 | there's still an annual savings that the company would see.

01:27:57.680 | Now, granted, we could just keep that,

01:27:59.400 | we could take that as a distribution,

01:28:01.720 | we could do whatever we wanna do with that difference.

01:28:03.480 | But what I would hope to see is if there's a way to,

01:28:07.000 | I don't know, and that's less obvious

01:28:11.000 | than the medical sharing option,

01:28:12.520 | where there's such a significant contribution savings

01:28:15.480 | that we're trying to find a way to perhaps

01:28:19.440 | keep the burden on the company

01:28:22.240 | so that we're not paying income tax against this

01:28:25.960 | and use the company assets that would normally go

01:28:29.240 | to the mainstream healthcare provider

01:28:31.480 | to pay whatever related cost associated with it.

01:28:35.120 | - Would your company qualify based upon the ideological

01:28:39.760 | and religious screenings

01:28:40.680 | of the Christian Healthcare Sharing Ministries,

01:28:42.720 | would your company qualify

01:28:43.800 | for a group healthcare sharing program?

01:28:46.240 | - At least for the highest paying,

01:28:51.840 | most expensive family, which would be for my wife and I,

01:28:54.920 | I can speak for us personally.

01:28:56.360 | - So that's your problem there.

01:29:00.960 | And you'll have to research it.

01:29:03.000 | So there are organizations that would qualify

01:29:05.520 | if your organization, for example,

01:29:07.280 | has some statement of faith screening

01:29:10.720 | that your employees have to subscribe to,

01:29:14.200 | then you could qualify for a healthcare sharing ministry.

01:29:16.800 | But most companies wouldn't qualify for that

01:29:19.520 | because most companies wouldn't be able

01:29:21.680 | to discriminate against employees one way or the other.

01:29:24.160 | And so you could offer it.

01:29:26.920 | You're not required to offer it.

01:29:28.080 | You could offer it if somebody could participate in it.

01:29:30.640 | But most companies, in my understanding,

01:29:33.040 | couldn't do that collectively.

01:29:35.280 | So on that, you'll have to research that and talk with them

01:29:37.920 | and see if you would qualify.

01:29:39.680 | If you would qualify, and if your employees,

01:29:42.160 | your three non-related employees would be interested in it,

01:29:45.880 | I think it's a really wonderful option.

01:29:47.560 | I love the outcome of the Healthcare Sharing Ministries

01:29:52.560 | plans because they just do such a good job.

01:29:57.240 | They align, number one, they can save you money

01:30:01.320 | out of your actual pocket in terms of paying for premiums

01:30:04.800 | 'cause they're so much less expensive.

01:30:06.640 | They do a really good job, in my opinion,

01:30:09.080 | of starting to change the medical marketplace.

01:30:11.240 | I was very excited when under the,

01:30:14.600 | I think it was President Bush, George W. Bush,

01:30:17.200 | when he passed the legislation

01:30:18.480 | that brought in healthcare sharing accounts

01:30:20.600 | because I was very excited

01:30:21.840 | about the high deductible health plan.

01:30:23.120 | From my reading, it was about the only option

01:30:25.560 | that could start to change medical costs

01:30:29.060 | because with a high deductible health plan,

01:30:31.360 | you had an incentive to change,

01:30:34.000 | to negotiate with your provider.

01:30:36.160 | Well, my experience with the Healthcare Sharing Ministry

01:30:37.960 | has been that incentive is much stronger

01:30:40.120 | because now, not only do I have the incentive

01:30:42.560 | of saving money, but I'm with a group

01:30:44.640 | of ideologically like-minded people,

01:30:47.040 | which means I see myself as part of a group of people

01:30:49.720 | that I wanna help, I wanna see them succeed,

01:30:51.400 | and so I drive a harder bargain with my medical providers,

01:30:54.920 | and then I just pay cash, and then that's right,

01:30:56.920 | that's good for the doctors

01:30:58.000 | because they can spend less time paying people

01:30:59.760 | to work through the billing,

01:31:00.840 | and they can just take cash payment,

01:31:02.600 | and then I have total flexibility also

01:31:05.360 | by not being limited to what's in network

01:31:07.160 | versus out of network.

01:31:08.400 | Now, we can pit the free market against one another,

01:31:10.520 | and I can go where I'm treated best

01:31:12.000 | with whatever physician is better,

01:31:13.840 | whatever state is better,

01:31:15.080 | anywhere in the world that's better,

01:31:16.240 | and so you open up things like medical tourism for,

01:31:20.840 | I mean, there's just so many options,

01:31:21.800 | so I love what Healthcare Sharing Ministries

01:31:24.080 | can accomplish financially and for everybody,

01:31:28.720 | where everybody benefits.

01:31:29.560 | I benefit, the doctors benefit,

01:31:31.560 | my fellow plan participants benefit.

01:31:33.320 | I think it's a really good option,

01:31:35.920 | but I don't know how you can apply it in a company

01:31:38.320 | unless there, I don't know the answer to that.

01:31:42.320 | I don't see any reason not to do the HSA.

01:31:44.520 | I think in that same vein of what's effective,

01:31:47.820 | the HSA is really good for most people.

01:31:50.280 | Unless you have an employee

01:31:51.760 | that has ongoing chronic health conditions

01:31:54.440 | where they need a plan that has a low deductible,

01:31:56.880 | if you can offer a health deductible health plan,

01:31:59.000 | high deductible health plan that's qualified for an HSA,

01:32:02.600 | for the majority of people,

01:32:03.680 | that's gonna be the best solution for them

01:32:05.080 | because they can get their preventive care

01:32:07.000 | covered under the high deductible health plan,

01:32:09.000 | and yet they can still enjoy lower premiums.

01:32:12.200 | Those lower premiums can be for you, good for you,

01:32:14.760 | and then what you can do as a company

01:32:16.200 | is you can just put some of those savings and match them

01:32:19.040 | or make contributions

01:32:20.320 | to their health savings account for them.

01:32:22.680 | So that, in my mind, is a great use for the money.

01:32:26.560 | Now, I think you could create

01:32:29.760 | some additional supplemental health plan

01:32:32.380 | if you're willing to create your own private plan,

01:32:35.240 | usually in supplement.

01:32:36.980 | I think you could create a plan

01:32:39.120 | that would allow you to spend more money on it,

01:32:42.580 | but that's out of,

01:32:43.420 | you'll need to find an appropriate consultant on that,

01:32:46.240 | and I don't know.

01:32:47.060 | But I don't see any reason not to do the HSA.

01:32:49.320 | I don't see any reason why you shouldn't just go ahead

01:32:51.160 | and make contributions to the accounts for the employees

01:32:54.040 | and then allow them to also put their money in for them.

01:32:56.640 | I don't see any downside to that.

01:32:58.280 | - Okay.

01:33:00.360 | Yeah, I think that was what I was defaulting to,

01:33:02.380 | just for simplicity and familiarity for the employees,

01:33:05.080 | to be able to basically give them

01:33:07.520 | the same premium amount month over month,

01:33:09.600 | but then they have the benefit

01:33:11.200 | of seeing an HSA account value grow

01:33:13.360 | compared to just, yeah,

01:33:15.280 | if they don't use their insurance all that much,

01:33:17.000 | that's just money spent,

01:33:18.680 | which is one of the frustrating things about insurance.

01:33:21.680 | - Right, right.

01:33:22.600 | And you can, yeah, exactly.

01:33:24.400 | It's the thing that is the very best way to help them.

01:33:28.840 | And when they understand the power

01:33:30.280 | of the healthcare sharing account,

01:33:32.440 | where they, I'm sorry, the health savings account,

01:33:34.000 | where they understand the power

01:33:34.880 | that the money can be contributed.

01:33:36.920 | If you do it as a payroll deduction,

01:33:38.360 | they can avoid the employment taxes on their contribution.

01:33:40.760 | That's really great.

01:33:41.840 | If they understand that if you don't use the money

01:33:44.240 | for health needs, you can take it out in retirement.

01:33:47.440 | It's a really powerful account,

01:33:49.280 | and you can match the money,

01:33:50.680 | you can put the money in for them, make contributions,

01:33:53.080 | and that'll be good for them and good for you,

01:33:55.160 | allow you to do that with them.

01:33:59.000 | So I think that's probably your best option,

01:34:01.480 | because although, if you ran some religious organization

01:34:06.480 | where you had a doctrinal statement

01:34:08.560 | that your employees had to assent to before joining,

01:34:11.280 | then the healthcare sharing ministries would work great,

01:34:13.840 | but you can't do that

01:34:14.760 | in just a private for-profit business.

01:34:17.320 | So I don't see how that would work for you.

01:34:20.440 | - Well, I think in this particular case,

01:34:22.520 | we're such a small company,

01:34:24.360 | we would be able to let people who chose not to be

01:34:27.080 | in the healthcare sharing program

01:34:28.720 | to still continue with their current plan.

01:34:31.160 | So in this scenario,

01:34:32.440 | I was looking at keeping the other two employees

01:34:34.160 | on just a small two-point contract

01:34:35.960 | with the healthcare provider,

01:34:37.720 | and perhaps moving my family

01:34:39.400 | to the medical sharing program alone.

01:34:41.080 | - Okay, maybe so.

01:34:42.600 | I would just say, I'm sorry,

01:34:44.080 | you've reached the end of my knowledge.

01:34:45.520 | (laughing)

01:34:47.560 | I'm not good enough,

01:34:48.400 | but hopefully maybe there'll be a listener

01:34:50.640 | who knows something about it

01:34:52.120 | and can get in touch with me,

01:34:53.320 | and if so, I'll forward the info on to you.

01:34:55.200 | If you do, send me an email, do that.

01:34:56.480 | If a listener has a suggestion for you,

01:34:59.600 | you can email me, joshua@radicalpersonalfinance.com,

01:35:02.400 | and then you can go ahead and send me an email,

01:35:05.120 | and that way I have your email address

01:35:06.280 | and can pass that on after the show.

01:35:08.360 | But it's an interesting idea,

01:35:09.480 | and I appreciate your doing a good job.

01:35:11.640 | Employees really do value medical programs,

01:35:17.120 | especially the appropriate caliber of employees.

01:35:19.480 | I hate how ridiculous the marketplace has gotten.

01:35:22.760 | Unfortunately, I don't have a solution.

01:35:24.480 | I don't see how it can be solved in the short term.

01:35:28.440 | But for now, take care of yourself,

01:35:29.840 | take care of your employees,

01:35:30.760 | and may your business continue to grow.

01:35:34.080 | That's it for today's Q&A show.

01:35:35.000 | I'm gonna skip the music as we go.

01:35:36.360 | I will just simply close with three things.

01:35:38.060 | Number one, the healthcare sharing ministry that I use,

01:35:40.440 | the Samaritan Ministries, love them, they do a great job.

01:35:42.520 | Check 'em all out.

01:35:44.200 | I intend, back to the courses,

01:35:46.260 | my goal is to create a comprehensive course on that

01:35:48.680 | and at some point,

01:35:50.680 | and so that you can kind of work between 'em,

01:35:52.680 | 'cause I love them.

01:35:53.680 | They do such a great job.

01:35:54.760 | We have such a great experience.

01:35:56.000 | But if you wind up joining Samaritan Ministries

01:35:58.040 | in your research, go check out the past series

01:36:00.160 | that I did on the podcast,

01:36:01.320 | and if you wind up joining,

01:36:02.160 | let 'em know Joshua Sheets sent you.

01:36:04.200 | Number two, several listeners made unsolicited good words

01:36:08.580 | about my courses.

01:36:09.420 | I'm so grateful for that.

01:36:10.480 | If you'd like to check those out,

01:36:11.600 | the career and income course

01:36:13.920 | is not currently available for sale.

01:36:15.880 | I may be launching it.

01:36:16.960 | I'm still deciding.

01:36:17.800 | I'm changing a few things

01:36:18.640 | and trying to update it and make it better,

01:36:20.160 | but I may be launching that again in the new year.

01:36:22.000 | I see it's the number one thing that can be done,

01:36:23.880 | but for now, go and buy the credit card course,

01:36:25.720 | radicalpersonalfinance.com/creditcardcourse,

01:36:27.720 | and then closing, number three,

01:36:29.520 | join me next week, Monday, December 17,

01:36:33.840 | Tuesday, December 18, Wednesday, December 19,

01:36:37.100 | Thursday, December 20, and Friday, December 21.

01:36:40.120 | Join me at 12 o'clock, noon Eastern time for a Q&A call.

01:36:43.980 | That phone number is 561-440-7362.

01:36:47.780 | I'll do about an hour of Q&A each day,

01:36:49.800 | and then I'll cut things off,

01:36:50.860 | so it behooves you to get in early.

01:36:53.100 | If I don't get to you, just call in again,

01:36:54.660 | but 561-440-7362.

01:36:57.660 | Join me on Monday at noon Eastern

01:36:59.520 | for a special week-long series of Q&A shows.

01:37:02.420 | Thank you for listening.

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RPF0610-Friday_QA