RPF0626-Friday_QA
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00:00:14.800 | Today on Radical Personal Finance, it's live Q&A.
00:00:17.600 | [MUSIC]
00:00:34.160 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:37.040 | skills, insight, and encouragement you need to live a rich and meaningful life now,
00:00:40.720 | while building a plan for financial freedom in 10 years or less.
00:00:44.000 | My name is Joshua, I am your host, and today we host a live Q&A show. It's just like the radio,
00:00:49.920 | got open phone lines, callers waiting on the line,
00:00:52.560 | I open up the mic and we chat about any topic you desire.
00:00:57.840 | [MUSIC]
00:01:06.480 | At the moment, I do not record these shows on a specific daily schedule. For example,
00:01:10.640 | I don't record them on Friday at 8 o'clock in the morning or anything specific like that.
00:01:14.880 | But if you will watch your podcast feed and/or my Twitter account,
00:01:18.000 | Twitter of course is twitter.com/joshuasheats. If you will watch those two resources,
00:01:22.480 | I usually put them out. So of course, this particular show I have advertised on the
00:01:29.920 | podcast feed to listeners. That's how these listeners got on the line. And I also work hard
00:01:34.720 | to do these shows regularly for patrons of the show. So of course, you can join at patreon.com,
00:01:39.120 | find Radical Personal Finance, and that's how you get access to these calls. But I would love it if
00:01:43.120 | you would call in to the next show. I always enjoy fielding listener questions, taking listener
00:01:47.840 | comments. And so I hope that you enjoy these. I've always had good feedback from the audience
00:01:51.120 | that these shows are interesting and I love doing them. We go first to Dan in Calgary,
00:01:55.520 | Canada, Calgary, Alberta, Canada. Welcome Dan to the show. How can I serve you today, sir?
00:01:59.040 | Hello, Joshua. Well, thanks for opening the Q&A session up to the public. I was really excited
00:02:06.560 | about that. But being from Canada, I didn't have a particular technical question to ask you that I
00:02:14.000 | thought you haven't already covered in some way for Americans. So I decided to try to have a
00:02:22.000 | discussion with you. And I'd like to challenge your endorsement of capitalism. In the past,
00:02:28.160 | you've stated that you don't invest in publicly traded companies. You don't think they are an
00:02:36.240 | ethical place for your money. And you've also said that you don't support the current feminism
00:02:45.040 | movement because you believe it demonizes motherhood. And so with regards to feminism,
00:02:51.360 | I would argue that it demonizes motherhood because we live in a very capitalist society that
00:02:56.720 | only values people on their income. So if we got rid of that value system, then feminism could
00:03:06.480 | focus on other things. So I guess, in summary, do you think capitalism has become too...
00:03:14.160 | Okay, I guess another detail is that the current state of capitalism is very different from the
00:03:20.880 | kind of theoretical, like small business. I think small business capitalism is great. It provides
00:03:28.800 | lots of benefits to society. But I think maybe it's become too big and out of our control,
00:03:35.680 | where we're all just cogs in the global financial system. And because we don't have a close eye on
00:03:46.160 | our money, we can't use it to act ethically. So has capitalism become too big? And is there a way
00:03:54.800 | to regain control of it? I love the question. Thank you for calling in with such an interesting
00:04:01.280 | question. One of the things when I've tried to trigger audience members to call in and talk
00:04:06.320 | about something interesting like this, and usually people want to talk about technical questions,
00:04:10.160 | which of course I love to talk about. But I love these kinds of conversations. I think they're
00:04:16.000 | good questions. So first, for clarity, Dan, are you thinking about this abstractly? Or do you
00:04:22.960 | have a solution? For example, if not capitalism, are you an advocate for communism, for socialism?
00:04:30.080 | Are you advocating for a certain alternative economic theory? Or is this just more you're
00:04:35.760 | thinking through the issues and wondering your way through? I do have some thoughts on replacements,
00:04:43.760 | but I don't think I can argue strongly for them. However, I think Europe, I've seen some very
00:04:52.240 | interesting things out of Europe. They have one policy of is a right to repair law. So it tells
00:05:00.640 | Apple, if you want to sell products, you have to give consumers the opportunity to repair them,
00:05:07.040 | and not just be tied into continually buying new products. And that kind of fights the kind of free
00:05:15.440 | reign capitalism has. So I do believe in the free market, but I also think heavy regulation can be
00:05:23.920 | beneficial. And then also in regards to the income tax, I was just listening to one of your shows
00:05:32.160 | where you believe in a flat rate tax. And again, in the context that the capitalism has changed
00:05:44.320 | from what we think of it as just like a business with people, it's changed to become this global
00:05:50.640 | system that just works to gain more money and not actually help people. So yeah, I think heavy
00:06:02.480 | taxation. And so in terms of incentives, you would, I don't want to put words in your mouth,
00:06:09.600 | but I think you would say that people are incentivized to gain money when they work hard.
00:06:16.240 | But I would think that there's a limit to that. And that we don't need incomes over
00:06:21.280 | a hundred thousand or 200,000 that you can have other incentives than income if your basic needs
00:06:32.080 | are met. And I believe people would pursue those other incentives.
00:06:38.400 | - Right, right. Yeah, so you've mentioned a hodgepodge of ideas, and I think
00:06:42.880 | I'll freely share my own personal opinions. I would say kind of as preamble,
00:06:50.800 | I don't think any of us really live in a purely capitalistic society. None of us live in a pure
00:07:01.840 | society. And so when talking about capitalism or socialism or communism, in my observation,
00:07:09.440 | I think we're all dealing with just a mixed bag. For example, I really, you know, officially,
00:07:15.360 | China is officially communistic. And yet, if you're interested in free market business creation,
00:07:23.040 | it's one of the most exciting places in the world because the Chinese government has massively
00:07:30.400 | liberalized the ability of individuals to own the tools of production, which of course is the
00:07:35.920 | classic economical description of free market capitalism, who owns the tools of production.
00:07:41.760 | And so although it's officially communistic, then, but yet there's a lot of free market
00:07:49.280 | opportunities there. Now, on the same hand, you know, the United States would like to be
00:07:53.440 | billed and advertised as the world's defender of free market capitalism. And yet, in my
00:07:59.440 | observation, at least the US economy is an extremely distorted and regulated market that
00:08:06.800 | has substituted free market capitalism for crony capitalism and has really substituted a lot of
00:08:13.360 | problems. And so I would not call the US American system of enterprise a pure model of capitalism.
00:08:22.640 | So I think what would be most interesting is to talk on a few of the ethical issues that you
00:08:27.040 | raised. And in my mind, there is a common theme. Perhaps we would never approach the idealistic
00:08:33.840 | perfection. If I could advocate for a strong position, I would happily advocate for a strong
00:08:41.440 | free market capitalist system without the intervention of government agents in the
00:08:48.640 | tools of production, in the ownership or the management of the tools of production.
00:08:52.320 | But I also think that some of the issues that you mentioned are not a perfect example of
00:08:59.040 | capitalism. For example, you mentioned the right to repair laws. Ideologically, I'm in favor of
00:09:05.920 | those right to repair laws. And for the uninitiated, my understanding of the right to
00:09:11.120 | repair laws is this. Let's say that you purchase a piece of equipment. Usually here we're dealing
00:09:15.600 | with electronic equipment. And you buy a phone and the screen on a connector on your phone goes bad.
00:09:23.360 | So you open up the phone, you take out the connector and you swap in another connector.
00:09:27.920 | Well, officially doing that, many of the companies, the electronic companies or electronics
00:09:32.880 | companies are adding stickers that says if the user repairs this device, it completely voids
00:09:39.360 | any kind of company warranty associated with it. So then separately, you fix the connector,
00:09:44.160 | but then the screen goes bad and it's completely unrelated to the connector and you file a
00:09:48.320 | warranty claim. The company is in a situation where they're going to deny that claim because
00:09:52.640 | you opened up the phone. And it's evident that you opened the phone. Well, I think that's wrong.
00:09:58.080 | It should not be that way. It's your device, you paid for it, you're allowed to work on it. And
00:10:02.240 | that's what my understanding of the right to repair laws are. And so I would advocate for that
00:10:05.920 | against whatever Apple would say or whatever Samsung would say or whatever these companies
00:10:12.480 | would say. I support that. I'm in favor of that solution. But I see that as an extension of the
00:10:19.840 | ethics of private property, which is the basis of my understanding of a free market, my understanding
00:10:26.080 | of capitalism. Now, similarly, I think that there are interesting discussions that usually no one
00:10:32.240 | really cares about except weirdo political commentators. But for example, recently I was
00:10:37.760 | thinking about intellectual property law. And I was listening to a presentation from a strongly
00:10:43.840 | libertarian attorney. And libertarianism would be where I would draw a lot of intellectual
00:10:49.040 | stimulation, a lot of intellectual arguments. Of course, I try to be a little bit more pragmatic
00:10:57.360 | than many libertarians. But he was making a strong defense of why libertarians should oppose
00:11:04.320 | intellectual property laws. They should oppose the ability for you to trademark and copyright
00:11:09.520 | your inventions, etc. And I think in many ways I agree with that. I'm not fully persuaded one way
00:11:15.440 | or the other. In the past, I would have been a stronger advocate for intellectual property laws.
00:11:19.840 | At this point, though, I've come to see them as pretty corrupt. And intellectual property laws
00:11:24.480 | really are not helping a lot of things. Now, I can't change that system. I'm not going to get
00:11:29.440 | on my high horse and start trying to convince people. But I see it all as flowing from basically
00:11:34.720 | an ethical root. So what I think of as the ethical root in most of these things is based upon theft.
00:11:42.800 | It's my personal belief and ideology that all law flows from God's law. I see that as a unifying
00:11:52.320 | theme. Now, many people wouldn't see that as a unifying theme because they would have to
00:11:57.200 | appeal to some form of authority. So some traditions would go to natural law, some
00:12:02.320 | traditions would go to other sources. But I would see it as flowing from God's law. And so one of
00:12:08.320 | the basic elements of God's law, what I would say is a controlling law for all mankind everywhere
00:12:13.760 | on the earth, is don't steal. Thou shalt not steal. It's a fundamental law. Now, different
00:12:18.880 | people of different political persuasions support that or deny that in different ways. So for
00:12:23.600 | example, many of my friends who are secular libertarians would say, "Well, this is just a
00:12:29.200 | common practice. You can observe this in human history. It seems ethically sound through just
00:12:33.760 | ethical reasoning. We can derive this application from a study of human history. It doesn't have
00:12:38.720 | to be rooted in God's law." That's fine, whatever. Most of us agree, thou shalt not steal. Well,
00:12:43.840 | if I think about a phrase like thou shalt not steal, there are two sides to that. There's the
00:12:48.880 | positive side of it, of don't steal, and then there's the other side of the converse, which
00:12:53.680 | means, well, that means that property rights are inherent and there's individual ownership of
00:12:57.840 | property rights. And so that's the foundation, my theoretical philosophical foundation of something
00:13:02.560 | like property rights. So I just simply apply that, try to apply that principle consistently
00:13:08.720 | in every area. So what the government intervention then comes in is I see the vast majority of
00:13:16.320 | government intervention as a violation of the laws of theft. So the basic useful and catchy phrase is
00:13:27.200 | that many people who would propose a governmental solution, propose the redistribution of wealth
00:13:34.080 | through government action, the action of government agents, they would say, "Well,
00:13:37.680 | thou shalt not steal except by majority vote." So if you can get everybody to agree that we
00:13:43.520 | should steal from that person and take that thing from that guy and give it to this person over here,
00:13:48.400 | then we can do it. Then it's moral. So actions become moral based upon their outward consequences.
00:13:56.080 | And so many people would judge the morality of a nation. For example, this has become very
00:14:01.440 | common as here in the United States, and I don't follow Canadian politics much, so you'll have to
00:14:06.800 | comment on that. But here in the United States, of course, the progressive left has become
00:14:12.560 | increasingly vocal about the morality of wealth. And there's a strong movement right now to declare
00:14:21.840 | the poor distribution of wealth to be basically an immoral system. So I don't buy that because
00:14:28.800 | of additional ethics that all flow out of my own personal Christian worldview as far as the
00:14:34.800 | responsibility that wealth brings, etc., and the responsibility for charity. So let me just go back
00:14:40.480 | to a couple of your arguments, or to a couple of the points you raised. I agree with you that the
00:14:47.760 | systems that we face right now are troubling, as far as many things are troubling. I always like to
00:14:55.600 | start, and here we could just simply pursue an evidentialist argument and say, "Let's do a
00:14:59.520 | rational discussion of who is profiting the most and what underlying philosophies are profiting the
00:15:05.280 | most." So it's possible here we could create a fairly large tent. Nobody has to agree with me
00:15:10.080 | in terms of my own presuppositions to the argument. We could just look and say, "Let's look
00:15:14.480 | at human history and let's try to understand where are people flourishing the most, where are people
00:15:19.520 | benefiting the most, at least as we can measure it by some markers, such as personal wealth,
00:15:26.160 | such as personal health, such as the ability to have the basics of life." Because this would again
00:15:32.400 | be, "On what basis would we do a moral comparison? On what basis would we say one society is superior
00:15:37.440 | to another?" When I was in college, I spent some time studying under some extremely left-wing
00:15:44.080 | professors, and the basic argument was usually that you should measure the morality of a system
00:15:52.080 | based upon the results for the citizens. And so one of the most moral societies—there were two
00:15:57.280 | examples in the time that I was in college that were held up to be the most righteous and just
00:16:03.440 | and moral systems of governance and economic control. And those two systems—I was in Latin
00:16:09.600 | America—but those two systems were Cuba and Venezuela. And the argument was, "Yes, well,
00:16:15.040 | Cuba is not doing very well, but at least they have a very low infant mortality rate, and at
00:16:19.760 | least they have universal literacy, and the source of all of Cuba's problems is the U.S.
00:16:24.720 | problems with them, the U.S. control of their economy, etc." And then at that time, Venezuela
00:16:31.120 | was hailed as the paragon of human virtue and the way to govern an economy and a system, because,
00:16:36.960 | "Well, look, everybody's wealthy, everybody has money, everybody has all of their needs met."
00:16:41.040 | Well, fast forward less than—well, I guess a little bit more than a decade. Right now,
00:16:44.720 | Venezuela, you can't drive a truckload of goods through Venezuela without getting robbed by the
00:16:49.520 | people that are starving in the streets. And the system is forcing—women are selling themselves
00:16:57.200 | and their children into prostitution just to eat. It's a totally corrupt system. And you see the
00:17:03.760 | evidence of that. Cuba has all kinds of things that you also have to look at, because you have
00:17:07.680 | to look at violence and murder, etc., that also are associated with it. So I think there's a good,
00:17:12.800 | strong evidentialist argument that could be made that capitalism and systems of free markets have
00:17:18.400 | raised the most people in the history of the world out of poverty. And I don't define that
00:17:23.920 | just in nominal terms, meaning I don't define that just in terms of the amount of money that
00:17:27.520 | they have. I'm defining it also in terms of quality of life that various people have, the
00:17:32.160 | ability to purchase the things that they need, the ability to have clean water, clean food,
00:17:36.240 | healthy food, etc. So I think that's a good argument. I would say, however, that that doesn't
00:17:41.760 | mean that the current systems don't deserve a whole lot of scorn, a whole lot of correction.
00:17:47.520 | What I see, what frustrates me the most in the United States of America is crony capitalism,
00:17:52.240 | corrupt capitalism. The United States of America is one of the most corrupt societies on planet
00:17:58.800 | Earth. And the reason has largely to do with the political systems. Now, most US Americans don't
00:18:03.760 | see their environment as corrupt. They don't see the society as corrupt, because external, obvious
00:18:10.240 | bribery, for example, I get pulled over by a police officer and he says, "I'm going to take
00:18:15.040 | your license, but $20 will get it back." That's the obvious forms of corruption that are present
00:18:19.920 | in many places that we travel. Well, that doesn't really happen in the United States.
00:18:24.000 | The corruption that does happen like that is much more hidden. It's the contracts, the special
00:18:30.080 | dispensations that are given by the governors. But the major corruption is in the political system,
00:18:35.680 | where you basically buy the votes of politicians with the billions of dollars that are contributed
00:18:39.920 | to political campaigns. Now, I don't know how you solve that, but I think it's good to acknowledge,
00:18:44.960 | first and foremost, that there is a huge amount of corruption. And I see that corruption at all
00:18:50.000 | levels. You can see it in the federal government, you can see it in the local government. So back
00:18:53.920 | to taxation, for example, one of the trends that really troubles me is the practice of local
00:19:01.040 | economies, local political governments, to give special tax considerations, special tax benefits,
00:19:09.200 | tax exemptions, to certain companies that will come in and do what they want. That really troubles me.
00:19:16.880 | I don't believe that should exist. If you are going to tax, if it's right to tax, the system
00:19:22.080 | should be a level playing field. You shouldn't say, "Well, this company ABC has promised to come
00:19:26.880 | and create 100 jobs here, so we're then going to give them a 10-year tax exemption on their property
00:19:31.040 | taxes," or things like that. So I can freely acknowledge and do acknowledge the deep corruption
00:19:36.240 | in those systems. And what I see happening in this argument is very few of us are competent
00:19:41.760 | to argue first principles and see the natural extension of those principles. So we usually feel
00:19:46.960 | threatened. So most Republicans in the United States would feel threatened if you attack
00:19:51.680 | crony capitalism, they think you're attacking capitalism. And everything has basically become
00:19:57.440 | twisted and bastardized, etc. So for example, I'm opposed to free trade agreements. I'm opposed to
00:20:02.240 | any kind of free trade agreement between the United States and Canada and Mexico. Free trade
00:20:07.760 | agreements are the exact opposite of free trade. Free trade is when there's not an agreement saying
00:20:12.880 | that we're going to have a special trading block here and we're going to give these certain things.
00:20:16.240 | That's the opposite of free trade. So I'm sympathetic to your arguments. I'm sympathetic
00:20:22.240 | that things are too big, things are too corrupt. I'm sympathetic to those discussions, but I don't
00:20:30.240 | see it as a problem with capitalism, but as a corruption of capitalism. Now, we have to be
00:20:36.400 | careful here because it's possible that I'm committing a logical fallacy, the no true
00:20:40.400 | Scotsman fallacy. It's possible that I'm just redefining capitalism to say, well, it's not
00:20:45.280 | actually, this is just the wrong expression of it if we just had actual capitalism. And that's
00:20:50.080 | exactly the same thing that people from different political ideologies, we all have a tendency to
00:20:55.440 | do that. Well, the problem is not socialism, it's just that we haven't actually tried socialism. So
00:20:59.680 | we all have to be careful. But I don't disagree with your critiques. I just see that the basic
00:21:06.000 | first principle has to be who has the right of property ownership and then what are the
00:21:12.800 | responsibilities of that property owner and what are the responsibilities then of governing
00:21:17.360 | authorities. And on that basis, there has to be a coherent law that would govern and say,
00:21:23.840 | this is the realm of an individual and this is the realm of government. So those are just
00:21:28.640 | the comments. I'm sympathetic to your critiques. I don't disagree with them, but I don't have a
00:21:34.080 | problem defending the concept of capitalism in the middle of the mixed up systems that we all live in.
00:21:40.880 | Okay. Yeah, that's a very interesting response.
00:21:50.560 | Yeah, trying to counter that. Well, and just, I guess, would you, to me, it's like,
00:21:59.040 | whatever government you have, if there is a company, so that has access to a certain amount
00:22:07.840 | of money, it's just inevitable that they can cause the corruption, in my opinion. Because
00:22:18.720 | in the capitalist world, you're just pursuing money and so you throw aside all ethics. And once
00:22:24.240 | you get big enough, there's not people at the helm anymore who actually can see the big picture and
00:22:30.000 | see damage. It's just all about money here right now. So to me, if companies get big enough,
00:22:37.840 | it's just inevitable that they'll be unethical. Let me interrupt you to count.
00:22:46.000 | Would you agree with that?
00:22:47.120 | Yeah, let me interrupt you to counter that argument. So first, we could argue about whether
00:22:52.640 | or not corporations should exist or be acknowledged. Now here, we should acknowledge,
00:22:58.720 | we have moved, we will be moving against about 500 years of developed common law. And if we take
00:23:05.600 | the position that corporations should not exist, we're in the vast minority. Now, I have no problem
00:23:10.800 | in the minority on all kinds of issues. But that would be one line of argument. So you could advance
00:23:16.400 | the argument to defeat that. You wouldn't have to necessarily defeat capitalism, but you could just
00:23:21.520 | advance the argument that corporations, and the idea that a corporate entity different than a
00:23:27.520 | person could exist or have special rights, that that is a corrupting influence. I don't buy that,
00:23:33.120 | but I don't want to argue that right now. I think that is a valid point that you could argue.
00:23:38.240 | In my mind, your bigger question would have to come back to what is the proper role of government?
00:23:45.120 | Because it is true that individuals can amass great wealth and great power through the use of
00:23:51.200 | corporations. It is also true that individuals can amass great wealth and great power through
00:23:56.960 | the use of government. If you want to commit crimes and be allowed to go free in most modern,
00:24:03.360 | or the modern world, the best place to do that is as a government official. Because as a government
00:24:07.840 | official, you have massive leeway, and it's very, very hard for you to be prosecuted. Just go and
00:24:13.440 | become an agent of the government. And so in political theory, I think you have to start at a
00:24:18.800 | more theoretical standpoint and say, which is what you've done, of capitals, who owns the systems of
00:24:24.800 | production, you have to say, well, what are the responsibilities of government? So here would be
00:24:29.520 | an example. It's my opinion that the government should exist, that there is an important role
00:24:39.200 | of government. Now, my friends from the anarchism world, or minarchism, or anarcho-capitalists,
00:24:48.240 | they would disagree with that. They would tend and say, you know, the only good government is
00:24:52.000 | dead government, that there is not such a thing as government. Because my thinking is bound by
00:24:58.240 | biblical principles, and because I begin from the presupposition that the Christian Bible is the
00:25:05.920 | revealed Word of God, which contains the outline, and because that same Bible affirms the role of
00:25:12.640 | government as being important, as a restraint on evil, then I can't become an anarchist. Although
00:25:18.800 | I'm sympathetic to those arguments, I understand them, I can't get there because of those
00:25:22.800 | constraints on my personal ideology. But I do think there are different functions of government.
00:25:28.560 | So what I think is the most intelligent approach is to say, should there be, for example,
00:25:34.400 | should there even be something that exists called the executive state? The problem that people have,
00:25:40.560 | and I'm not convinced there should be, and by the executive state I mean the U.S. government,
00:25:44.400 | the vast majority of the U.S. government, except for the judicial branch. I think the best role
00:25:50.560 | of government, where government is the best, is simply in the judiciary, to have a judge
00:25:56.080 | to preside over a dispute of two individuals. The majority of things that people like me are
00:26:03.200 | frustrated about as they relate to government involve the executive state, and the executive
00:26:09.040 | state is where people derive their power. So it's not inevitable, in my opinion, that corruption of
00:26:15.280 | the system by people who generate wealth and control is inevitable. That's only inevitable
00:26:20.880 | if you have a large and powerful executive state. Now, I don't know how to change that in the United
00:26:26.160 | States of America or in Canada. The trend is in the power of, is in the direction of a large and
00:26:30.960 | ever-increasing executive state. The average U.S. American, and I would dare say the average Canadian,
00:26:35.920 | cannot even conceive of what the absence of an executive state would be like. But that's where
00:26:42.400 | I would like to live. I would like to live in a country that does not have, at the very least,
00:26:47.600 | a strong central government, and in the United States that was the tradition prior to primarily
00:26:52.880 | President Theodore Roosevelt ushering in the progressive era, and of course massive
00:27:00.800 | expansion under President Franklin Delano Roosevelt. But prior to that, the function
00:27:05.600 | in the U.S. government was extremely small. There was an executive state set out in the U.S.
00:27:10.080 | Constitution, but its purpose and its role was extremely small, and people didn't have much
00:27:15.120 | contact with that. In the last century, everything in the U.S. system has been turned upside down,
00:27:21.840 | where now the central executive state is the primary focus of power, and thus it's the primary
00:27:26.960 | focus of money. And so for the majority of its life, Washington, D.C. was perceived as a swamp,
00:27:33.840 | not because President Trump said we're going to drain the swamp, but because it was a literal
00:27:38.560 | swamp and nobody wanted to be there. But the U.S. government didn't actually do much in those days.
00:27:43.360 | There were just a few basic things that happened. Today, the most bustling, thriving, vibrant
00:27:49.200 | economy involves the U.S. Capitol in Washington, D.C. And today, almost no company, almost no
00:27:56.080 | industry can afford to not have a lobbying presence there, and that just means it comes down
00:28:02.000 | to who can pay, who can buy the most money for their pet project. And so on that, I can share
00:28:08.560 | you in your critique, I share with you in your critiques of that whole corrupt system, but I
00:28:14.160 | don't think, I don't agree that it's inevitable that you would have that corruption. It's
00:28:20.240 | inevitable that you would have that. It's only inevitable if you have a large, powerful executive
00:28:24.880 | state. Because we have a large, powerful executive state, perhaps it is inevitable. I would like to
00:28:30.240 | see the executive state disappear. Unfortunately, most people don't. At this point in time, I'm not
00:28:36.640 | aware of, perhaps you could make an argument that Senator Rand Paul in the United States
00:28:41.440 | lobbies for that. Perhaps there are a few Congress people, but I don't know of any political party
00:28:47.520 | that today is receiving any traction in arguing for the diminishment of government,
00:28:52.000 | the diminishment of government influence. Everything is just growing, growing, growing.
00:28:55.840 | So I don't see it. I'll let you, Dan, make a final comment, and then we'll get off of this
00:28:59.920 | political, although I could talk for hours on this, but what's happened is during our conversation,
00:29:04.240 | I've had about six callers join, and then they've all disappeared. So I don't want my listeners to
00:29:08.480 | disappear as well, a few other callers. But Dan, go ahead and make your last word
00:29:11.440 | of whatever case you'd like to make.
00:29:16.800 | Well, I just want to say, yeah, thank you for your thoughts, and I hope to hear more of your
00:29:24.000 | views on topics like this in the future.
00:29:26.160 | Well, thank you. You are, at least as far as my email inbox, you are in a minority
00:29:31.200 | of people who actually want my opinions on these types of topics, but I certainly do enjoy
00:29:35.680 | discussing them. My only comment would be, I think all of us are learning and are growing
00:29:42.000 | and changing, and I don't know that, so I don't think that my own opinions right now
00:29:47.440 | are necessarily going to be the same as they are a decade from now. I still have a lot of
00:29:52.160 | questions on these topics, and it's my opinion that the only way to find truth on some of these
00:29:57.920 | topics is to have a robust and vigorous debate among fair-minded, honest people who can consider
00:30:06.720 | those topics. One of my greatest griefs and disappointments on the state of affairs,
00:30:12.640 | especially in the United States—perhaps it's better in Canada, but my time in Canada
00:30:16.560 | wouldn't say that if it's better, it's much better, but you'd have to be the judge of that.
00:30:20.640 | In the United States, one of my biggest griefs, frankly, is it seems very difficult for people
00:30:26.560 | to have an honest debate over deeper principles or philosophical principles. Most of us are so
00:30:34.560 | entrenched in our tribalism where we feel threatened if somebody just disagrees with
00:30:38.000 | one certain thing, and we just can't conceive of anything else. One quick funny story, Dan.
00:30:45.040 | I had a friend of mine who—I hadn't done much with them—I reached out to a friend of mine,
00:30:53.920 | and this friend, their daughter was a friend of mine, and I called him up, and the first thing
00:30:59.200 | that he said when he heard my name—I needed something from this guy—the first thing he said,
00:31:03.440 | he said, "Joshua, I heard that you're a Democrat." And I said, I laughed, I said, "You heard I'm a
00:31:10.800 | Democrat? How on earth did you hear that?" He said, "I heard you're a Democrat." And I thought,
00:31:17.840 | he said, "My daughter told me you're a Democrat." And I thought about it. And it was funny to me
00:31:22.640 | because I'm not a Democrat. I've never voted for a Democratic politician in my life,
00:31:29.280 | but because I'm not also a Make America Great Again Republican, then I automatically got lumped
00:31:35.440 | in with the Democrats. And so it was hilarious to me. We went on to have a discussion about borders,
00:31:40.640 | my opinions on immigration and borders were his biggest frustration, got to build a wall,
00:31:46.960 | etc. And because of that argument, we went on and basically he wound up hanging up the phone on me,
00:31:52.000 | and I had to laugh because the terms don't fit. The label doesn't fit. I'm not a Democrat,
00:31:58.240 | but I'm not a Republican. I think we should be able to have this discussion. And it's the reason
00:32:03.520 | that I take the flack that I do for doing this on the show is because I want to foster this
00:32:08.320 | discussion among fair-minded people who can sit and talk and argue about things. And it's that
00:32:14.320 | necessary debate that will ultimately lead to, in my opinion, the truth, or at least as close
00:32:19.360 | to the truth as we can get. And it's a great... I want to foment that debate and encourage it
00:32:25.440 | any way I can, which is why I even... I thank you for calling up and asking the question, Dan.
00:32:30.080 | Mark in Michigan, welcome to the show. How can I serve you today, sir? Please don't ask me about
00:32:34.560 | communism next. I won't. No, this is more of a technical question. Great. I am interested in
00:32:44.000 | umbrella liability insurance. And I think it's a good idea for most people. I'm convinced of that.
00:32:50.160 | But I've not been able to find much good information on how to figure out exactly
00:32:54.160 | how much you should get. Most of the information I see online just kind of stops at, "It's cheap,
00:32:59.440 | so get it." But I'm just wondering your opinion on what factors you should consider when thinking
00:33:06.560 | about liability insurance and figuring out how much coverage you should get. Like, should you
00:33:11.360 | just cover up to your net worth? Or is there an argument to be made for going above that number?
00:33:16.960 | Is there such a thing as too much liability insurance? So I just wanted to get your
00:33:21.840 | thoughts on that. The reason that... So I have pondered this question. I have been asked the
00:33:28.800 | question multiple times by clients of mine, and I don't know a good answer. I have asked... I've
00:33:35.680 | searched for somebody's... I've searched for arguments on the topic. I've searched for
00:33:40.640 | analyses. I have not found something that I have discovered to be satisfying as far as a way to
00:33:47.200 | approach that formulation. In general, about the best I can find is, "Hey..." is exactly what you
00:33:55.920 | have found, which is, "Hey, liability insurance is a good thing. It's really cheap, and so you
00:34:00.560 | should buy a lot of it. Maybe you should buy as much that's equal to your net worth." But I haven't
00:34:05.280 | found any good formula that would defend that. And I think there are a couple of reasons why.
00:34:10.000 | First, the risk is hard to quantify, meaning, how do we actually quantify the risk of a lawsuit,
00:34:18.560 | which is one of the primary areas where liability insurance is going to play a part? We can quantify
00:34:25.440 | that risk a little bit if we analyze the risk of a person. For example, if you own six jet skis,
00:34:30.880 | and you have... if you own four jet skis, and you have quadruplet 14-year-olds, you face a higher
00:34:37.840 | risk because 14-year-old boys and four jet skis probably don't mix very safely. So you could say,
00:34:44.320 | "I have an increased risk there." And so the insurance company can quantify that in some ways.
00:34:48.480 | But how do you quantify or figure out what your own personal risk of litigation is? How do you
00:34:54.160 | know if your friends are the ones who are going to slip and fall on your front steps, and which
00:34:58.960 | one's going to sue you and which one's not? How do you know that? I've not found, in my searching,
00:35:04.800 | I've not found any arguments that would indicate how you would know that. And so we're all just
00:35:10.240 | basically guessing. We have a gut feeling about our situation. We say, "Well, I think these certain
00:35:15.760 | actions and activities expose me to liability. Perhaps I'm more of a prominent person. Perhaps
00:35:20.560 | people know that I'm wealthier." But those are just guesses. Some of the court cases that do
00:35:25.760 | go through in civil litigation are things where the person would never guess they had any liability.
00:35:31.360 | And then you have another question to say, "Well, how do we know what my actual risk is
00:35:35.280 | in case there is litigation, in case I am held liable?" We can read some incredible,
00:35:43.840 | breathless headlines in the newspaper about so-and-so was just awarded $5 million in damages
00:35:49.600 | for a slip and fall. But then we don't see the follow-up story where the judge said,
00:35:54.800 | "That was a ridiculous settlement, and it was changed, and this actual settlement was $413,000."
00:36:00.400 | So we don't know what our actual legal liability risk is, and we don't know how that risk would
00:36:05.040 | be found. There are times where you have an activist jury or an activist judge,
00:36:09.040 | and an award settlement seems to be completely out of the realm of reasonable, rational,
00:36:14.960 | monetary settlement. But then there are times where it's very reasonable. Somebody sues,
00:36:20.960 | thinking they're going to get millions, and they get $200,000. So I think there's a lot
00:36:25.920 | of difficulty here in actually figuring out the answer, because the risk is hard to define.
00:36:30.960 | So in my searching and in my thinking about the problem, I have not come up with an answer to it.
00:36:36.880 | Barring a good answer, the only thing I have to say is this. Number one, think about
00:36:42.800 | insuring your net worth. It makes sense to me that if you have a $5 million net worth,
00:36:49.040 | and if you can get a $5 million umbrella liability policy, in absence of any better argument,
00:36:55.120 | that seems pretty decent to me. But I wouldn't say that you were wrong if you bought $3 million,
00:37:00.080 | and I wouldn't say you were wrong if you bought eight or ten. I don't know. I just say, "Meh,
00:37:04.320 | seems as good as anything else," as an idea. So I think insuring your net worth makes sense.
00:37:09.040 | Number two, I think you should ask for and calculate the cost of the insurance in different
00:37:14.960 | quotes and see if there are any, for lack of a better word, breakpoints. The idea being,
00:37:20.320 | is $5 million of insurance twice as much as $2.5 million of liability insurance?
00:37:25.680 | My guess would be that it's not. Now, I've had some clients calculate this,
00:37:31.200 | but I haven't calculated this recently, so you have to ask your insurance agent for the numbers.
00:37:35.200 | But usually it's not. And so if you're thinking about it, and $2.5 million of insurance is going
00:37:39.760 | to cost you $1,500 a year, and if $5 million is going to cost you $2,200 a year, I think that's
00:37:45.600 | reflective of reality, because there's a much lower risk that the insurance company is going
00:37:49.360 | to pay out $5 million than $2 million. And so I think there are breakpoints in liability insurance,
00:37:54.800 | and I think it's worth it to you to exploit that. So why not go ahead and get $5 million,
00:37:59.680 | if you can qualify for it, and that meets your net worth, especially if there's a minor breakpoint,
00:38:05.120 | a decrease in cost for that additional amount of insurance. And I think the third thing is,
00:38:10.720 | just do an assessment of your personal risk and your personal risk factors. Some of those things
00:38:16.240 | will be known to the insurance company, in terms of your behavior, your criminal record report,
00:38:21.200 | or whatever the situation is. But then some things will be known just to you, where you recognize
00:38:26.000 | that you might be doing something that brings you a higher risk. And so because of that,
00:38:30.640 | you're going to go ahead and add a little bit more liability insurance. And then also,
00:38:35.760 | you should consider your other assets, and you should consider the other planning that you have
00:38:39.600 | done. Liability insurance should be a cornerstone of good defense planning, but you might adjust
00:38:47.040 | your amounts based upon how well-sheltered your other assets are, and how exempt they are from
00:38:51.680 | the claims of creditors. So that was a fairly lengthy way of saying, I don't know either,
00:38:57.440 | but hopefully, by talking to your insurance agent, studying the numbers, and just kind of thinking
00:39:01.920 | about your personal risk factors, you'll arrive at a number that feels right. And I wish I had
00:39:07.120 | a better formula. If any listener has one, please email me, joshua@radicalpersonalfinance.com.
00:39:11.600 | I have not yet found somebody who will advance an argument that makes sense to me beyond what
00:39:17.040 | I've just said. Okay. No, that's very helpful. I guess just one follow-up question.
00:39:24.400 | Do you feel like having a higher umbrella liability coverage amount would make you a target
00:39:34.400 | of a lawsuit in any significant way? As in, is that a knowable piece of information for
00:39:42.640 | an attorney who may be representing someone that wants to sue you? Can they figure out how much
00:39:47.440 | insurance you have and target you that way? Or if that's not the case, then it seems like price
00:39:54.880 | being equal, more would be better. I'm just wondering if there could be such a thing as
00:40:00.400 | having too much insurance. I am not certain about the answer to that question.
00:40:06.640 | In my studies of the subject, I don't know how somebody, prior to the initiation of a lawsuit,
00:40:14.080 | or the initiation of legal action, or of a claim, I don't know how somebody would know that.
00:40:21.840 | And I don't think that if there is a mechanism for somebody to find that information,
00:40:30.960 | I don't know what it is. Now, I've studied a lot on the question of privacy. I've been super
00:40:37.760 | interested in the topic of financial privacy and trying to understand how it can be maintained.
00:40:43.760 | And what I have learned is there are far more mechanisms for information sharing than ever
00:40:49.600 | before. Basically, every time that I have thought, "Well, that's not going to happen," I have been
00:40:55.680 | proven wrong in financial privacy and in other aspects of privacy. And I've learned all of my
00:41:03.920 | instincts in the past have been wrong. Just a couple of simple examples. I used to think, "Oh,
00:41:11.040 | there's not that much of a risk of somebody being able to track your location by your cell phone
00:41:16.480 | signal." And then I started to find information where there was good location. And I was not
00:41:21.040 | surprised when, it was about a month ago now, maybe two months, when the big article in,
00:41:28.160 | I think it was Wired Magazine, came out where the reporter was able to hire a bounty hunter for,
00:41:36.240 | I think the price was just a few hundred dollars. And the bounty hunter was able to identify the
00:41:42.000 | location of the individual's cell phone just simply based upon having the cell phone number.
00:41:48.240 | Now, I had previously come across good information that told me to expect that story, but that's a
00:41:54.800 | public story that you could find. That if anybody knows your cell phone number, yes, it is actually
00:41:59.040 | a tracker in your pocket. Now, to finances, similar things with bank amounts and IRA amounts.
00:42:04.080 | I used to think, "Well, there's privacy about those things." I have since learned there is not.
00:42:08.640 | You cannot trust that privacy exists. So, in the past, all of my instincts have been wrong to say,
00:42:14.960 | "Oh, no, there's no way for someone to find out." Because of that, I'm very cautious in the answer.
00:42:19.040 | So, it wouldn't surprise me if you did research and found out, yes, there is a way for someone
00:42:23.200 | to know the size of the policy. And just to be clear, the most obvious examples here is that
00:42:30.560 | a motivated adversary would do it, whether it's legal or not, just through the use of pretexting.
00:42:36.640 | So, the most obvious way to do it would be, if I wanted to find out how much your liability
00:42:42.160 | insurance policy was, I would observe you. I would figure out who your insurance agent is or who the
00:42:49.920 | insurance company is that you likely work with. If I didn't know that for certain, I would do that
00:42:54.880 | by calling and pretexting, which is illegal now. But I would do that by calling and pretexting your
00:42:59.520 | homeowner's insurance company, sorry, your mortgage company, which I can find on the deed for your
00:43:05.120 | house. I can find the mortgage company that has a lien against your property. I would call the
00:43:09.680 | mortgage company, which is probably handling your escrow payment. Then I would call that same
00:43:13.520 | company, which is probably the same insurance agent that you use for your liability insurance.
00:43:17.600 | By pretexting that agent on the liability insurance, I would find out how much liability
00:43:22.000 | insurance you have. That's illegal, but it's doable by somebody who's skilled with good
00:43:27.200 | social engineering skills to do it. So, it's at least possible that way. But if there's a simple
00:43:33.520 | way to do a web search or hire a financial private investigator to find out, I don't know what it is.
00:43:37.920 | Now, to the question of is more liability insurance a good thing or not a good thing,
00:43:43.120 | in general, the consensus seems to be among those who are experienced, the attorneys who are
00:43:51.120 | dealing in this, in my study of their work, it seems to be that yes, indeed, liability insurance
00:43:57.520 | is a good thing. There could be exceptions to that. So, I have read several attorneys who have
00:44:03.120 | given a defense that if all of your other assets are completely protected and completely ironclad
00:44:11.040 | locked up, that going without insurance can actually be a legitimate strategy. But I think
00:44:16.880 | it's most legitimate for somebody who has a high profile, a high target. The people who I have seen
00:44:22.960 | who have been advanced as a good case study of this are physicians. Physicians who have
00:44:29.760 | significant personal risk with their medical practice, and there are physicians who will
00:44:35.280 | choose to go without malpractice insurance, and they just simply say, "Listen, you can sue me.
00:44:43.600 | You won't get a thing." And because their asset protection structures are ironclad,
00:44:49.280 | they're, "No, you will not get a dime out of me." And because in this case, because they can't go
00:44:55.840 | after the insurance company and expect to get a settlement from the insurance company, then in
00:45:02.000 | that case, it does minimize the risk of the lawsuit actually being put all the way through.
00:45:06.720 | My understanding, even in the insurance business, there was a change. It used to be
00:45:10.640 | that the insurance companies would write policies, liability insurance, malpractice insurance,
00:45:16.960 | whatever the specific policy was, they would write the policy and keep it, and they would quickly
00:45:22.160 | settle. Well, that generated so many, so much losses for the insurance companies that they
00:45:27.280 | decided to change, and then they decided, "We're going to fight tooth and nail." Now, that made a
00:45:31.680 | change in the marketplace of litigation. So I don't know the certain answer, but those are some
00:45:36.480 | thoughts on it. I think I would go at this point with the consensus viewpoint of people who can say
00:45:44.320 | more liability insurance is a good thing, and the only reason I would violate that would be if I
00:45:50.560 | specifically knew that my asset protection attorney is specifically advising me on my situation and
00:46:00.560 | giving me good arguments as to why I should forego the insurance. I, Joshua, would not give you that
00:46:07.040 | advice. Okay, great. Thank you very much. My pleasure. Thank you for calling in. All right,
00:46:13.760 | we know now to the great state of Washington. Welcome. Welcome to the show. Tell me your name,
00:46:17.200 | please, and how I can serve you today. My name is Alex. Alex, welcome.
00:46:23.120 | I had a question. I listened to Dave Ramsey, and I've just found you recently, so I've been
00:46:31.600 | listening to you guys. I want to get a house, but I'm also in the middle of paying off a bunch of
00:46:38.160 | debt. I have credit cards. I have my wife's car payment, my car payment. So it's like,
00:46:44.000 | should I, is it worthwhile? Because I know Dave Ramsey says you got to save up 20% down,
00:46:49.040 | which 20% on a normal house is like $200,000, so that's like 40 grand. So not only do I have to go
00:46:54.400 | through the debt snowball, but then I have to save up 40 grand before I can get a house.
00:46:57.920 | So I'm thinking, I spend $1,000 a month on rent right now. Should I maybe look into getting a
00:47:06.880 | house with very minimal down, or should I just keep working on the debt snowball and keep wasting
00:47:13.440 | money on rent? When did you start doing the Dave Ramsey plan? Like, I don't know, last year.
00:47:23.600 | Okay. And are you making progress? How much debt have you paid off in the last year?
00:47:26.880 | Well, we started with, I think in the middle of last year, we started with $118,000.
00:47:35.120 | Right now, we're at like $74,000. Congratulations. That's awesome.
00:47:40.480 | So short answer would be this. My advice would be follow the Dave Ramsey plan,
00:47:46.000 | get out of debt, and know you're not throwing away money by renting your house. One of the
00:47:53.280 | biggest misconceptions is the idea that renting is throwing away money. In the majority of markets,
00:48:00.560 | your cost of renting and your cost of ownership will be very similar. But you should not buy a
00:48:06.960 | house until you are very financially stable and you're very convinced that buying a house is going
00:48:13.680 | to be a better move for you. If we actually go through the numbers and went through the numbers,
00:48:18.000 | I could persuade you of that numerically. But buying houses, houses are never as cheap as you
00:48:24.240 | think that they're going to be. And so if you can rent for $1,000 a month, and if you can get great
00:48:30.240 | traction on your debt snowball and pay off tens of thousands of dollars of debt, I would encourage
00:48:36.560 | you keep doing exactly what you're doing. Get completely out of debt. And when you are completely
00:48:41.680 | out of debt, you have a fully funded emergency fund. Then at that point in time, lift your head
00:48:46.720 | up and look around and rethink through the house question. But I listened to a podcast. And so
00:48:54.480 | this is like I was it's not that I was expecting that. But that's that's that's my thinking. That's
00:48:59.280 | my thought process, too. I'm like, yeah, let's let's keep paying off. Let's not like jump into
00:49:04.480 | anything new, because who knows, we might want to move. I just listened to your thing about RVs.
00:49:08.880 | It's like, heck, yeah, dude, I would laugh. I would much rather instead of having a house to
00:49:12.800 | live in an RV. But my wife wouldn't want to do that. So that may be my my like rebuttal or challenge
00:49:19.760 | to that is I lost my train of thought. The that you should buy a house and it would lower your
00:49:28.000 | costs or something like that. Well, no, like, oh, yes, you talked about how eventually the Democrats
00:49:38.160 | will take will take office, right? The next president will be a Democrat. And let's say
00:49:43.600 | they start like, obviously, this is more or less like, oh, well, hypothetically, if they start to,
00:49:48.800 | you know, the Medicare for all, if they start all these other things, inflation will start to kick
00:49:54.800 | in. And you will you and your podcast, I believe you mentioned having a mortgage is one of the best
00:49:59.520 | like methods of like wealth distribution, because your loan stays the same, but the value of your
00:50:04.560 | house increases astronomically. And so I'm thinking like, yeah, maybe it'll be difficult
00:50:10.320 | right now. But at least I'll have something so that if Trump loses in 2020, which who knows,
00:50:15.760 | depending on who they go with, who the Democrats go with, if he loses, they're going to start
00:50:20.880 | doing crazy things like that, you know, all this stuff like, and eventually, they're just gonna
00:50:25.920 | start printing uncontrollably, which is like, well, dang it, that means I'm gonna miss out
00:50:32.080 | on that wealth distribution. Well, so I understand. Yeah, I think it is flawed thinking. And I want
00:50:41.120 | to deal with a couple of the arguments that you said, but let me just step back for a moment and
00:50:45.120 | give you the reason why I answered your question the way that I did. When I hear when I'm hearing
00:50:51.440 | your talk, you talk and hearing you ask a question, I'm trying to discern to discern where you are in
00:50:58.800 | your financial journey, and where you are in your level of financial sophistication. And when I say
00:51:06.160 | that, that's not a an unkind term. For example, I'm not I'm not trying to say that you're
00:51:12.160 | unsophisticated, I'm trying to discern where you are in your personal level of financial education
00:51:18.000 | and in the clarity of your plan. So that's what I'm listening for. It's not so much about the
00:51:23.600 | specific deal. I'm listening to you're trying to say, hey, what's the clarity of your plan?
00:51:29.840 | So let me tell you what I'm thinking as an advisor, when you call me and you say,
00:51:34.640 | I've had $118,000 of debt, and I'm making progress paying it down. And although I didn't go through
00:51:40.880 | and create a complete list of what all those debts were, you listed a few minutes ago,
00:51:45.760 | you basically said it was on a bunch of things. And so the normal pattern of somebody who's in
00:51:50.480 | your situation, where they have a bunch of things, the normal pattern is when you've accumulated a
00:51:56.320 | significant amount of debt that spread out across cars and credit cards and student loans or
00:52:00.240 | whatever else, that that's usually due to the fact that you didn't have a clear financial plan,
00:52:05.680 | you didn't have a clear income plan, you didn't have a clear spending plan with your money.
00:52:10.080 | And so you were somewhat haphazard in your expenditures, and that led to you accumulating
00:52:14.800 | debt. Now, let me pause. Do you think that's accurate in your situation regarding your past
00:52:19.920 | actions and past behaviors that led to the accumulation of the debt? Or was there some other
00:52:23.520 | reason why you accumulated the debt? No, that's like, yeah, that's like the nail on the head,
00:52:30.640 | right? That's like, that's exactly right. It was just like, I didn't know what I was getting.
00:52:35.520 | I'm only 26 now. So it's like, shoot, you know, it's like, yeah, I was pretty, pretty stupid
00:52:40.640 | earlier. Good, good. Okay. Yeah, that's right. Perfect. So congratulations for changing. I want
00:52:46.800 | to firmly wholeheartedly if I could reach through the phone and grab your hand and pump it up and
00:52:52.640 | down, I would I'd slap you on the back and I'd say awesome. Now, what is most important at the
00:52:58.400 | initial stages of wealth building is to develop new habits, especially habits of money management.
00:53:07.760 | And that is what is so powerful about the Dave Ramsey program. Because Dave gives his followers
00:53:17.520 | a clear goal, get debt free. And because he talks about the way to do it, which is increase income,
00:53:25.520 | decrease expenses and manage the money so that it goes towards that debt. And because he is able to
00:53:32.080 | instill such a powerful motivation into people, the clarity of that goal will pull you towards
00:53:38.720 | it. Once you and your wife decide, hey, this is what we want. It pulls you towards it, just like
00:53:42.640 | any goal, any goal that you set pulls you towards it. If it's a goal that is held deeply and
00:53:47.440 | important. And along that process, you're learning new lessons of money management. You're learning
00:53:52.320 | to say no to your desires. You're learning to to plan out your expenditures. You're learning to
00:53:58.240 | focus on your money. You're developing some system of budgeting, some way of tracking your money.
00:54:04.000 | You're developing the practice of setting financial goals. Those goals are one big long-term goal of
00:54:09.360 | being debt free. But then there are the micro goals. You're working through your debt snowball.
00:54:13.520 | And so you're learning how to say, I'm paying off this credit card, I'm paying off that car,
00:54:17.440 | etc. And then you're learning to communicate with your wife. You're learning to increase
00:54:21.360 | your income. You're learning to work more. All of these things are working. You're paying off
00:54:25.200 | the debt. However, it's still fairly new. And that was why I asked you, and I'm just trying to show
00:54:31.520 | you how I'm thinking as an advisor. That was why I asked you how long you've been doing this.
00:54:36.240 | If you had told me you've been doing this for two years, and if you weren't making progress,
00:54:41.920 | then I would have said, we need something, something different. And I would have started
00:54:46.160 | exploring strategies to say, is there a way that you could, maybe you should buy a house,
00:54:50.880 | and rent it out, or maybe you should move into an RV or something. But because you said,
00:54:55.600 | it's been relatively new, and because you're making great progress, I think your best move
00:55:00.640 | at this point in time is to keep making progress systematically and pour everything onto it.
00:55:07.200 | So that was why I answered in that way. It sounded to me like you were a new convert,
00:55:14.160 | and you were newly changing your behavior, and it takes time for those things to become
00:55:18.160 | entrenched habits. Now, to deal with your arguments. So that was why I answered. I
00:55:26.080 | answered the way I did on a behavioral standpoint. Now, to deal with your arguments. I'm very
00:55:31.520 | concerned about anybody trying to predict anything in the future and to make plans based upon that.
00:55:38.880 | So for example, is it likely that President Trump would be elected in 2020? How do I know?
00:55:46.160 | Very few people. I didn't think he would be elected in 2018 or '16. So I think very few
00:55:51.920 | people would know that. If you're a political junkie, Ronald Reagan, wasn't it Ronald Reagan
00:55:58.480 | who had the lowest approval score two years before election and then won by a landslide?
00:56:02.800 | I mean, there are tons of examples of things changing, and the US-American electorate is a
00:56:07.280 | fickle beast. So I'm not going to make any predictions of short-term predictions. So I'm
00:56:15.120 | not going to make any plan of mine that relies on whether President Trump wins re-election or
00:56:20.160 | whether President so-and-so is elected. And I'm not going to make any plans based upon whether
00:56:24.960 | a Republican is in office or a Democrat is in office. The reality is, thankfully, that the US
00:56:32.160 | government is dysfunctional. And so in general, that means gridlock. And as far as I'm concerned,
00:56:37.600 | that's about the best that we can get. If they're just in gridlock, then nothing gets passed,
00:56:45.520 | nothing happens, and then they can't stick their noses into more of my business.
00:56:50.240 | So the biggest danger is if you have a strongly—if you have a Republican House of Representatives,
00:56:58.160 | a Republican Senate, and a Republican president, that's dangerous. If you have a Democratic House,
00:57:03.280 | a Democratic Senate, a Democratic president, that's dangerous. So it's my understanding of
00:57:07.920 | the electoral situation in the United States that even if a Democrat were to be elected in 2020,
00:57:12.880 | and even if the House of Representatives were to maintain and perhaps develop an even stronger
00:57:17.200 | majority, it's very unlikely to have a democratically controlled Senate. And so I
00:57:21.680 | think—I don't see any reason for you to freak out about anything politically. And even if there were
00:57:27.680 | a reason for you to freak out about anything politically, you're not yet in a place where
00:57:32.240 | you can afford to freak out. Because no matter what, no matter who is elected, no matter what
00:57:37.120 | government programs are passed, you still need to pay off your debt. You still need to develop those
00:57:41.680 | money habits. You still need to continue to practice living frugally. You need to continue
00:57:46.960 | to practice earning a lot of money. You need to practice managing the money. And those skills
00:57:51.520 | will apply no matter what the systems are two years, three years, four years from now. So that
00:57:56.880 | was the reason for it there. Now, one more comment and then I'll let you respond, Alex.
00:58:02.160 | I'm not—I personally would not be 100% opposed to your changing your living situation.
00:58:09.680 | There are many people who, in the middle of paying off their debt, have made a change and moved from
00:58:17.600 | renting a house to owning a house, and that change has helped them to pay off debt faster.
00:58:26.000 | For example, if you and your wife are currently renting a house for $1,000 a month—and by the way,
00:58:31.760 | do you and she have children? Yeah, we have one daughter. Okay, how old is your daughter?
00:58:37.840 | She is four. Okay. She'll be five later this year. Okay, so fairly young. If you and your wife,
00:58:45.200 | for example, were renting a house for $1,000 a month, but the house next door to you is up for
00:58:52.560 | a sale, and it's a three-story house. It has two stories and a basement, and it's got six bedrooms,
00:59:01.120 | and it has a mother-in-law shack out back, and it's $240,000. And you look at it and you say,
00:59:08.480 | "Listen, there is a college right around the corner. This is a heavy rental market,
00:59:12.240 | and I think I could rent out all six of those bedrooms for $500 a month, and my wife and I
00:59:18.000 | could live in the mother-in-law shack out back. And by the way, this house is being sold by
00:59:22.400 | somebody who has to sell quickly, or maybe it was left as an estate sale or something like that.
00:59:28.240 | And so I think this house here would make me a lot of money, and I think I could do it. And yeah,
00:59:33.040 | I'm still in debt, but I think if I buy this house, I'll wind up making $1,000 a month."
00:59:37.520 | And I'm using, of course, an extreme example. But if you had some scenario like that,
00:59:43.680 | where there was a clear plan to making money with the house, you and your wife and your daughter
00:59:48.480 | are going to live in the 300-square-foot mother-in-law shack in the back, while meanwhile
00:59:52.400 | making thousands of dollars per month with thousands of dollars per month, then in that
00:59:58.480 | situation, I would consider it. I would move in the direction of actually purchasing the house.
01:00:05.520 | But at this stage in your life, just to say, "I'm tired of money throwing away renting
01:00:10.000 | and moving to a house," I think that's a bad plan.
01:00:12.880 | Okay. Okay. So if there was no income potential, it wouldn't make sense to buy a house right now,
01:00:19.760 | essentially, right?
01:00:20.560 | Yeah, generally, no. Because the pure costs of buying a house, the pure costs, by the time you
01:00:26.880 | total up all of the costs, specifically the cost of insurance, the cost of taxes, and the cost of
01:00:35.600 | interest, plus the costs of an appropriate down payment, plus all of the additional expenses of
01:00:42.800 | a house, the washing machine breaks, you have to replace it, all the stuff, the roof fixes,
01:00:50.560 | et cetera. In general, the cost of buying a house is probably going to be more than the cost of a
01:00:59.600 | -- it's probably going to be more than the cost of renting. And the problem is, renting is certain.
01:01:08.960 | You can plan your finances certainly. And because previously you haven't demonstrated
01:01:14.320 | competence with planning finances, that's why you're in debt. So you didn't previously
01:01:19.440 | demonstrate competence with planning ahead, saving money, escrowing the money that's going
01:01:24.000 | to be needed for repainting the house, et cetera. Because those skills were not previously demonstrated,
01:01:30.320 | you need to first develop those skills before moving into the ownership of a house. Once you
01:01:35.920 | demonstrate those skills by getting out of debt, saving money, et cetera, and once you have fewer
01:01:40.560 | expenses, which means you have more wiggle room in your budget, then if you want to buy a house,
01:01:44.480 | then it'll be a blessing to you and not a curse. That's my answer.
01:01:50.240 | Right. Yeah. That's great. I appreciate that. But if we tried to go get a house, we just applied
01:01:57.280 | just for fun. And they told us like, "Oh, if you just sell your car and pay off the debt,
01:02:01.680 | we can get you approved." And so right now, because that was like, it's a goal of ours,
01:02:07.680 | obviously, to have a house, we are looking now into getting out of one car loan.
01:02:15.200 | And so maybe it's just too soon. Maybe it's like we're six to eight months roughly too early,
01:02:22.720 | which we'll be looking into this. And who knows? But I appreciate the response. I appreciate the
01:02:28.080 | time. By far, your podcast is just going through every episode. I appreciate it so much, man.
01:02:40.160 | Thank you.
01:02:40.480 | I appreciate all that you do. I know it's no joke. It's a lot of work you're putting into it,
01:02:46.160 | man. I know for sure.
01:02:47.440 | It's my pleasure. And I'm glad that you found it. Frankly, Alex, I'm thrilled that you found my
01:02:52.720 | show because the majority of the listeners of my show are already wealthy. They're already doing
01:02:58.000 | well, and they enjoy the technical content. But when I started the show, my goal was to reach you.
01:03:05.440 | My goal was to reach people who are interested in making a change. And so I'm thrilled that you
01:03:13.200 | found it and that you made it here. And that would be, so thank you. And keep up the good work.
01:03:18.320 | Here would be my two comments in closing. Comment number one, everything in personal financial
01:03:24.720 | management is skill. The reason I use the word skill is skill can be developed.
01:03:34.880 | It's not a matter of natural talent. It's skill. Skill can be developed. And so what you are doing
01:03:41.760 | is developing new skills. And what you need to teach your daughter is skills, skills that relate
01:03:47.520 | to financial planning, financial management, financial behavior, et cetera. This is all
01:03:52.240 | skills. And skills can be learned, which means that any person can dramatically change their
01:03:57.520 | life if they have an idea, if they have a desire, if they're willing to go and study and learn and
01:04:04.160 | practice the skills until they become a part of them. So one comment, you're doing the right thing
01:04:07.920 | in developing skills. Comment number two, only other comment on the house. If your question on
01:04:13.200 | the house is a financial question, in my opinion, the answer is clear. Keep renting. Because the
01:04:21.440 | financial calculation of the house versus renting, renting versus buying, is less a matter of,
01:04:30.880 | it's fairly clear. And you're probably getting a better deal renting. But there could be other
01:04:35.680 | factors. Now you haven't listed any of those other factors, but I want to make it clear for
01:04:38.560 | any of the listeners. There could be other factors why you would actually need a house.
01:04:41.600 | So factors related to your wife, to your daughter, to other children, to certain circumstances.
01:04:50.400 | There could be other factors. But because none of those things have appeared, I would encourage you,
01:04:55.600 | stop shopping for houses even. Keep something coming so you're aware of the prices. In most
01:05:01.600 | markets, this is not a good time to buy a house if you don't need one. Wait. Stockpile your money.
01:05:07.040 | Stop shopping so you're not feeding that. And keep the goal, the goal of your paying off debt,
01:05:14.320 | keep that center. Keep everything focused on that. Because once you're out of debt,
01:05:18.960 | you will experience a freedom that you have never in your life before, that you've never experienced.
01:05:26.240 | You'll experience a freedom of choice. And when you go shopping for a house right now,
01:05:31.520 | you're shopping based upon what the mortgage company says they'll approve.
01:05:34.720 | But when you're debt free, and you've been debt free for a few months, and you go shopping then,
01:05:41.040 | you'll be shopping based upon what you actually want. And it'll take time for that freedom to
01:05:46.240 | settle in. You might not even live in Washington. You might move to Mexico. And so don't encumber
01:05:51.760 | yourself with a house. Focus on getting out of debt. Enjoy that freedom. And then if you want
01:05:57.600 | to shop for houses, go for it. So Alex, thank you for listening. I'm glad you're here.
01:06:00.640 | Thank you so much, Chad.
01:06:03.520 | And with that, we close out today's Q&A show. Thank you all for listening. I really love doing
01:06:08.880 | these shows. And that was the kind of diversity that I enjoy. Talk a little bit of political
01:06:12.800 | theory, talk a little bit of financial practice, and talk a little bit about paying off debt and
01:06:19.840 | owning a house. I hope you also enjoy that diversity. If you do, I applaud you for it.
01:06:24.880 | You're an unusual person who is actually able to work through these things. So take these concepts.
01:06:30.400 | My closing plea, I used to put this at the very end of every show. I just want to close with this
01:06:33.840 | because I haven't said it in a while. Take something useful from this show and go and teach
01:06:38.800 | it to somebody else. Take something that I've commented on and think about it. And if you agree
01:06:43.520 | or disagree, go have a conversation with somebody else. Go and dig into something. If you think I'm
01:06:48.240 | wrong on something, fine, feel free to reach out to me. But more importantly, go and study something,
01:06:53.840 | go and look into something. And if we do that and we continue these types of productive conversations,
01:06:58.800 | then we can build a better world.
01:07:02.800 | Just remind me, I don't love trite poems, but I think they have their place. Reminds me of that
01:07:09.520 | little ditty that I heard years ago. God said, "Your task is to build a better world." I answered,
01:07:19.120 | "How? The world is such a large, vast place, so complicated. I'm so small with all my weaknesses,
01:07:25.760 | there's nothing I can do." God smiled and replied, "Just build a better you."
01:07:31.360 | Now, we'll all have a wink at the simplicity of it, but I think there's a truth in that.
01:07:36.800 | And back to even how we opened today's Q&A show, if you consider what
01:07:43.200 | some political ideologies do, they de-emphasize the individual and the responsibility of the
01:07:52.240 | individual. And in my opinion, that's one of those things that I find most
01:07:59.840 | problematic with collectivist ways of thinking. The individual becomes unimportant. The individual
01:08:06.560 | is extremely important, and it's your behavior and my behavior that makes a difference. And when
01:08:12.960 | you're part of collectivism, you don't worry about your behavior, you just worry about the collective.
01:08:18.320 | But you have a responsibility to whom much is given, much is required. We all have that
01:08:24.240 | responsibility, and it's individualism. The individual responsibility that you and I share,
01:08:31.520 | that in my opinion, leads to change. When you take what you've been given, and you bear the
01:08:38.400 | responsibility you have properly, and you use that to build your own skills, build yourself up,
01:08:44.400 | build your character, develop yourself, etc., and then share that around you, as individuals do that,
01:08:50.240 | and as individuals are empowered, that reflects on the community around us. Hopefully that wasn't
01:08:56.640 | trite. Wish you all a great day, and I'll be back with you very soon. Thank you for listening.
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