RPF0715-Friday

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00:00:30.460 | It's Friday.

00:00:31.460 | Today, live Q&A.

00:00:32.460 | [MUSIC]

00:00:48.860 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,

00:00:51.940 | skills, insight, and encouragement you need to live a rich and meaningful life now, while

00:00:55.900 | building a plan for financial freedom in 10 years or less.

00:00:58.860 | Today, it's Friday.

00:00:59.700 | Today, we do live Q&A, a recorded live Q&A show.

00:01:02.300 | Any Friday that I'm able to set up the technology, be in front of a good internet connection

00:01:06.500 | where we can do it.

00:01:07.500 | Works just like talk radio.

00:01:08.500 | Callers call in.

00:01:09.500 | We chat about anything that is on your mind.

00:01:12.220 | Sometimes it's fun.

00:01:13.220 | Well, usually it's fun.

00:01:14.220 | I love these shows.

00:01:15.220 | [MUSIC]

00:01:21.300 | If you would like to join me for a Friday Q&A show next week, join as a patron of the

00:01:26.100 | show.

00:01:27.100 | That's patreon.com/radicalpersonalfinance, patreon.com/radicalpersonalfinance.

00:01:32.300 | That will give you access to the Friday Q&A call-in shows.

00:01:36.060 | We begin with Pete in Massachusetts.

00:01:37.580 | Pete, welcome, sir.

00:01:38.580 | How can I serve you today?

00:01:39.580 | Pete Slauson, CEO, Radical Personal Finance, Inc.

00:01:40.580 | Hey, Josh.

00:01:41.580 | Hope you're doing well.

00:01:43.860 | Credit card question for you.

00:01:45.380 | All right.

00:01:46.380 | Let's go.

00:01:47.380 | I finally got through the credit card course after buying it about a year ago.

00:01:50.620 | I'm glad you got through it.

00:01:51.980 | I had a little time on my hands.

00:01:52.980 | Yeah.

00:01:53.980 | It was great, actually.

00:01:56.180 | The question I have is it's a little bit of the opposite issue, I think, that some of

00:02:00.620 | the content was geared toward.

00:02:02.020 | I actually have a pretty robust number of credit cards.

00:02:06.740 | I've sort of done the airline points churn over the years.

00:02:12.140 | At this point, the annual fees that I have on all of the cards, it's not insane.

00:02:19.580 | However, there are cards that I have that are pretty idle where I'm paying the annual

00:02:25.460 | fee at this point.

00:02:26.940 | I'm wondering where the sweet spot is between having the credit, keeping my FICO score up,

00:02:34.860 | but on the other hand, not paying fees for cards that are really unlikely to ever be

00:02:40.620 | used.

00:02:41.620 | I don't think that you should pay annual fees for cards that you're not using.

00:02:45.900 | I don't think the value is there even with regard to your overall credit, et cetera,

00:02:51.220 | unless you think that all of a sudden you need to borrow a bunch of money and so you

00:02:55.540 | need to keep that utilization ratio really low.

00:02:59.320 | If that's the case, then maybe you have to just keep it because you need it, but it doesn't

00:03:04.220 | make sense to keep cards with annual fees around for a significant amount of time.

00:03:12.140 | The first thing to think about is the only cards that you should keep that have an annual

00:03:15.500 | fee is a card that has a benefit that you're actively using.

00:03:20.460 | So if you have a premium card, an Amex Platinum or a Chase Sapphire Reserve or something like

00:03:30.660 | that and you say, "Yeah, I've got these annual fees, but I'm really using this card and I'm

00:03:34.900 | getting the benefits from it.

00:03:36.340 | I'm taking full advantage of the program and it's worth my paying the money to have access

00:03:40.180 | to this premium card," then I think that's fine, but you're not going to have more than

00:03:44.020 | a couple of those that you're actively using.

00:03:47.180 | You're not going to have an Amex Platinum and a Chase Sapphire Reserve and a Delta Amex

00:03:53.620 | and a Marriott, whatever their thing is, and a Hilton with $195 here and $400 there, etc.

00:03:59.820 | There's no need.

00:04:00.900 | And so what you should do is you definitely should get rid of those annual fees.

00:04:04.920 | So a couple things that you can do.

00:04:07.320 | Number one is you can just call them and see if they're willing to waive the annual fee.

00:04:12.020 | Sometimes they'll do that, and so if you call and say, "I'm going to cancel it before the

00:04:14.320 | annual fee," sometimes they may be willing to waive it.

00:04:16.960 | The best thing to do, if possible, though, is to downgrade the card.

00:04:21.020 | So downgrade it from a card with that company that has an annual fee and move it to a card

00:04:26.420 | with the company that doesn't have an annual fee, and/or move the credit limit if they'll

00:04:31.460 | let you do that.

00:04:32.700 | That way you can keep the credit limit available to you, which will help your utilization ratio

00:04:37.260 | if you use credit card debt in the future without having to pay those annual fees.

00:04:42.140 | Interesting.

00:04:43.460 | Okay.

00:04:44.820 | And will most of the credit card companies, I would assume some of them would waive the

00:04:51.820 | fee, but I can't see that happening, but will they generally downgrade the type of card?

00:04:56.220 | Generally, I believe so, yes.

00:05:00.060 | I don't have enough personal experience.

00:05:01.980 | I've never played the mileage game to have all the premium cards.

00:05:06.140 | I have a couple of premium cards that I use, but not for the mileage game.

00:05:09.820 | And so I don't have extensive personal experience with it.

00:05:12.660 | I know it's possible.

00:05:14.540 | And I've paid a lot of attention to those who do the mileage game, and they certainly

00:05:18.060 | do have the ability to do that.

00:05:20.140 | So I don't know the percentage.

00:05:21.220 | I can't tell you, okay, 50% of them will, but I know many of them will.

00:05:24.980 | Great.

00:05:25.980 | I'll give it a try.

00:05:28.980 | All right.

00:05:30.980 | Thank you.

00:05:32.980 | Any other questions then before you go, Pete?

00:05:40.860 | That's it.

00:05:41.860 | Great.

00:05:42.860 | Nope.

00:05:43.860 | I'm back.

00:05:44.860 | All right.

00:05:45.860 | Very good, sir.

00:05:46.860 | Glad you are here.

00:05:47.860 | We go now to Jason in Dallas.

00:05:48.860 | Jason, welcome to the show.

00:05:49.860 | How can I serve you today, sir?

00:05:50.860 | Hey, Josh.

00:05:51.860 | Good to be talking with you.

00:05:52.860 | Been listening to you for about three years now.

00:05:53.860 | Love your stuff.

00:05:54.860 | Thank you.

00:05:55.860 | I'm glad you're here.

00:05:56.860 | Can you hear me okay?

00:05:57.860 | Yeah, sounds good.

00:05:58.860 | Go ahead.

00:05:59.860 | All right.

00:06:00.860 | So I had a question just about my wife and I's plan for the next couple of years and

00:06:09.860 | just your financial advice and just wisdom on it.

00:06:13.740 | So currently between my wife and I, she makes 80 grand a year.

00:06:17.900 | I make 100 between two jobs.

00:06:22.500 | And we have a home before the COVID.

00:06:26.220 | We could have sold it for 230 and we have 98,000 left to pay off.

00:06:31.260 | That was the BC era, the before COVID.

00:06:35.460 | Before COVID, before the Rona.

00:06:38.420 | Exactly.

00:06:40.100 | We've been pretty aggressive on paying off our house and we're on a plan to pay it off

00:06:47.180 | by about this time next year with just being real good, real frugal.

00:06:54.980 | But with all of the economic impact of Corona, we were thinking possibly of shifting that

00:07:03.220 | plan instead of paying off the house as quickly as we can to stockpiling that money and possibly

00:07:12.060 | getting another house and renting out our current one.

00:07:14.860 | The caveat that makes all this kind of tricky is we have our first child on the way due

00:07:19.800 | in October.

00:07:21.660 | And by the end of the year, my wife plans on quitting her job, staying home with kids

00:07:27.700 | and starting our family.

00:07:29.540 | So that would drop our income down to 100 a year.

00:07:34.020 | And then now we're between would we be able to rent out our current house and have enough

00:07:42.860 | money for another house for us to move into when our current rent wouldn't cover our mortgage

00:07:49.260 | since we have a 15 year mortgage.

00:07:53.460 | Is that clear enough?

00:07:54.540 | So the specific question is, should we buy a rental at this point in time?

00:07:58.420 | Is that the basic question?

00:08:01.780 | Our dream is to have two, three acres and a bigger home to raise more kids.

00:08:06.860 | And that's what we want to move into.

00:08:09.420 | And we don't know whether to stay with our specific plan to pay off our house and then

00:08:15.540 | stockpile up money to try to get into that next 10, 15 year house or save the money now

00:08:24.400 | and look for the opportunity in the midst of this crisis.

00:08:28.580 | I would not pay off extra.

00:08:29.980 | I would not focus on paying off my house right now, especially if you've previously thought

00:08:34.320 | about working on a plan where you're going to purchase investment property.

00:08:40.080 | I'm all for having paid off houses, but I think that it makes more sense for you to

00:08:45.100 | start if you're interested in owning rental property.

00:08:48.180 | I think it makes much more sense for you to start by building up a rental portfolio early

00:08:53.740 | in life, setting that in place so you can have your tenants paying off your rental mortgages

00:08:59.400 | for you and then go to paying off your house and paying off the market, paying off the

00:09:04.660 | rental units.

00:09:06.180 | When you look at where we are right now, I don't see any benefit of your having a paid

00:09:10.700 | off house.

00:09:11.700 | I do see a benefit of your having a lot of money in the bank.

00:09:15.000 | And so what I would do is – and just be clear, that was an inaccurate statement.

00:09:20.160 | If your house were today totally paid off, then it would be helpful.

00:09:23.720 | It would be beneficial.

00:09:25.200 | But right now, if you lost your job and you instead of having a $98,000 mortgage, you

00:09:29.720 | have an $88,000 mortgage, you're not helped by just simply having a slightly lower mortgage

00:09:34.900 | balance.

00:09:36.900 | What you need is money in the bank.

00:09:38.720 | And so when we're in an emergency like we are right now, the first thing I do is stop

00:09:43.120 | all debt payoff, just stockpile cash and then wait and see.

00:09:47.940 | Wait and see what opportunities emerge.

00:09:49.860 | Now I think there will be quite a few opportunities to invest in real estate very productively

00:09:54.300 | and profitably in the coming years.

00:09:56.580 | And so that would be my plan is I think that one of the most important things with real

00:10:00.620 | estate in order for real estate to work effectively, you can often find a deal but there are times

00:10:07.180 | when it's a lot easier to find deals than others.

00:10:09.900 | And depending on the market that you're in, there have been a lot of markets where

00:10:12.060 | there simply haven't been any deals available over the last couple of years.

00:10:15.180 | I've known a lot of real estate investors who said, "I can't find anything worth

00:10:17.540 | investing in."

00:10:18.740 | Now if this recession goes according to normal recessions, then starting six months from

00:10:25.260 | now, a year from now, there's going to be a lot of distressed sellers and that means

00:10:29.460 | that there's going to be a lot of opportunities for real estate investment.

00:10:33.500 | And so if you can maintain your income and if you can have savings, that's the time

00:10:36.660 | to start expanding that portfolio.

00:10:39.020 | The other thing that makes me say that is with regard to timing.

00:10:42.420 | You want to have two to three acres in the country, bigger house, great.

00:10:45.460 | You don't need it with a baby.

00:10:46.640 | You don't need it right now.

00:10:47.640 | You need it in five years.

00:10:49.300 | And so what I would do is I would set out a five-year plan to buy five rental houses

00:10:53.300 | in the next five years and then go ahead and once you've bought those five rental houses

00:10:57.580 | in the next five years, then make the switch to the two to three acre farmette out on the

00:11:03.220 | edge of town with a big old farmhouse because a five-year-old will actually use that.

00:11:07.660 | You don't need that at this stage of life.

00:11:09.020 | And so I'd keep on investing.

00:11:10.420 | I'd stop the early payoff and I'd look for deals.

00:11:13.140 | If no deals emerge and you're a year from now and you got $98,000 in the bank, then

00:11:17.220 | just stroke a check and pay off the mortgage.

00:11:19.340 | But I think you'll start to see some deals that will entice you to invest.

00:11:22.380 | Okay.

00:11:23.380 | Yeah, I love that.

00:11:25.380 | Can I ask another question?

00:11:28.540 | Go ahead.

00:11:29.540 | Given what you just said about the five rental houses in the next five years, do you think

00:11:37.460 | that the rental market is going to be abundant or a lot of people are going to be renting

00:11:45.180 | as opposed to buying?

00:11:46.180 | Say I do find some deals, will I be high and dry and not able to find any renters?

00:11:52.020 | I think you can always find a renter at some price.

00:11:55.580 | The rental market is certainly being impacted right now by the RONA on all sides.

00:12:03.500 | There are some risks that are emerging that I never foresaw.

00:12:05.900 | I never foresaw states saying you can't evict your tenants.

00:12:09.820 | You've got massive numbers of tenants behind.

00:12:12.060 | And so I think that there are some significant risks.

00:12:14.700 | But at the end of the day, people need a place to live.

00:12:16.900 | And so the biggest risk would be for you if you bought rental houses in a place that was

00:12:23.460 | dying, if you bought rental houses in a town that was dying or in a part of the country

00:12:28.180 | that was dying and people are moving from there and moving into the big city.

00:12:32.220 | So you want to think carefully about where you buy.

00:12:34.300 | But I think that you can mitigate that risk.

00:12:36.260 | There's always going to be somebody available.

00:12:38.340 | Somebody wants to rent a house at some price.

00:12:40.100 | And so you'll just need to study the rental market as you get closer to buying and make

00:12:44.580 | sure that the demand is there.

00:12:46.820 | Okay.

00:12:47.820 | Okay.

00:12:48.820 | Last question.

00:12:49.820 | With our current house, we have got a 15-year mortgage and about 1850, 1875 mortgage.

00:12:59.780 | But I believe we can only rent it out for $1,500 or $1,600.

00:13:03.060 | Is that anything worth refinancing to try to get the rent to be able to cover the mortgage

00:13:09.660 | or just float that cash to $300, $400 extra a month to make sure that the house is paid

00:13:19.380 | off and don't worry about the closing costs of a refinance?

00:13:22.780 | I wouldn't say don't worry about the closing costs of a refinance.

00:13:26.620 | Calculate them.

00:13:27.920 | We don't want to be flippant here and I don't know what those costs would be for you specifically.

00:13:32.500 | But conceptually, assuming that the costs are acceptable, conceptually, if the basic

00:13:37.580 | plan is we own a house right now and we want to move out of this house and rent it out

00:13:41.740 | and we're going to move into another house and maybe you do that every year for the next

00:13:44.660 | five years, do the nomad real estate investing strategy.

00:13:49.420 | In that circumstance, then yes, I think refinancing to a 30-year mortgage makes sense.

00:13:54.540 | And so I would refinance to a 30-year mortgage and I would put that 30-year mortgage up to

00:14:02.220 | the maximum amount that I thought was going to make sense based upon what I could rent

00:14:08.100 | it out at and how much money and cash I could get out of the property.

00:14:12.380 | Because I would not recommend that you have a 15-year mortgage at $1850 and you can only

00:14:17.380 | rent the house out for $1500.

00:14:19.100 | That's unsafe, especially if your wife is going to stay at home with the baby, you're

00:14:23.220 | losing $80,000 in your household income.

00:14:25.980 | That's just not safe to have an extra $300 payment.

00:14:28.540 | I'd rather the payment cash flow for a couple hundred dollars because my tenants can pay

00:14:33.140 | off that mortgage for me over the next 20, 30 years once I get them in there.

00:14:38.100 | And it doesn't matter whether they pay it off in 15 years or 30 years, I need the property

00:14:42.600 | to cash flow safely so that I can have safety in my portfolio.

00:14:47.580 | And so yes, calculate the closing cost, calculate the cost, calculate the interest rate, etc.

00:14:52.960 | But conceptually, you want to finance it for the longest period that you can at the lowest

00:14:56.860 | cost because that increases your safety.

00:14:59.820 | Now I need to of course point out the big risk is don't spend the money.

00:15:04.180 | The big risk that if you do a cash out refinance is if you go and spend the money and you buy

00:15:09.340 | a new car because well we're having a baby so we need a $50,000 car and you start spending

00:15:13.940 | it on fancy consumption items, then you start going backwards.

00:15:18.380 | So if you do a cash out refinance, then put the money in a bank account and use that as

00:15:22.820 | your investing fund that you're going to use to buy more rental houses in the next few

00:15:26.140 | years.

00:15:27.460 | And then if you don't find those, then go ahead and pay off the mortgage again so you

00:15:30.780 | can be back where you are.

00:15:31.780 | You don't want to go backwards because you do a cash out refi and then start spending

00:15:35.660 | the money.

00:15:36.660 | So be careful there.

00:15:37.660 | Okay, great.

00:15:38.660 | Great.

00:15:39.660 | Thank you for being here.

00:15:40.660 | All right, we move to Kevin in Colorado.

00:15:41.660 | Kevin, welcome.

00:15:42.660 | How can I serve you today, sir?

00:15:43.660 | Yeah.

00:15:44.660 | Hi, Joshua.

00:15:45.660 | I've got a couple of quick comments and then a question.

00:15:46.660 | Okay.

00:15:47.660 | First comment is, I'm a little bit concerned about the cost of the mortgage.

00:15:48.660 | I'm not sure if it's going to be a good idea to pay off the mortgage.

00:15:49.660 | I mean, I'm not sure if it's going to be a good idea to pay off the mortgage.

00:15:50.700 | Okay.

00:15:51.700 | Hi, Joshua.

00:15:52.700 | I've got a couple of quick comments and then a question.

00:15:53.700 | Okay.

00:15:54.700 | First comment is, radical personal finance destination events.

00:15:59.700 | You said something about that months ago and I just wanted to encourage you that that's

00:16:06.540 | something that I would be absolutely interested in.

00:16:10.340 | Thank you.

00:16:11.340 | I was just about ready to commit.

00:16:14.780 | Like I had thought it through and I talked to my wife.

00:16:17.060 | I was like, okay, here's what I think would be interesting.

00:16:19.140 | And the thing that I've wrestled with is just simply how do I make it like cool?

00:16:25.780 | How do I, what do I want to do?

00:16:27.100 | Am I trying to do something high end?

00:16:28.460 | Am I trying to do something entry level?

00:16:30.820 | Is it going to be all lectures?

00:16:31.820 | Is it going to be hanging out, et cetera?

00:16:33.140 | And I finally had kind of built out the idea and then coronavirus came along and shut the

00:16:38.460 | world down.

00:16:39.540 | And so it was, I was glad, I was thankful because, you know, one of the groups of people

00:16:44.300 | that I just feel for intensely right now is anybody who is associated with events and

00:16:50.700 | makes their living on events.

00:16:51.700 | There's a lot of people who make their living on events and those people are just, are being

00:16:57.980 | hammered right now with everything closed.

00:17:00.180 | And so I was fortunate that I hadn't made reservations.

00:17:02.980 | I hadn't committed financially.

00:17:04.740 | And so I put it on pause just until travel restrictions, you know, lighten up a little

00:17:08.700 | bit.

00:17:10.180 | But thank you.

00:17:11.180 | I appreciate that.

00:17:12.180 | What would you like, if you were going to come to a radical personal finance destination

00:17:15.740 | event, what are the kinds of things that you would really love to see at that kind of event?

00:17:19.740 | So first of all, for it to be possible for me, it would have to be family friendly.

00:17:28.380 | So in a setting that I could bring my wife and boys with me.

00:17:33.740 | I would love, I get the feeling that a lot of us listeners would just really enjoy each

00:17:43.700 | other's company and bouncing ideas off of one another, almost kind of like a mastermind

00:17:49.380 | of just various people with some similar ideas, but obviously with completely diversified

00:17:56.700 | experiences.

00:17:57.700 | So definitely time for that sort of thing.

00:18:01.820 | I personally, like ADD, I really don't like to sit down for hours and hours of classroom

00:18:08.700 | or session, but having some of those options available, obviously, with maybe some guest

00:18:16.620 | speakers on certain topics that they're experts in would be a lot of fun.

00:18:22.820 | But nothing too, for me personally, nothing because it's not, it wouldn't necessarily

00:18:30.340 | be focused for my industry, not necessarily a rigorous academic program, but more of a

00:18:38.500 | little bit more casual, but with definitely opportunities to maybe find some different

00:18:46.140 | type of people to invest with and come up with business ideas together.

00:18:49.380 | Cool.

00:18:50.380 | Well, what you're saying is pretty much along the lines of what I have planned.

00:18:53.860 | I definitely would like to do something that's family friendly, just because it allows me

00:18:56.780 | to incorporate my family, which I enjoy.

00:18:58.820 | I'm at a stage of my family where it's a real burden on my wife for me to go away.

00:19:04.380 | And so if I go away, I have to make sure that I provide help for her in the household.

00:19:10.980 | And so it's a lot easier if I can just do a family event and bring my own children along.

00:19:14.820 | And so I definitely would like to do it as a family friendly event.

00:19:18.820 | And I think that a lot of the, I think I would guess, and I've proven this from the meetups

00:19:24.780 | that I've done, the casual meetups here and there, but I think my audience does skew.

00:19:28.540 | We probably have, as an audience size, we probably have more children than some other

00:19:33.900 | personal finance podcasts do.

00:19:36.460 | And yeah, what I would like to do is strike that balance of have some useful education.

00:19:43.420 | But the challenge is that I believe that there's real value.

00:19:48.380 | When I analyze the world and kind of look at what's working and what's not, as I see

00:19:52.960 | it for pure education, pure education is administered more effectively virtually.

00:20:00.660 | I can create something, if I'm just going to teach, teach a class, I can create that

00:20:05.180 | more effectively in a virtual format where it's more thought out, it's better prepared,

00:20:11.580 | it's more polished, it's more to the point.

00:20:14.260 | And then I can provide that in a way, in a format that is really helpful to people in

00:20:20.460 | a virtual course or in a written format, preferably with different modalities that serve people.

00:20:27.100 | Some people like video and video with illustration.

00:20:29.380 | Some people like audio so they can listen to it at multiple times.

00:20:31.760 | Some people with some good written notes or transcript.

00:20:34.500 | For straight up education, I feel like that's a superior mode of delivery.

00:20:39.180 | I generally don't go to conferences just for education.

00:20:45.580 | In fact, if I go to conferences, I often skip a lot of the educational sessions and I just

00:20:50.580 | get the tapes and I listen to them later.

00:20:52.700 | I've done that for years.

00:20:53.700 | Even when I was a financial advisor, I would go to events but I would never go to the sessions

00:20:58.240 | because why should I spend my time going to a session when I can just simply pay $300

00:21:03.100 | and get the recording of the whole thing and then I can listen to every session instead

00:21:06.660 | of having to pick and choose.

00:21:08.260 | So what I look for when I go to an event is I look for basically three things.

00:21:14.220 | Number one, what's timely?

00:21:16.140 | And so what you can get at an event is you can get somebody's real life opinion.

00:21:21.340 | So the fact that we're on this phone call right now, if you want to ask me about something

00:21:25.700 | right now, Friday, April 17, 2020, then you can say, "Yes, what's your opinion right now?"

00:21:33.200 | And that's something that you can do at an event that you can't do reliably in virtual

00:21:36.540 | events.

00:21:38.180 | Number two is you can get personalized feedback.

00:21:40.940 | And so one of the great things about an event is that you have an opportunity to interact

00:21:45.300 | with a teacher, with an expert, with a presenter.

00:21:48.120 | And so you can ask personalized questions.

00:21:51.020 | You can get real-time follow-up.

00:21:52.540 | Something is unclear or you disagree with something or you think that maybe the group

00:21:57.500 | would benefit by another idea.

00:22:00.140 | That's better done in a live format than in a virtual format.

00:22:03.980 | And then number three, and that personalized feedback is as I see it, some of the most

00:22:08.580 | valuable things you can possibly get.

00:22:11.660 | And then number three is the community.

00:22:13.740 | And so the basic reason that I go to events is community.

00:22:18.380 | And that community for me is sometimes with my audience.

00:22:21.680 | But a lot of times for me that community is people who are on the journey with me and

00:22:26.580 | people who are ahead of me who I can isolate in one place.

00:22:32.880 | And so I can fly all over the world and try to nail down all these experts and call up

00:22:37.580 | so and so who lives in Chicago and say, "I'm going to come see you in Chicago.

00:22:41.740 | Can I have lunch with you?"

00:22:42.740 | But that's a pretty expensive proposition.

00:22:45.620 | And for me, especially at this time in my life, it's pretty expensive to do that.

00:22:48.380 | Or I can say, "Hey, you're in Montevideo.

00:22:51.180 | Can I come hook up with you there?"

00:22:53.300 | But those things are possible.

00:22:54.780 | But it's a lot easier if I go to an event that's kind of a centralized attraction for

00:23:00.060 | the particular subject that I'm studying and now boom, boom, boom, boom, boom, I can meet

00:23:04.380 | five, six, ten people at one event.

00:23:06.740 | It's a very efficient use of the time.

00:23:08.780 | And so that's my analysis on the value of live events.

00:23:11.540 | I think in the future live events are going to be much, much more important than they

00:23:15.860 | are right now.

00:23:17.580 | As I look at many industries, my industry, other industries, I think what I see happening

00:23:23.740 | is that a lot of stuff is moving to digital interaction, virtual interaction.

00:23:30.140 | But when you move to virtual interaction, the live friendships, the live relationships,

00:23:35.400 | the live event becomes even more important because it's the context of a real relationship,

00:23:41.540 | an in-person physical relationship that makes the digital communication that much more effective.

00:23:47.100 | So if I'm running a company right now that's working virtually, I'm not going to run a

00:23:51.300 | company where we don't get together in person.

00:23:53.860 | It might be fine if we work virtually the vast majority of the time, but we still need

00:23:58.340 | to get together at a minimum a couple times a year in person because that's where that

00:24:02.900 | human dynamic is enhanced so that now when we go back to the virtual environment, the

00:24:07.620 | virtual environment is more productive.

00:24:09.620 | And so you didn't ask for it, but I agree with you.

00:24:13.100 | Go with your question, Kevin.

00:24:14.100 | So the question has to do, another real estate question.

00:24:15.100 | So I'm selling a rental next week actually that's got a lot of equity and I am planning

00:24:30.380 | on using the funds, reinvesting using a 1031 exchange to avoid paying the capital gains.

00:24:42.140 | And so my question to you, so I've been just trying to think about how to make this decision

00:24:46.700 | whether I want to either A, go with the 1031, reinvest in another investment property or

00:24:53.980 | B, hold off because I'm not really confident about the market being able to stay nearly

00:25:02.580 | as strong as it's been.

00:25:05.060 | Maybe it's more worth it to actually pay my taxes for what could be a much better opportunity

00:25:13.140 | in six months or a year or so.

00:25:15.860 | And so I'm trying to just, I really respect your opinion, the way you think about things.

00:25:21.500 | And I was wondering if maybe I'm not, I haven't thought about all of my options here about

00:25:25.980 | why I might go one direction or the other.

00:25:28.580 | How much are you selling the property for and what's going to be the capital, the taxable

00:25:32.220 | gain?

00:25:33.220 | So I'm selling it for $320,000 of which about $200,000 is taxable gain.

00:25:45.180 | And how much cash are you going to have after the sale?

00:25:49.500 | $240,000.

00:25:51.500 | Have you identified some, already looked at a property that you'd like to 1031 into?

00:26:04.820 | I have not.

00:26:05.820 | I don't have anything in specific.

00:26:08.180 | And actually just last week, the IRS came out with, they said that normally there's

00:26:15.660 | a 45 day identification period after the sale and they've extended it right now to July

00:26:22.220 | 15th for anything between now and then.

00:26:28.940 | And so I really, I didn't want to identify anything too soon because I feel like the

00:26:34.380 | market is in flux.

00:26:37.940 | And so really I've kind of been holding off on even trying to identify or replace a property.

00:26:45.540 | It's really hard.

00:26:46.900 | This is a really hard question because...

00:26:54.020 | Can I kind of tell you how I...

00:26:55.660 | Go ahead, please.

00:26:56.660 | So the way, yeah, so my thoughts now are, okay, I expect my tax liability on this to

00:27:04.780 | be about 40,000.

00:27:08.460 | And so my thought is if I expect the market to be flat or increase in value at all, it's

00:27:15.940 | a no brainer, but I don't.

00:27:20.060 | So I guess then the question is how much do I expect the market to drop?

00:27:23.940 | And the bigger of a drop I expect, and obviously what I expect doesn't mean what's going to

00:27:29.540 | happen, the less leverage.

00:27:33.500 | So one of my thoughts is if I feel like it might be relatively stable, but I'm not real

00:27:39.260 | confident, maybe I just buy the minimum amount of replacement property so that I'm not increasing

00:27:45.380 | my leverage.

00:27:46.380 | But it's still, I mean, it's a good chunk of change to have to pay to the tax man.

00:27:54.260 | Oh yeah, big time.

00:27:55.700 | If I decide to hold off.

00:27:58.220 | When does the property, so when does this property close?

00:28:02.700 | On Tuesday, next week.

00:28:06.780 | I think that's a really hard question because at these numbers, if we knew what was going

00:28:15.260 | to happen in the real estate market with some certainty, then we could sketch out the numbers.

00:28:22.380 | So let's just talk it through for a moment because I think the problem is predicting

00:28:26.020 | the timing of this situation.

00:28:28.820 | My current operating assumption as of April 17, 2020 at 1.30 PM, my current operating

00:28:37.460 | assumption is that we are with coronavirus first.

00:28:47.820 | I've had a hard time understanding it, but I don't think either of the extreme positions

00:28:52.400 | at this point in time are probable.

00:28:54.820 | I don't think that coronavirus is just something to be taken lightly.

00:28:59.900 | It's clearly something significant and serious.

00:29:03.660 | So the allegation of it's a hoax or it's a political play, I don't think that bears out.

00:29:08.900 | My evidence for that is number one, you can see that there are in certain communities

00:29:13.060 | with certain risk factors, you can see that a lot of people are dying.

00:29:16.820 | Number two, more importantly, you can see that on a global basis, basically almost any

00:29:22.660 | country that has the capacity and looks at what's happening, takes it very seriously

00:29:29.700 | and has imposed draconian restrictions.

00:29:33.020 | That tells me that this is not a hoax.

00:29:36.940 | But on the other side, it doesn't seem like the most pessimistic predictions have come

00:29:41.860 | true.

00:29:42.980 | And so it doesn't seem like it is so bad that the pessimistic assumptions are true.

00:29:51.380 | And so we seem to be kind of squarely in the middle where I think it's bad and I think

00:29:56.180 | a lot of people are going to continue to die today.

00:29:58.640 | Record number of people died yesterday in the United States and 4,000 people in one

00:30:05.460 | day.

00:30:06.900 | And so it's just going to continue.

00:30:08.620 | And the problem is I think that in some ways this is the worst situation we could have.

00:30:13.360 | If we could be convinced that it's not a big deal, that this stuff is not necessary, we

00:30:17.780 | can just go back to life as normal and everything was overblown, great.

00:30:21.460 | And that means that we could improve the, we could say, well, at least we were cautious,

00:30:26.260 | maybe we were too cautious, but let's get back to work.

00:30:29.820 | On the other hand, if it were really bad, then everyone would be justified in saying

00:30:33.340 | it's really bad.

00:30:34.340 | But right now what I think is going to happen is I think there's going to be more and more

00:30:39.020 | rebellion from citizens saying, "You're not going to shut my life down.

00:30:43.020 | You're not going to shut my business down for something that is the way it is."

00:30:47.080 | And there's going to be just a patchwork all around the world of people trying to navigate

00:30:50.400 | this middle ground.

00:30:51.400 | In some ways, I think the middle ground is the most difficult situation for us to plan

00:30:57.020 | in.

00:30:58.020 | So I still can't quite figure out what's going on with coronavirus.

00:31:02.540 | Today there were a couple of stories about some increased antibody testing that seemed

00:31:07.480 | to on the surface of the headlines, I haven't been able to dig into them yet, wait for them

00:31:11.180 | to be debunked, but on the headline seemed to indicate that maybe the theory that there

00:31:15.020 | have been more people infected by it could actually be true.

00:31:19.020 | I discounted that theory last week for a couple of reasons, but with some more testing that's

00:31:23.920 | going on, maybe that is actually true.

00:31:26.540 | And so in the coming weeks, as has always been the case, we'll start to know more and

00:31:30.140 | more.

00:31:31.140 | So that's my kind of current up-to-date talk about the virus.

00:31:34.000 | But unfortunately, I still find that maddening because we don't know what to do.

00:31:38.860 | All I know is for me, I'm going to continue to stay home, but I'm lucky, I'm fortunate

00:31:43.020 | in the fact that I can stay home without it harming my productivity.

00:31:47.200 | It's kind of psychologically frustrating and it's annoying, it's distancing and it's isolating,

00:31:53.260 | but it's not impacting my business.

00:31:55.020 | But at this point in time, if I were running a business that had in-person, I don't think

00:32:00.960 | I would be following the mandates.

00:32:03.460 | I just cannot see how I could let somebody, how I could let a government official destroy

00:32:08.980 | my life and destroy my business by their mandate.

00:32:12.880 | And so at this point in time, I would probably be putting in some kind of precautions, but

00:32:17.700 | I think I would try to put in some precautions, but I can't sit around and let them destroy

00:32:23.100 | my life and my livelihood with this stuff.

00:32:27.020 | That's just kind of where I'm at.

00:32:29.540 | So now let's pivot to the economy.

00:32:33.360 | At this point, I'm pretty well convinced that we're in the beginning stages of a multi-year

00:32:39.700 | global – I'm going to use the word – depression.

00:32:43.540 | I think that we won't know, of course, whether this actually is labeled a depression until

00:32:49.060 | after the fact.

00:32:50.060 | There's no way for us to predict for sure because basically there's no formal definition

00:32:56.100 | of a depression.

00:32:57.100 | You just know it after the fact.

00:32:58.100 | It's a really bad, really long recession.

00:32:59.780 | But I think that all of the evidence indicates that this recession that we are in the middle

00:33:04.420 | of or starting at the beginning of is going to be really long and really deep.

00:33:10.340 | And one of the biggest reasons for that is just simply that it is global.

00:33:14.420 | It is a global event.

00:33:16.460 | And so it's going to be devastating.

00:33:19.260 | And I cannot see how at some point in time that doesn't have the normal expected effect

00:33:25.940 | on real estate values, on other values.

00:33:29.260 | I understand maybe why stock markets are up when everyone's getting bailout money, etc.

00:33:35.740 | But I still – I can't understand the positive case right now for demand.

00:33:40.920 | Is there some pent-up demand?

00:33:42.420 | Yeah, probably so.

00:33:44.440 | And to the extent that you can pay everyone more money for them sitting at home collecting

00:33:48.040 | unemployment and then you'll stretch that out for a couple of years and who knows.

00:33:52.580 | But I still think it's going to have the normal effects on real estate.

00:33:57.540 | And so as more and more people lose their jobs and as more and more people run out of

00:34:01.900 | money and as at some point in time banks start foreclosing, landlords start evicting, states

00:34:07.620 | of emergency are lifted through whatever means, right?

00:34:10.020 | They can't continue the state of emergency just indefinitely.

00:34:13.900 | At some point in time, the normal economic impacts are going to apply.

00:34:19.460 | The basic laws of the market can be pushed off for some time perhaps, but they can't

00:34:27.020 | be ignored forever.

00:34:28.220 | They're going to have an impact.

00:34:30.220 | So if we come back now to your situation, on a $320,000 property, a 10% decrease in

00:34:38.220 | value at $320,000 is $32,000.

00:34:42.140 | And so in order for you to basically pay your tax and then buy another property, you know

00:34:49.300 | that it's a $40,000 bill right now.

00:34:52.140 | But if you close on a property, then a 10% move in real estate would be a $32,000 drop.

00:34:59.980 | Probably something like 12 or 13% would be that $40,000 number.

00:35:04.700 | I have a very hard time not seeing in most markets, I have a very hard time seeing in

00:35:11.540 | most markets not seeing at least a 15% decline in real estate prices.

00:35:17.740 | I just can't see how that doesn't happen.

00:35:20.660 | And I would say in the fullness of time, that's my guess.

00:35:25.620 | So when I look at it, yeah $40,000 is a big bill, but your concern is relevant.

00:35:36.820 | The only idea that I have is, and I don't know where you are in your settled kind of

00:35:42.820 | family situation, but the only idea that I have is maybe you could do the move where

00:35:48.980 | you did, you'll just lay the idea out and you can see, but I don't know if this works

00:35:54.740 | with your family, but maybe you could do the move where you go ahead and identify a property

00:36:00.700 | that you're earmarking it for a rental, so you do the like kind exchange into a rental,

00:36:07.860 | but perhaps you're earmarking it for a rental, but you're choosing something that you would

00:36:12.460 | not be sad to move into as an individual.

00:36:16.100 | You're choosing something that you and your family would not be sad to move into and would

00:36:20.540 | be okay with living in for a while.

00:36:23.020 | And so if you did that, my basic idea is that could do two things for you.

00:36:29.860 | Number one, it could allow you to move into it, and if you lived there for a couple of

00:36:33.900 | years and if the prices stayed stable, it didn't go down, then you could go ahead and

00:36:39.320 | sell it.

00:36:40.580 | You would market it as a rental of course, so that you fulfill the agreement of the like

00:36:43.820 | kind, but if for some reason it doesn't work in the rental market, you can't fill it really

00:36:47.940 | well, you can't sell it or something, then you move into it, you convert it to a personal

00:36:51.380 | residence and then on the backside you sell it using the exclusion for personal residence

00:36:55.260 | and then you can go ahead and take your $200,000 gain tax-free under the exclusion, the 121

00:37:05.580 | exclusion.

00:37:06.580 | And then the second thing, the second idea about that is that if you chose something

00:37:10.040 | that you wouldn't be sad to live in, then you wouldn't be so frustrated about short

00:37:14.300 | term movements of that property and you might be happy to live there for five years and

00:37:23.100 | then that could be time where it goes ahead and comes back and it's just less sad and

00:37:31.300 | less frustrating when you're living in a house getting benefit from it if the value declines

00:37:35.740 | a little bit.

00:37:36.860 | So I don't know if you're willing to move or if that works at all in your family, but

00:37:39.660 | that's the best I got.

00:37:41.020 | Otherwise I think it's just a matter of you looking at your market, looking at your predictions

00:37:45.620 | and saying is it likely that we're going to get in excess of a 12 or 13% move or is

00:37:51.500 | it not?

00:37:52.500 | I think it's a really hard question.

00:37:55.060 | I would probably go in the, I'm more flexible in my outlook towards moving.

00:38:00.100 | If I thought that worked in my family needs, I would consider that.

00:38:03.700 | If not, I don't know.

00:38:05.380 | I just don't know.

00:38:06.380 | Okay, well I hadn't thought about it from that angle of a potential primary, but that

00:38:16.460 | adds another element of complication to it.

00:38:18.660 | Yeah, but I think it's very doable.

00:38:21.100 | You're not required.

00:38:22.220 | You can convert a rental into a house to live in any time and so you need to make a good

00:38:29.660 | faith effort at trying to rent it.

00:38:31.380 | You need a good faith effort at putting it in the market.

00:38:33.820 | That's the terms of the deal.

00:38:36.100 | But there's some interpretation available there under what it means to make a good faith

00:38:42.260 | effort of putting it on the market.

00:38:44.940 | I think that if you bought a house, let's say you did the like kind exchange and you

00:38:52.140 | run the numbers on it and you know that the house could go down, but you go ahead and

00:38:55.780 | put it on the market at numbers that work for you, well you know you've avoided the

00:38:59.100 | $40,000 of gain for now or the $40,000 of tax for now.

00:39:04.500 | So you can go ahead and put it on the market and if you get a good tenant, you're going

00:39:08.820 | to be fine even if the value declines.

00:39:10.660 | But if you can't get that good tenant, if you can't make your numbers work, then your

00:39:14.300 | backup plan is just go ahead and move into it if you buy something that would work for

00:39:17.820 | your family.

00:39:19.540 | I think it's not a bad plan.

00:39:21.500 | You consider it, but I think it's not a bad plan.

00:39:23.100 | It's worth considering.

00:39:24.100 | Yeah, actually, so in that situation, do you know, does it have to be rented for a certain

00:39:30.740 | period of time before you can make it your primary?

00:39:33.700 | I've never looked at it this direction.

00:39:35.500 | I've looked at going primary to rental, but never rented the primary.

00:39:38.900 | I'm not aware of any legal requirement that it has to be rented for a certain amount of

00:39:43.700 | time.

00:39:45.060 | But what I would do if I were doing that is I would document very carefully my attempts

00:39:51.140 | at renting it.

00:39:52.660 | And so I would very carefully document my advertising for the house.

00:39:58.060 | I would carefully, I would put it on Airbnb for a temporary period of time.

00:40:03.300 | I would make a good faith effort to rent it and I would document that good faith effort.

00:40:08.180 | But to my knowledge, there's no requirement that it be rented for a certain amount of

00:40:12.420 | time.

00:40:13.420 | It's about the effort.

00:40:14.420 | And that would make sense in terms of the IRS doctrine.

00:40:17.060 | For example, many people are confused over the hobby loss rules with business deductions.

00:40:22.740 | And they mistakenly assume that a business has to earn a profit in two years out of five

00:40:28.500 | in order for it to be labeled appropriately as a business rather than it being labeled

00:40:33.700 | as a hobby so that exclusions of their deductions occur.

00:40:37.620 | It's not the case.

00:40:38.620 | A business actually never is required to make money in order to qualify as a business.

00:40:44.120 | What is required is that the owner is running things in a business-like manner, that the

00:40:50.140 | owner is making a real genuine good faith effort to make a profit, and that they're

00:40:55.220 | genuinely doing all the things that you would do to make a profit.

00:41:00.620 | And so you're adjusting expenses.

00:41:02.300 | You're adjusting the business plan based upon the market.

00:41:04.860 | So when you're in something where it's kind of on the border this way where you're understanding

00:41:09.060 | that this is possible, the key is you need to make a genuine effort and be able to document

00:41:13.780 | that.

00:41:14.780 | So if you're sitting in front of a judge, you say, "Judge, look, I put it on the market.

00:41:18.200 | These were my predictions going through.

00:41:19.620 | This was my business plan.

00:41:20.700 | This is what we did.

00:41:22.180 | And unfortunately, the market conditions changed, but I made a genuine good faith effort to

00:41:27.220 | rent it out."

00:41:28.620 | And so as long as your plan involves you're actually doing that, I think you're okay.

00:41:33.580 | It's fine to have a backup plan, right?

00:41:35.620 | Every business owner that opens a business knows that their backup plan is the business

00:41:38.740 | may go bankrupt.

00:41:40.480 | We all know that.

00:41:41.760 | We may go bankrupt.

00:41:43.420 | But the key is just understand that it's the effort that's required, and if you'll document

00:41:49.420 | that effort, you can create a strong chain of evidence that would support you in that

00:41:53.860 | decision.

00:41:54.860 | Awesome.

00:41:55.860 | Well, I appreciate that.

00:41:56.860 | I appreciate your different thoughts on this.

00:41:57.860 | Good.

00:41:58.860 | My pleasure.

00:41:59.860 | All right, Kevin, thank you for calling in.

00:42:03.900 | We go now to looks like Phillip in Louisiana.

00:42:06.860 | Phillip, welcome to the show.

00:42:07.860 | How can I serve you today, sir?

00:42:08.860 | Hey, hi.

00:42:09.860 | Can you hear me?

00:42:10.860 | Sounds good.

00:42:11.860 | Phillip, go ahead.

00:42:12.860 | Hey.

00:42:13.860 | I don't know if you remember me, but we spoke two years ago.

00:42:19.020 | It was a paid session, but I was 28 then.

00:42:22.700 | I worked for two years, and I just put in my credit cards and my student loans.

00:42:27.740 | And I guess I was deciding back then.

00:42:31.100 | I told my parents, 40K, I was deciding back then whether to pay them or to start investing.

00:42:40.940 | And I guess you gave me advice to pay them with the same fervor as I paid the government

00:42:47.700 | and the other lenders.

00:42:48.700 | And so I did that.

00:42:50.220 | And I guess it's two years later, and I'm out of debt, completely out of debt now.

00:42:54.340 | Congratulations, dude.

00:42:55.340 | That's awesome.

00:42:56.340 | Well done.

00:42:57.340 | Thanks.

00:42:58.340 | Yeah.

00:42:59.340 | So my last check to them, Wednesday, 10K check.

00:43:03.540 | And so I'm basically almost at zero right now.

00:43:07.900 | I have 2.5K somewhere around in places.

00:43:13.060 | But I guess I was just looking at plans for the future.

00:43:18.380 | And I know you've mentioned a lot of times about, like you were saying, if I didn't do

00:43:25.740 | it over again when you were sitting, you would buy a house, I guess, every year, just accumulate

00:43:33.660 | assets.

00:43:34.660 | And so I was just basically wondering about that strategy of, I guess, buying a house

00:43:39.460 | every year.

00:43:40.460 | Let's say if I want to do that in the next six months when my lease expires.

00:43:45.060 | I was just wondering about that strategy and any other advice you have on building wealth.

00:43:52.140 | From today's calls, we're going to have to change the name of the show to Radical Real

00:43:54.980 | Estate.

00:43:55.980 | This is the third call in a row that we've spoken about real estate.

00:43:59.820 | Interesting.

00:44:00.820 | So you are currently 28 years old, and you are unmarried, no children?

00:44:04.620 | No, I'm 30 now.

00:44:07.180 | Okay.

00:44:08.180 | So your number one goal at this point in time, now that you've gotten out of debt, congratulations.

00:44:14.380 | First thing is don't go back into debt.

00:44:16.700 | Make a commitment that with the exception of an investment asset, you're not going to

00:44:21.420 | go back into debt.

00:44:22.980 | Because if you will commit that to yourself, you will always maintain your flexibility

00:44:27.140 | and your freedom.

00:44:28.140 | You'll lose some flexibility and freedom borrowing money on investment assets such as real estate.

00:44:33.740 | But at least there, if you ever want out, and you're thoughtful and careful, if you

00:44:37.300 | ever want out, you can just simply sell the house and pay off your debt.

00:44:41.020 | So at this point in time in your financial plan, you now have two primary goals.

00:44:46.380 | Goal number one is to increase your income massively.

00:44:50.580 | That has got to be your primary focus is how can I increase my income massively?

00:44:56.580 | Far more important than buying real estate, far more important than investing at this

00:45:00.540 | stage of your life is generating a very, very high income from work that you care about,

00:45:07.140 | with people that you like, under conditions that you enjoy.

00:45:10.740 | You don't have to choose a bad job just because it makes a lot of money, but you need to choose

00:45:14.140 | a good job or a good business that you're well suited for and put your focus on massively

00:45:19.440 | increasing your income.

00:45:21.980 | Prior to coronavirus this year, what was your income expected to be?

00:45:25.380 | What's still the same?

00:45:28.780 | My job is pretty stable.

00:45:30.420 | I basically work in a pension.

00:45:32.620 | I'm an actuary.

00:45:34.300 | I'm certified.

00:45:37.500 | My job isn't going anywhere really.

00:45:40.020 | I make 100K, I guess.

00:45:42.540 | I just got a raise, like land.

00:45:44.540 | Congrats.

00:45:45.540 | Good.

00:45:46.540 | Yeah.

00:45:47.540 | So my expected, I guess going into the future, my salary right now is I think 98K.

00:45:57.660 | It was 88 at the start of this year, so I guess this year I'll probably make around

00:46:01.420 | 95K total plus bonus.

00:46:06.020 | And how much are your living expenses?

00:46:11.140 | My apartment is around 1200, including water, but I guess utilities, electricity are add-on

00:46:19.500 | expenses.

00:46:20.500 | So add everything, as far as internet or whatever, it might be around 1400.

00:46:25.060 | Besides from that, I don't have any other expenses.

00:46:29.340 | I have two old cars that I fix whenever one breaks.

00:46:34.260 | They're both 20 years old.

00:46:36.460 | One's a 99, I think, CRV.

00:46:40.820 | Another one's a 2002 Honda CRV.

00:46:43.900 | So let me cut you off for a moment.

00:46:44.900 | I live pretty frugally.

00:46:45.900 | Good.

00:46:46.900 | All right.

00:46:47.900 | So what that means, if you live pretty frugally, if you've got $100,000 income and you've got

00:46:50.740 | to say $30,000 a year of personal expenses, then you should be able to save after taxes

00:46:55.340 | something like 40 to 50 grand a year.

00:46:57.580 | Does that sound about right?

00:46:58.580 | Yeah, if I really push it, yeah.

00:47:01.820 | All right.

00:47:02.900 | So if you can save 40 to 50,000 dollars a year, you're doing awesome.

00:47:06.180 | And that's going to quickly allow you to pile up money for investing.

00:47:10.460 | So back to kind of my guidelines.

00:47:13.380 | Number one, most important thing is increase your income.

00:47:16.500 | And so congratulations for making a six-figure income.

00:47:20.180 | You should still look at that and study your career and study your income and ask yourself,

00:47:24.560 | how can I 10x my income over the next 10 years with career moves that I'm going to be excited

00:47:30.020 | about?

00:47:31.020 | How can I 10x my income over the next 10 years with career moves that I'm going to be genuinely

00:47:35.580 | excited about?

00:47:36.580 | I'm not trying to get you into a job that you don't like just because it makes a lot

00:47:40.420 | of money, but very few people ever set out an income goal.

00:47:44.580 | And that's why very few people actually make a lot of money.

00:47:47.660 | So the first thing you can do is set an income goal that you have and then work on how you

00:47:52.740 | can achieve it in a way that upgrades your lifestyle, in a way that gives you something

00:47:57.140 | really exciting.

00:47:58.320 | Because if you can go from 100,000 dollars a year to a million dollars a year and you

00:48:02.300 | can keep a 30 or 50 or 70,000 dollar a year expense ratio, it's a lot easier to get wealthy

00:48:08.620 | really quickly.

00:48:09.620 | Agreed?

00:48:10.620 | Agreed.

00:48:11.620 | I get it.

00:48:12.620 | All right.

00:48:13.620 | You're an actuary.

00:48:14.620 | You run the numbers.

00:48:15.620 | Imagine that you go from 100,000 dollars a year to a million dollars a year.

00:48:18.940 | It's a lot easier to get wealthy really quickly.

00:48:21.700 | So think about that.

00:48:23.340 | Now you don't have to always do that, okay?

00:48:26.860 | But you do have to think about it.

00:48:28.700 | You may come to a point where you say, "I've got a great job.

00:48:31.540 | I'm really well suited for this job.

00:48:33.340 | I really like it."

00:48:34.780 | And you may come to a point where you turn aside from a goal of always increasing your

00:48:39.700 | income because you've decided that for right now what you're doing is the best for you.

00:48:45.740 | But from a wealth building perspective, before you ever think about investing, you should

00:48:49.600 | go back and look at your income.

00:48:51.760 | Because investments in your income are almost always the best investments you can possibly

00:48:57.180 | make.

00:48:59.220 | So don't forget about that.

00:49:00.660 | Just because you got your actuary certifications, just because you got a college degree, just

00:49:04.340 | because you did that doesn't mean that you should stop investing in your income.

00:49:07.980 | If you'll go from $100,000 a year to a million dollars a year, it'll be a lot easier to become

00:49:12.140 | wealthy.

00:49:13.140 | Now, number two.

00:49:14.140 | Number two is you keep your expenses low.

00:49:16.220 | And so you're doing a great job.

00:49:17.300 | And so going forward, if you will maintain your low expenses, especially while you are

00:49:22.340 | single, especially while you're in this situation where you are flexible, if you'll keep your

00:49:27.300 | low expenses, you will pile up income massively.

00:49:31.040 | You haven't had a chance yet because you've been paying off the debt.

00:49:33.980 | You haven't had a chance yet to experience the joy of saving $40,000 or $50,000 in a

00:49:39.460 | year.

00:49:40.460 | But it's awesome because now that you've gotten your income up to six figures and you keep

00:49:44.860 | your expenses low, you can go to a point of saving $40,000 or $50,000 in a year, which

00:49:50.340 | means that your worlds open up in a way that you haven't experienced yet.

00:49:55.060 | And this is what's so frustrating about kind of your 20s is that the modern concept, and

00:49:59.780 | I don't remember all the details of your situation.

00:50:01.260 | I'm speaking generally.

00:50:02.340 | But in general, what many 30 year olds would have experienced is that you go through this

00:50:06.540 | rough, tough, expensive period of life.

00:50:10.740 | You graduate from high school, you got no money and they say, go to college.

00:50:13.100 | You go to college, you start borrowing money.

00:50:15.000 | Maybe you take out some credit cards or you just do stupid stuff and you go into debt.

00:50:20.460 | You have student loans and then you finally get out of college.

00:50:23.060 | You get your first job and it's an entry level job.

00:50:25.420 | So you're not making a ton, but then you work at it and you increase your certifications.

00:50:29.460 | You're taking lots of extra classes.

00:50:30.820 | You're passing actuary exams and then boom, finally, now you got $100,000, but you want

00:50:35.500 | a year of income, but you only got $2,500 to your name because you've been working to

00:50:39.580 | pay off debt.

00:50:40.860 | That makes you far ahead of many other people, but you haven't yet had the joy of piling

00:50:45.580 | up money.

00:50:46.580 | And so the next step is keep your expenses low and experience the joy of piling up money.

00:50:51.820 | If you need to upgrade anything in your life, that's a really big deal.

00:50:54.980 | You need a car that's a little bit better or something like that.

00:50:58.020 | Make a note of that.

00:50:59.380 | But keep your expenses low so you can save money.

00:51:01.980 | And then the most important thing when you're moving to investing is saving money, is having

00:51:05.840 | investment dollars.

00:51:07.460 | But at the beginning of an investment career, the thing that drives your results is not

00:51:11.540 | the rate of return that you can earn on your investments.

00:51:13.900 | It's the amount of money that you can save for investing.

00:51:17.380 | And that's driven by income and expenses.

00:51:19.940 | So you're doing awesome.

00:51:20.940 | Keep up that good work.

00:51:22.260 | Now let's assume that you've decided that real estate is a good fit for you.

00:51:26.180 | You shouldn't necessarily decide that hastily.

00:51:29.140 | I still believe that for the majority of people, if you have an inclination towards some form

00:51:34.700 | of entrepreneurship, if you have an inclination towards something like that where you can

00:51:39.180 | move into a job where you have more responsibility, where you can profit from it more, it's be

00:51:44.340 | far more profitable for you to do that than to just simply own real estate.

00:51:49.180 | But if you've decided that you're settled in your job, you're settled in your career,

00:51:52.220 | this is a good fit for you, then real estate is a really good mixture of a business and

00:51:56.900 | an investment.

00:51:58.080 | And so the nomad strategy that you're alluding to is dirt simple.

00:52:03.540 | Basically you buy a house and you just buy the house just like a standard house.

00:52:07.900 | You buy a house.

00:52:09.740 | You go around, you look around, you find a house, you get a mortgage and you buy a house

00:52:15.180 | and you move into the house.

00:52:16.180 | Then you can house hack it.

00:52:17.180 | If you're single and 30 years old, it works really well.

00:52:20.340 | Get a couple of buddies, buy a three bedroom house.

00:52:23.100 | Maybe your mortgage payment is going to be $1,500 a month, but get two buddies that you

00:52:26.740 | rent out two rooms to for $650 a month including utilities and that covers you and drops your

00:52:32.020 | personal living expenses from $1,400 a month down to maybe $400 a month or $500 a month,

00:52:38.500 | something like that because you took the risk of buying the house.

00:52:41.820 | So you buy a house, you live in it and then after a year, you'll have satisfied the requirements

00:52:48.740 | of a residential mortgage.

00:52:50.360 | Then you go ahead and you buy another one.

00:52:52.580 | So you buy another house and you rent out your first house and you move into the second

00:52:55.820 | one and you get your buddies to move with you.

00:52:58.100 | You say, "Listen guys, I know it's a hassle to move, but I got another great house.

00:53:00.900 | Would you come with me?

00:53:01.900 | I'll move your stuff for you.

00:53:03.140 | I'll pay for the mover so it's not such a big deal."

00:53:05.180 | You move them in with you and you rent out the first house.

00:53:07.700 | And then basically you repeat that as often as you want.

00:53:11.140 | You can buy more houses other than what you're just living in, but the once a year kind of

00:53:16.260 | scenario works really naturally and if you need a place to live anyway, it works out

00:53:20.260 | really well.

00:53:21.260 | The great thing about that system is that you can just do traditional residential financing.

00:53:27.660 | You're buying a house as an owner-occupant.

00:53:29.620 | It's a little easier.

00:53:30.620 | It's just what you're accustomed to.

00:53:32.480 | But if you do that for about five years and you pick up something like five rental houses,

00:53:36.340 | then you get yourself in a situation where you're 35 and now maybe you're married, maybe

00:53:40.700 | you got a baby or something like that.

00:53:42.100 | You say, "Okay, now I'll go ahead and pick the house that I want to live in."

00:53:44.940 | So you move again and you move into the house that you're going to live in for a while.

00:53:48.660 | And then you just fast forward and you let your tenants pay off those mortgages for you.

00:53:53.540 | And if your tenants pay off your mortgages for you over a course of 20, 25, 30 years,

00:53:59.060 | then 20, 25, 30 years from now, you're sitting there with a paid off real estate portfolio

00:54:03.580 | that may be making you, if you got five houses at $1,500 per month, you've got a gross income

00:54:09.380 | of something like $7,500 a month and now you're by most considerations financially independent,

00:54:16.020 | financially free based upon your real estate income.

00:54:18.580 | And so based upon your numbers, if you can earn $100,000, pay $25,000 of tax, that gives

00:54:27.380 | you $75,000.

00:54:29.220 | If you can live on $30,000, that leaves $40,000 available for investing.

00:54:34.340 | If you can save $40,000, then every year you can make a down payment on a house, a $30,000

00:54:40.020 | or $40,000 down payment on a house if necessary, depending on what your local market is like.

00:54:44.980 | And so you can comfortably save the money for a new down payment every single year.

00:54:49.100 | And what you got to make sure of is that the whole portfolio cash flows along the way where

00:54:55.020 | your rental income is at least as much more than your mortgage payment and other expenses

00:55:01.220 | as possible so that you have some safety.

00:55:04.020 | But as long as the portfolio cash flows and as long as you have the ability in the case

00:55:07.740 | of an emergency, right, coronavirus comes along and all of a sudden you got to just

00:55:11.660 | pay all your mortgages out of pocket, then you have the ability to do that out of your

00:55:15.860 | income and out of your cash flow.

00:55:17.020 | So that's the basic strategy.

00:55:18.740 | And if you'll do that and commit to that for a few years, it can be extraordinarily productive

00:55:23.540 | because once you own the houses, now you need to manage them, but your tenants are now paying

00:55:28.660 | off your mortgages for you and your houses may increase in value.

00:55:33.500 | What is frequently the case is let's say you buy a portfolio of five or six houses, you

00:55:37.940 | fast forward 10 or 15 years, your mortgages are paid down, but maybe all your houses have

00:55:43.620 | appreciated in value.

00:55:45.420 | And so what you do is you sell one or two of the houses that you don't like anymore.

00:55:49.500 | And by the way, the little hack that I mentioned to the previous caller about moving into it,

00:55:55.320 | if you're still flexible enough and you can move into one of those houses, you move into

00:56:01.180 | one of the houses, you live there for a couple of years, and then you go ahead and sell it

00:56:04.500 | and take the exclusion on the sale of the gain, $250,000 for a single person, $500,000

00:56:09.420 | for a married couple.

00:56:10.420 | You go ahead and sell that house, take that tax-free capital gain if you moved into it.

00:56:15.380 | Otherwise, go ahead and sell the house and pay the tax, and then you pay off the mortgages

00:56:19.300 | on a couple of the other ones.

00:56:20.860 | And so if property prices appreciate, which is a possibility, it's not a guarantee and

00:56:25.980 | you don't want to depend on it, but it's a good distinct possibility if you're really

00:56:29.540 | wise with where you buy and when you buy, if property prices appreciate, then you can

00:56:33.700 | get yourself in a situation where a 15-year plan is very reasonable, where you pay off

00:56:38.660 | a couple of the houses, they appreciate enough that you can finish paying off the mortgages,

00:56:41.580 | and now you're left with three or four houses completely debt-free because you used appreciation

00:56:46.460 | to pay off the rest of them.

00:56:48.460 | And so a plan like that is a very reliable plan towards financial independence at an

00:56:53.500 | early age, and it complements really well a high, stable income because the high, stable

00:56:59.300 | income makes it easy for you to plan.

00:57:01.300 | And so if you put those three pieces together, keep your income high and work on getting

00:57:04.420 | it higher, keep your expenses low and keep them low, and then number three, invest aggressively

00:57:09.780 | into something that's well-suited for you, then you're on the fast track to financial

00:57:14.260 | independence.

00:57:15.260 | Awesome.

00:57:16.260 | Definitely.

00:57:17.260 | Yeah.

00:57:18.260 | I guess my goal, I guess, is to, I guess, is stability.

00:57:25.780 | I guess more than it is, I guess, just like, I guess, trying to maximize my income.

00:57:35.340 | What do you mean by stability?

00:57:40.660 | I figure just having, I guess, only three houses, renting those out, that'll run with

00:57:46.340 | them stability, I guess, in any situation.

00:57:49.860 | I mean, as far as what I do, I don't mind what I do, but I think my goal would be to

00:57:56.900 | teach or do something more hands-on than, I guess, just stare at a screen for like 30

00:58:05.380 | years or something.

00:58:06.380 | Sure.

00:58:07.380 | Sure.

00:58:08.380 | Well, at this point in time, the best thing right now in the middle of this current emergency,

00:58:13.900 | keep your job, right?

00:58:14.900 | Even if you don't like your job, keep your job and save some money.

00:58:18.620 | So, get as quickly as you can to several tens of thousands of dollars in savings and enjoy

00:58:23.180 | what that feels like of having tens of thousands of dollars of savings.

00:58:27.380 | If you're not sure kind of about what's next, just save money, save money and look forward

00:58:31.140 | to the future and work on those plans.

00:58:33.060 | You have the ability.

00:58:34.060 | So, if at any point in time you decide, "You know what?

00:58:36.180 | I don't want to be an actuary.

00:58:37.340 | I want to be a teacher."

00:58:38.340 | Well, now that you're out of debt, you have the ability to pivot and do that.

00:58:41.940 | You can do that in any context.

00:58:43.780 | So, that's what getting out of debt bought for you.

00:58:46.620 | It bought you freedom.

00:58:48.300 | And so, I want you to enjoy that freedom and to go in the direction of the life and the

00:58:52.820 | lifestyle that you'll be happiest with.

00:58:56.120 | If you're not sure if you're going to continue in your career, then slow that plan down that

00:59:00.940 | I said.

00:59:01.940 | You know, slow it down.

00:59:03.860 | But if you want to continue your career and you keep your income up, then that plan is

00:59:07.860 | very, very feasible.

00:59:09.400 | And as long as you can save some money first, you need to save money and have it to do the

00:59:13.580 | plan to be a real estate investor.

00:59:14.820 | You need to have the ability to absorb unexpected expenses.

00:59:17.820 | You've got to have cash.

00:59:19.540 | You've got to have the ability to absorb three empty houses in a month because nobody's paying

00:59:23.580 | because they all got laid off from coronavirus.

00:59:25.760 | You've got to have the ability to pay for a new AC.

00:59:28.540 | You've got to have cash.

00:59:29.580 | And so, you need to take some time and study this out and think it out.

00:59:33.380 | But I'm not going to say to you, you've got to just prioritize money if you've got a different

00:59:36.900 | dream.

00:59:39.200 | But I guess in closing, save money.

00:59:41.740 | Congratulations for getting out of debt.

00:59:43.140 | Save some cash and then we'll see where we go from here.

00:59:47.420 | All right, we'll go to Brittany in Texas.

00:59:49.100 | Brittany, welcome to the show.

00:59:50.100 | How can I serve you today?

00:59:51.100 | Hi, Joshua.

00:59:52.100 | Thanks for taking the call.

00:59:53.100 | My pleasure.

00:59:54.100 | So, I wanted to talk to you really about starting a business and doing that while being a W2

01:00:04.460 | employee, something that's always been kind of knowledge.

01:00:07.780 | And I really appreciate your transparency and monetizing knowledge work, what you've done

01:00:12.380 | to pivot over the years to try different models of doing that.

01:00:17.180 | And just wanted to discuss your thoughts on really everything from narrowing your market,

01:00:24.700 | finding your client base and monetizing knowledge work.

01:00:27.660 | Okay.

01:00:28.660 | Do you want to ask a question or you just want to kind of a monologue on it?

01:00:33.500 | I'll give you a context maybe for a monologue.

01:00:38.100 | Please.

01:00:39.100 | I do like your monologue.

01:00:40.100 | So, I'm a W2 employee.

01:00:41.460 | I work in corporate finance.

01:00:43.020 | Also, very passionate about personal finance.

01:00:47.700 | And I'm working towards having a few certifications that I think could help kind of prevent imposter

01:00:52.300 | syndrome and validate the background to help with small business consulting.

01:00:57.980 | Specifically, a CMA, certified management accountant, MBA, I'm currently a candidate

01:01:03.300 | and a CTP, certified treasury professional.

01:01:08.540 | And my background is a degree in finance and international business.

01:01:11.660 | Married, no kids, W2 employee at a large multinational corporate, we'll say.

01:01:19.220 | And wanted your discussion around the value of adding letters, especially whenever trying

01:01:23.620 | to break into consulting work or a new industry.

01:01:29.020 | And then also just kind of around clarifying that business idea.

01:01:31.980 | What does that look like?

01:01:32.980 | Do you have good resources?

01:01:33.980 | You've recommended a lot of great books over the years.

01:01:38.540 | And then also how to differentiate.

01:01:40.580 | Highly compensated for my existing work.

01:01:44.460 | Investing in my current career versus investing in starting a business from a time and energy

01:01:48.500 | perspective because I could see my life going either way.

01:01:53.540 | Moving up in the corporate world, starting my own business and allowing that to grow

01:01:58.100 | or even moving to a smaller company and having a larger role, say, as treasurer or CFO.

01:02:03.140 | How old are you?

01:02:04.140 | I'm 28.

01:02:05.140 | Okay.

01:02:06.140 | Well, I'll give you a couple of things to think about that I think are important.

01:02:15.240 | Number one, the most important thing when starting a business, in my opinion, is clearly

01:02:21.580 | identifying a specific customer that you can market to.

01:02:30.540 | And that I think is the hard part because generally you don't want to narrow down.

01:02:35.620 | But you've got to identify a specific customer that you can market to.

01:02:41.420 | And so if you're going to go out and build a knowledge business, the question is who

01:02:46.100 | specifically are you targeting?

01:02:48.820 | Who are you going after?

01:02:51.300 | And if you cannot identify one person specifically, then it's very hard to make enough noise in

01:02:57.620 | the marketplace to reach that person.

01:03:00.080 | And so I'll use, you've listened to my work and you've made complimentary comments.

01:03:05.380 | I could not start Radical Personal Finance today and have it succeed because it's too

01:03:09.780 | general.

01:03:10.780 | I could not do it.

01:03:11.980 | The marketplace is too crowded.

01:03:13.380 | The brand is too broad.

01:03:14.740 | It's too general.

01:03:15.740 | I could not do it today.

01:03:17.380 | If I were starting over today with some kind of personal finance brand, the only way that

01:03:22.340 | I would be able to find enough listeners to make a difference is to narrowly identify

01:03:27.580 | one specific segment that I'm trying to help.

01:03:31.640 | Now I can expand out after that, but what you see if you compare, if I compare my brand

01:03:38.520 | to some other brands in my space, that brands that are more narrowly focused are far more

01:03:46.400 | successful.

01:03:47.400 | So for example, the work that Jonathan and Brad do at Choose Fi, their brand has gone

01:03:52.380 | through the roof.

01:03:53.380 | It's far bigger than mine is now.

01:03:55.900 | I had them on Radical Personal Finance right when they were getting started.

01:03:58.440 | I like to think that I kind of helped give them a push and sent a few listeners their

01:04:01.600 | way, but their brand is far bigger than mine is now because they chose one specific niche.

01:04:07.000 | They chose the financial independence niche.

01:04:09.880 | And so that's a good example because when people go looking for financial independence,

01:04:14.520 | they're now referable to that.

01:04:16.760 | And so the same thing happens in your business.

01:04:19.100 | Any brand you're going to start, whether it's consulting with people from a corporate finance

01:04:23.420 | perspective or a personal finance, you have to be focused on a niche.

01:04:27.440 | If I tried to start again today with Radical Personal Finance, it would be a complete failure

01:04:32.840 | because no one would find me.

01:04:35.000 | No one would find me fast enough and my brand is too non-referable.

01:04:39.000 | It's like, "Well, what's the show about?"

01:04:41.080 | "Well, Joshua talks about stocks sometimes and real estate.

01:04:44.640 | He does these Q&A calls and he talks about modern portfolio theory."

01:04:49.560 | How do you describe it?

01:04:50.560 | Right?

01:04:51.560 | If they're my listening base, if they're my listeners, they really like it.

01:04:55.400 | But the reason that I got it started was because when I started, it was a timing thing.

01:05:00.200 | There was a broad market, there was an empty market, and I knew that there was an opportunity

01:05:03.880 | for someone to come into that market and that's what I wanted to build.

01:05:07.160 | I didn't want to be bored left, right, and center.

01:05:09.560 | I used to own all these domain names for these very niche podcasts like Backup Plans.

01:05:13.560 | I had Social Security Podcast and Podcasting for Financial Advice, all these different

01:05:18.520 | brands that I had lined up that I could go with because they were better marketing fits

01:05:22.680 | but I didn't really want to do them.

01:05:25.200 | But the point is, be honest about your market and recognize that what works for somebody

01:05:31.040 | at a certain point doesn't work for everybody along the way.

01:05:34.120 | The key is to be able to niche down to the point where when your prospective customer

01:05:40.120 | hears you, they immediately know you're talking to them.

01:05:43.140 | As specific as you possibly can be is the key.

01:05:47.440 | That helps you with step number two is how to find the customer.

01:05:51.520 | One of the biggest problems that you face with a business is where are you going to

01:05:55.560 | find your customer.

01:05:57.160 | If you don't know who your customer is, you don't know where to find them.

01:06:00.640 | If you're focused on CEOs, that's too broad, right, because you don't know where to find

01:06:04.480 | CEOs.

01:06:05.480 | Is it CEO magazine?

01:06:06.480 | But there's a big difference between CEOs of Fortune 100 companies versus CEOs of plumbing

01:06:12.400 | businesses in small town rural America.

01:06:15.720 | Both of those are CEOs and I can find both of those people if I've got a business that

01:06:20.120 | can serve them but I can't find CEOs.

01:06:22.960 | That's just too broad.

01:06:25.360 | Once you can identify who your customer is, that allows you to go and find them with your

01:06:29.720 | marketing message.

01:06:30.720 | Then when they hear about your content, they hear about your blog, they hear about your

01:06:34.600 | brand, they hear about your podcast, they read about the title of your book, they say

01:06:38.520 | "That's me."

01:06:39.720 | You want them to immediately say "That's me.

01:06:42.160 | That's me.

01:06:43.160 | That's what I want.

01:06:44.160 | That's me."

01:06:45.160 | That to me is your single most important thing is to clearly identify who you want to work

01:06:50.040 | with, have some sense of kind of how you're going to work with them so that you can go

01:06:54.600 | and find them.

01:06:55.880 | And then once you can find them and start putting stuff in front of them, then you can

01:06:59.120 | start listening to them and see what they want.

01:07:01.920 | And then you just give them what they want.

01:07:04.920 | But you've got to begin with who do I want to find and then listen to them of what do

01:07:08.840 | they want.

01:07:09.840 | Now, to your question on like designations and whatnot.

01:07:13.520 | Designations might be important, but I think they're most important for you, not for your

01:07:17.920 | customers.

01:07:18.920 | I have a lot of designations.

01:07:20.360 | I used to have more.

01:07:21.360 | I've dropped several of my designations.

01:07:23.000 | I haven't maintained my CFP designation in a number of years.

01:07:26.360 | There was a time in my life when that was really important to me.

01:07:28.520 | I keep meaning to call the CFP board and go ahead and go through the reinstatement process,

01:07:33.200 | but it's just it doesn't matter to me anymore because I am at a place where I know I'm more

01:07:38.480 | confident in who I am and what I know.

01:07:41.640 | Whereas when I go back when I first started studying for the CFP exam, I didn't have that

01:07:45.600 | confidence and I didn't know what I didn't know and I was scared of everybody and I just

01:07:50.200 | didn't know like how can I help.

01:07:51.880 | And so for me, the process of designating up was probably more about me than it was

01:07:59.400 | about my customers and my clients.

01:08:01.760 | Do people respect designations?

01:08:03.600 | I think sometimes, but I have no idea what a CTP is.

01:08:07.680 | You know, I'm in the finance business.

01:08:08.920 | I've never heard of a CTP designation.

01:08:11.560 | And so if you handed me a business card that says Britney, you know, CMA, MBA, CTP, the

01:08:16.320 | only one of those that I know about is the MBA because that's a famous one.

01:08:20.280 | But if it says MBA, I don't know if it's an MBA from a big fancy prestigious school or

01:08:24.720 | if it's an MBA from an online night thing that you did in three months.

01:08:28.520 | I have no idea.

01:08:29.760 | And so the beauty of content marketing is that you can shine through and depend on the

01:08:36.960 | value of your ideas far more than the value of your designations.

01:08:41.420 | And to me, that's the beauty of content marketing.

01:08:43.940 | If I could have as a financial advisor, if my firm had allowed me to build media the

01:08:49.840 | way that I build it now, I would have had a huge business because people can assess

01:08:55.180 | who I am by hearing me speak.

01:08:57.580 | And to me, that's a far better resume than the number of titles on my business card.

01:09:02.120 | So are designations valuable?

01:09:04.400 | I think they're valuable.

01:09:06.060 | To me, the biggest value of designations is it makes it easier to get a job.

01:09:09.980 | So one of the reasons why I keep meaning to go ahead and reinstate my CFP, one of the

01:09:15.360 | reasons why I have those designations is just simply what if I go bankrupt?

01:09:19.160 | You know, if I go bankrupt and I need a job with my, you know, Joshua J. Sheets, CFP,

01:09:25.520 | CLU, CHFC, you know, CASL, RHE, REBC, CAP.

01:09:30.880 | I think like when I put that on a resume, I can put that resume in any stack and there's

01:09:36.180 | nobody that has more designations than I do other than Michael Kitsis probably now.

01:09:41.320 | But you know, I can put that resume in a stack and they're going to look at it carefully

01:09:45.920 | because they're going to say, "Well, I know Michael Kitsis has as many designations as

01:09:49.640 | Joshua does, so let me at least talk to him."

01:09:52.800 | So that's how I see designations.

01:09:56.480 | Designations do two things for you.

01:09:57.480 | Number one, they may increase your confidence and cause you to just feel more confident

01:10:01.440 | in the marketplace and that's infectious.

01:10:04.400 | When you feel confident, your clients will absorb that.

01:10:08.600 | And so if you need those designations in order to feel confident, get them.

01:10:12.680 | And then number two, is there a great backup plan?

01:10:15.000 | They make it easier for you to get hired for a job if you just got to make your resume

01:10:21.160 | stand out in a stack of papers.

01:10:22.920 | But do you need designations for content production?

01:10:26.280 | Probably not because when you're doing content, you have the ability to just simply rely on

01:10:31.760 | the quality of your ideas rather than relying on your designations.

01:10:36.400 | All right, that's helpful.

01:10:39.920 | Do you have any guidance on what to consider whenever thinking about managing your energy

01:10:47.040 | between growing your current income, you know, if you have a highly compensated W2 career

01:10:52.880 | versus the potential returns on a nascent business?

01:10:58.480 | I guess there's probably two ways to do it.

01:11:00.520 | Number one is what are you excited about?

01:11:03.760 | So if you're really excited about the W2 career, then I don't think you walk away from it.

01:11:08.640 | You focus on it.

01:11:09.840 | If you've got a lot of room to run, let's say you're making $200,000 a year, but you

01:11:14.160 | see that this W2 career could go to $800,000 a year with the right moves and you'd be excited

01:11:19.320 | about that, that's a big, big move.

01:11:21.560 | And I think that a lot of times it's a lot easier to do that in a career than it is starting

01:11:25.800 | a business.

01:11:26.800 | Business, when you're starting a side business and a content business, it takes a while to

01:11:31.160 | get your legs under you.

01:11:32.240 | And so from a financial perspective, if I'm advising you as a financial advisor, unless

01:11:36.880 | you hate your job, I'm going to say what opportunity do you really have here in your day job and

01:11:42.020 | let's not just despise it.

01:11:44.200 | Because five years of major income growth from you being 28 years old, from 28 to 35,

01:11:54.240 | seven years and you can add an extra hundred or a couple hundred thousand dollars with

01:11:57.640 | some right moves on your W2 job, you'll probably make more money doing that than building up

01:12:04.400 | a new business, especially if you're starting from scratch.

01:12:07.100 | And so I don't want you to walk away from your job unless you hate it, unless it's just

01:12:11.560 | terrible.

01:12:12.560 | In which case, all right, fine.

01:12:13.560 | You can convince me.

01:12:14.560 | But from a financial perspective, if you're okay at your day job, good.

01:12:17.400 | So give that puppy some time to run because being able to make a lot of money on somebody

01:12:25.060 | else's risk is awesome.

01:12:28.680 | And if your expenses are low and you can save a lot, that can set you up for financial independence

01:12:33.600 | and can make starting a business far easier.

01:12:36.520 | I bootstrapped all my businesses.

01:12:38.680 | But let me tell you, I don't ever want to bootstrap a business again.

01:12:42.240 | There's a place and a time for bootstrapping and I'm into it.

01:12:45.200 | Like, hey, I'm not going to sit around and waste time.

01:12:47.480 | But I don't ever want to bootstrap a business again because man, it's a lot of work.

01:12:51.160 | And the older that I get, the more I start to feel like a creaky old man when I'm like,

01:12:55.520 | I don't know if I could do it again.

01:12:57.160 | I don't know if I have the energy.

01:12:58.640 | I don't know if I have the enthusiasm.

01:13:00.240 | I don't know if I have the passion.

01:13:02.360 | You know, there were times when I was a new financial advisor, I was in my office at 4

01:13:05.280 | a.m.

01:13:06.280 | There were times I was leaving my office at 2 a.m. and just because I had the energy.

01:13:11.080 | Today, I couldn't do it.

01:13:12.360 | Now, I'd like to think that I could still be really effective because I got a little

01:13:17.160 | bit more wisdom now and a little bit more confidence.

01:13:19.560 | And so what I didn't have at 23, I do have now, which would make a difference.

01:13:25.160 | But I also, I increasingly kind of feel that question of, I wonder if I could still do

01:13:31.000 | this.

01:13:32.000 | You know, right now in the stage of life that I am, I can't do 70 hours a week.

01:13:36.360 | I can't.

01:13:37.360 | I've got too, it would cost too much in my life for me to do 70 hours a week.

01:13:41.520 | So I got to be effective on 40.

01:13:43.440 | But you're still, you know, in that stage where you can do both.

01:13:48.120 | So I would not run away from a W-2 income.

01:13:51.440 | What I would try to do is I would think about a strategy that allows me to do both.

01:13:55.280 | And so take an honest assessment of the new business and say, how much time can the new

01:13:59.560 | business produce?

01:14:00.800 | How much effort, you know, how much can I do with the new business?

01:14:08.280 | And can I make it work on 10 hours a week?

01:14:10.680 | Can I make it work on 15 hours a week?

01:14:12.480 | So if you do 40 to 50 at your day job and you can do 10 to 20 on your side job, I think

01:14:16.960 | that's really reasonable.

01:14:18.520 | I think 60 hours a week is, 60 to 70 is a really reasonable, consistent work week that

01:14:25.800 | you can do as a single woman.

01:14:27.840 | And so if the numbers would work that you can be effective enough at your day job with

01:14:32.400 | 40 to 50 hours and you can be effective enough with your night job with 10 to 20, I think

01:14:38.400 | something like that would be good.

01:14:39.400 | And it'll give it time to see if the side business has legs.

01:14:43.800 | I would never advocate, so what I did, I do not recommend.

01:14:48.800 | I had to leave financial services.

01:14:51.120 | I had to close my business.

01:14:52.640 | I had to walk away from a lot of money.

01:14:55.480 | I lost pensions.

01:14:56.560 | I walked away from residual income.

01:14:58.600 | I walked away from all of it.

01:15:01.640 | But that was exclusively because of the stupidity of the financial services industry and the

01:15:06.400 | onerous regulations.

01:15:08.640 | In any other industry, I think that's a foolish move.

01:15:12.040 | I think that unless it's absolutely required, do not walk away from the cash cow until you're

01:15:18.240 | sure that the side business has legs and you're really sure you want to do it.

01:15:21.600 | And to me, a good metric of being sure is how much am I willing to work on this early

01:15:26.680 | in the morning, late at night, on the weekend, etc.

01:15:29.680 | How much am I really willing to work on it?

01:15:32.120 | Because if you're willing to work on it a lot and it starts to show some legs and starts

01:15:35.120 | to show some financial potential, then you'll feel good about walking away from the day

01:15:39.620 | job because you're really excited about it.

01:15:41.480 | But if you find that you're too tired and you're not going to build up the side thing,

01:15:45.400 | well then, now you know that probably better to stick with the day job and make the money

01:15:48.760 | there.

01:15:49.760 | All right, that's helpful.

01:15:51.800 | Last question, where can we sign up?

01:15:55.680 | I know you do some one-on-one consulting, but I don't recall how to sign up.

01:16:00.800 | Email me.

01:16:01.800 | Joshua@radicalpersonalfinance.com.

01:16:02.800 | Email me.

01:16:03.800 | It's not on the website.

01:16:04.800 | You have to email me for details.

01:16:05.800 | Great.

01:16:06.800 | Thank you.

01:16:07.800 | Thank you, Brittany.

01:16:08.800 | All right.

01:16:09.800 | We are going to do something that Joshua is not very good at.

01:16:11.880 | I've got four callers on the line and I've got about 10 minutes that I have to wrap up.

01:16:16.400 | So we're going to do rapid fire.

01:16:17.560 | So we go to Pottstown, Pennsylvania.

01:16:19.640 | Welcome to the show.

01:16:20.640 | Go fast with your question.

01:16:21.640 | We're going to do rapid fire and you can call back next week for more conversation.

01:16:23.760 | Hey, Joshua.

01:16:24.760 | Go ahead.

01:16:25.760 | Can you hear me?

01:16:26.760 | Yep.

01:16:27.760 | Go fast.

01:16:28.760 | Okay.

01:16:29.760 | I just was curious.

01:16:30.760 | Based on your advice like 45 days ago, you were like, "Hey, stock up.

01:16:37.240 | Get ready.

01:16:38.240 | Be ready for this kind of stuff."

01:16:39.240 | And I still see problems in the supply chain and you read about stuff about new packing

01:16:44.040 | places closing down and things like that.

01:16:45.840 | How do you evaluate that sort of information and know what kind of moves you might want

01:16:50.320 | to make in this kind of weird time right now?

01:16:52.800 | Got it.

01:16:53.800 | You think about what's in your life, what you actually need, and you think about what

01:16:57.520 | the risk to you would be if you weren't prepared for it and then you move accordingly.

01:17:02.200 | So nothing has fundamentally changed in the last 45 days that would make me more optimistic.

01:17:08.640 | The specific concern is that it's progressing slowly.

01:17:12.720 | And so what you do is you say, "What's the cost to me of stocking up?

01:17:16.640 | What's the cost to me of being prepared?"

01:17:18.760 | And with things like food or shortages in the supply chain, the cost is basically nothing.

01:17:23.160 | You simply buy the stuff that you're going to use anyway and you stockpile the stuff

01:17:28.000 | that you're going to use anyway.

01:17:29.000 | And that way you're protected if everything goes bad.

01:17:32.900 | But yet if nothing goes bad, you still use the stuff.

01:17:35.640 | That's why stockpiling is such an absurdly simple strategy and it's always the right

01:17:40.340 | move because it works both ways.

01:17:42.660 | You don't have to be right.

01:17:44.320 | And so if you're pessimistic about shortages in the supply chain, you're pessimistic about

01:17:48.520 | meat disappearing off the shelves, you're looking around and you're reading a story

01:17:53.160 | and you say, "I don't know if this is true or not."

01:17:55.360 | And just ask yourself, "If it were true, what would I do and what would the cost of

01:17:59.120 | that be?

01:18:00.120 | And if it were not true, what would I do and what would the cost of that be?"

01:18:02.980 | And so for me, if I've got the money and I'm worried about supplies of meat drying up,

01:18:07.120 | I'm just going to stock up.

01:18:09.160 | My freezer remains completely full of meat and my pantry remains completely full of food.

01:18:14.520 | And I feel great about that because there's no downside whatsoever.

01:18:19.500 | If everything continues to go bad and the shortages are right and all the fear mongers

01:18:23.440 | are right, which they certainly could be, then I'm going to be better prepared.

01:18:28.860 | And if they're wrong and the optimistic case is actually the right case and, hey, it was

01:18:35.600 | all an overreaction, no big deal.

01:18:37.360 | I'm going to eat food that I would have consumed either way.

01:18:39.920 | Now that's different than a big investment decision.

01:18:42.440 | That's different than making a bet on the direction of the market.

01:18:44.920 | That's different than making a bet on real estate or something like that.

01:18:49.000 | But that is the truth.

01:18:50.600 | All right.

01:18:51.840 | Everyone jumped off because they heard my rapid fire, except New Jersey.

01:18:55.320 | New Jersey, welcome to the show.

01:18:56.320 | How can I serve you today?

01:18:57.320 | Hey, Joshua.

01:18:58.320 | I'll ask you my rapid fire question first.

01:19:02.920 | Getting married soon, do you think it's a good idea to set up some type of business

01:19:07.040 | LLC to manage the number of contractors that I'm going to have to hire?

01:19:14.120 | For the wedding?

01:19:15.120 | Yeah, for different services.

01:19:18.240 | Like to limit personal liability as well as kind of shield myself a little bit.

01:19:26.520 | I can't see the risk that you would personally incur why that would at all be necessary.

01:19:34.880 | I can't see why that would be worth the hassle.

01:19:38.280 | If you're renting a facility and you're hiring a florist and a photographer and a preacher

01:19:46.960 | and a caterer, etc., I just can't see the liability exposure that you have that would

01:19:55.520 | make that necessary.

01:19:57.560 | So my answer is no.

01:19:58.560 | I don't see the benefit of it.

01:20:00.040 | Okay.

01:20:01.040 | Thank you.

01:20:02.040 | You said you had another one.

01:20:04.120 | I did that one in 45 seconds.

01:20:05.640 | So go ahead.

01:20:06.640 | Yeah.

01:20:07.640 | So I took your career and income planning course and I wrote out kind of my plan.

01:20:14.480 | And what I came up with was I want to invest in people whom I can have a high influence

01:20:18.160 | with and a high impact using their skills and ideas in niche areas.

01:20:23.200 | And if this goes too long, I'll call back next week.

01:20:25.720 | But the primary idea was to employ someone in my family who has extensive experience

01:20:32.560 | in the child care industry and trying to set up a Montessori or Waldorf type school, particularly

01:20:38.320 | in the Southeast.

01:20:39.840 | And this would be my first venture into business.

01:20:43.200 | And I'm wondering, where do you think is a good place to get started with that?

01:20:48.200 | The best place to start with that.

01:20:50.040 | So Montessori and Waldorf would have their own marketing attraction in certain environments.

01:20:59.200 | But what I would say the best place to start with that, go read Nick Kozel's manual that

01:21:04.160 | Gary North publishes on his website, GaryNorth.com.

01:21:07.160 | You'll have to sign up and become a member and then he's got it somewhere in his downloads.

01:21:10.800 | But Nick Kozel, years ago, North got him to write a manual on how to start a daycare,

01:21:16.880 | basically on the cheap.

01:21:18.600 | And that has always been, when I read that manual, it persuaded me that it's a good potential

01:21:24.160 | business.

01:21:25.440 | And so that to me would be a really good place to start, could be very profitable.

01:21:33.560 | The basic outline of the idea is you go to churches that have facilities that are not

01:21:39.280 | being used during the week and you make a deal with them to use those facilities during

01:21:48.400 | the week to provide daycare services.

01:21:50.980 | And so what I would do is I would start with that and then I would set up the next stage

01:21:56.420 | of schooling for the daycare children to matriculate into.

01:22:04.340 | And I personally would not, if you find that Waldorf or Montessori branding is appropriate

01:22:10.100 | for you, and it's a draw, I think it would be a draw, I would not personally brand as

01:22:16.220 | that.

01:22:17.220 | I would rather go ahead and get rid of the baggage of those two identifiers and just

01:22:21.300 | simply build my own brand in a local area.

01:22:24.940 | Because if I built my own brand, then I can have more leeway with the type of things that

01:22:32.340 | I build and probably more financial opportunities.

01:22:36.420 | I do think there's a real opportunity for for-profit schooling.

01:22:40.700 | And I'll call in next week and we'll chat about some ideas.

01:22:43.260 | I don't know, I have not tested them in the market, but I'll give you all my ideas and

01:22:47.540 | you can see if you can test them in the market and see if people would actually buy them.

01:22:51.380 | Will do.

01:22:52.380 | I'll call in next week.

01:22:54.300 | Thank you.

01:22:55.300 | All right.

01:22:56.300 | Thank you everybody for being here for today's Q&A show.

01:22:57.540 | I've got to go for today.

01:22:58.540 | Got a bunch of questions and if you'd like to join, a couple things that some listeners

01:23:03.340 | have alluded to and let me give you some info on those.

01:23:05.420 | First of all, if you'd like to join me next week, go to patreon.com/radicalpersonalfinance.

01:23:08.820 | That's important.

01:23:09.820 | Patreon.com/radicalpersonalfinance.

01:23:10.820 | I do a small amount of individual consulting.

01:23:13.820 | I've got some time in early May now, but if you'd like to reach out to me for individual

01:23:18.780 | consulting, send me an email, joshua@radicalpersonalfinance.com.

01:23:22.660 | Sometimes I'm 10 minutes behind on email, sometimes I'm 10 days behind on email.

01:23:25.980 | The only way I know how to manage my life and business is sometimes I walk away from

01:23:29.000 | communications and I focus on getting stuff done.

01:23:31.740 | And so if you don't hear back from me immediately, I promise you will hear back from me, but

01:23:35.060 | send me an email, joshua@radicalpersonalfinance.com if you're interested in consulting.

01:23:39.100 | Some listeners have referenced some of my courses.

01:23:41.260 | I have a course on how to borrow money safely and never pay interest using credit cards.

01:23:45.680 | You can find that course at radicalpersonalfinance.com/store and every single one of you who has a credit

01:23:51.180 | card or who will ever have a credit card needs that course.

01:23:54.660 | So the only people who don't need that course is if you're firmly convinced I'm never going

01:23:57.520 | to have a credit card, don't buy it.

01:23:59.100 | But if you are, then if you have one, then go to radicalpersonalfinance.com/store and

01:24:03.540 | sign up for that course.

01:24:04.540 | And then finally, I do have a career and income planning course.

01:24:07.500 | The single biggest decision that you can make that will influence your life positively and

01:24:11.660 | help you live a rich life now while building a plan for financial freedom in 10 years or

01:24:15.540 | less is going to be to optimize your career and your income choices.

01:24:20.540 | What you want to do is you want to build a career based upon something that you really

01:24:25.780 | are thrilled about doing and do it in a way that's insanely profitable.

01:24:31.020 | And in that context, you have the ability to enjoy your life now, enjoy the impact of

01:24:38.780 | your career while simultaneously building a massively profitable career which opens

01:24:45.340 | up fascinating groups, fascinating opportunities for you that nothing else does.

01:24:50.820 | Trust me, it's a whole lot easier to become financially independent very quickly if you

01:24:56.780 | make a million dollars a year versus a hundred thousand.

01:24:59.660 | It's a whole lot easier to become financially independent quickly if you make a hundred

01:25:02.460 | thousand instead of thirty thousand.

01:25:04.260 | And so bar none, I have almost never talked to somebody where the first thing that we

01:25:10.300 | didn't talk about was how can you increase your income while maintaining and improving

01:25:15.260 | your lifestyle.

01:25:16.620 | And the single best way to do those two things together is to build a career that you don't

01:25:22.140 | want to retire from, to build a career that you're excited about that has opportunity.

01:25:25.700 | And so if you're interested in that course, go to radicalpersonalfinance.com/store and

01:25:29.260 | you will find that there.

01:25:30.260 | Thank you for listening.

01:25:31.260 | I'll be back with you next week.

01:25:32.260 | Or yeah, next week.

01:25:33.260 | If you are looking for an exciting role in customer service, food service, or retail,

01:25:38.740 | connect with a job at the airport.

01:25:40.900 | Get started in a role that offers competitive wages, consistent schedules, and fast-tracked

01:25:45.940 | in management while you work in a vibrant, exciting environment where security is a priority.

01:25:51.460 | The airport has it all.

01:25:53.200 | You can have it all too.

01:25:55.020 | Visit cmhserviceindustry.com to learn more.

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