RPF_0002_-_The_first_question_in_financial_planning...what_do_you_want
00:00:00.000 | Welcome to the Radical Personal Finance Podcast, Episode 2. I'm your host Joshua Sheets.
00:00:07.000 | I've thought a lot about how to begin this podcast. I've gone down a few different rabbit trails in my mind.
00:00:16.000 | For example, I question should I jump right into the tactics of what type of retirement account to open,
00:00:25.000 | or what type of investment to choose, or how to save money on your living expenses.
00:00:33.000 | But I think I'd like to begin somewhere else. I'd like to begin with a question.
00:00:44.000 | What do you really want? And then that would lead naturally to the second question, why?
00:00:55.000 | I read and consume, probably like many of you, a lot of financial literature.
00:01:01.000 | And I think about a lot of arguments. I think about a lot of the debates that are commonly had about what's the better thing to do.
00:01:12.000 | And I've come to the conclusion that there are lots of great things to do.
00:01:18.000 | And just about every decision that somebody makes could be correct, given their circumstances,
00:01:25.000 | if they know what they want and what they're trying to achieve.
00:01:30.000 | So the best place to start with financial planning is, what do you want? What are your goals?
00:01:39.000 | Now, the challenging thing is that most of us, me included, often don't exactly know what we want.
00:01:51.000 | If we did, we'd probably be a lot closer to it than we are right now.
00:01:57.000 | So I think there's a period of self-searching, soul-searching, self-discovery,
00:02:05.000 | to kind of figure out what it is that we actually want.
00:02:09.000 | But that's got to form the foundation of our financial planning conversation.
00:02:16.000 | When I chose the title for this podcast, Radical Personal Finance, I chose it because I'm drawn to the extremes.
00:02:25.000 | I'm drawn to the people who live radically.
00:02:28.000 | The interesting thing is I think I'm not the only one who's drawn to that.
00:02:32.000 | I think a lot of people are drawn to that. We're often drawn to extreme stories, stories of extreme wealth and success,
00:02:39.000 | stories of extreme poverty, stories of extreme success, extreme sacrifice.
00:02:48.000 | And I think the reason that we're drawn to those things is partly because we admire people who are 100% focused on their task.
00:03:01.000 | We often find people in history who did one thing and did it well.
00:03:06.000 | What do you remember Martin Luther King Jr. for?
00:03:08.000 | What do you remember Mahatma Gandhi for?
00:03:10.000 | What do you remember Abraham Lincoln for?
00:03:13.000 | What do you remember, insert the name of your favorite historical figure here, for?
00:03:22.000 | As humans, I think we're probably drawn in many ways to people who know what they want and why they're trying to achieve it.
00:03:32.000 | And with financial planning, we've got to do exactly the same thing.
00:03:35.000 | We've got to understand what we want and why we're trying to achieve it.
00:03:38.000 | Let me give you an example.
00:03:40.000 | Do you want to be retired?
00:03:43.000 | Why?
00:03:46.000 | Many people are putting money into a retirement account, whether that's through an employer-sponsored plan such as a 401(k)
00:03:54.000 | or some sort of deferred compensation program at work, or whether that's an individual account such as a Roth IRA or similar account.
00:04:05.000 | And yet, why?
00:04:09.000 | Sometimes, perhaps we do it because it's what our parents told us to do, or it's what our college professor told us to do, or it's because we were forced into it.
00:04:26.000 | But maybe we'd rather use the money and go travel the world.
00:04:30.000 | Or maybe not.
00:04:32.000 | After all, retirement can be a very long way away.
00:04:37.000 | Or, on the other hand, retirement can be not very far away.
00:04:42.000 | In life, we have a lot of decisions and choices that we can make.
00:04:46.000 | And depending on what the outcomes to our decisions and choices are, that's what determines the route that we take in life.
00:04:56.000 | If we know what it is that we truly want, oftentimes we could achieve it far faster than society would tell us that we could.
00:05:06.000 | Let me give you an example.
00:05:08.000 | Many times, if you ask people what they want to do when they retire, they say travel.
00:05:13.000 | Well, that's great. I like to travel too.
00:05:17.000 | But the next question is, well, how much does it cost to travel?
00:05:22.000 | Most of the time, people just simply don't know.
00:05:26.000 | There are people all around the world, traveling the world nonstop for $1,000, $2,000, $3,000, $4,000, $5,000 a month, depending on what their lifestyle is like.
00:05:41.000 | Travel really doesn't cost that much.
00:05:43.000 | In fact, it probably costs less than many of us spend on a daily basis at our home.
00:05:50.000 | I think it's interesting. I'll have to look and see if I can find this essay.
00:05:54.000 | If I can, I'll put it in the show notes.
00:05:57.000 | Chris Gillibeau, years ago, wrote an essay that his epiphany – for those of you who don't know, Chris Gillibeau was a popular blogger who just recently, I think before his 35th birthday, completed a quest of traveling to every country in the world.
00:06:16.000 | His epiphany in one of his essays that I read came to him as he was traveling across perhaps Eastern Europe, maybe Russia, in a train, trying to figure out how much it would cost him to go and see more countries.
00:06:30.000 | He realized that for $30,000, he could see, I think it was something like 100 countries or 30 countries.
00:06:36.000 | I don't remember the specifics of it.
00:06:38.000 | But with that $30,000, he could travel.
00:06:42.000 | And so he thought, "Well, where do I come up with that $30,000?"
00:06:47.000 | And he realized that most of his friends and people his age would go out and buy a new SUV for $30,000.
00:06:55.000 | And so he simply decided to forego buying the SUV and to take that same amount of money and travel with it.
00:07:01.000 | That choice appeals to me more than owning an SUV does.
00:07:07.000 | But yet, how often have we actually stopped and thought to ourselves, "Do I want an SUV?"
00:07:16.000 | Many of us who might own an SUV backed into that more by accident than by purpose.
00:07:24.000 | So let me challenge you with a question.
00:07:27.000 | What do you want?
00:07:28.000 | What do you really want?
00:07:30.000 | What are your goals?
00:07:31.000 | Once you know what your goals are, the path to get there is pretty simple.
00:07:37.000 | It may not be maybe simpler for some, maybe simpler for others, but it's fairly straightforward and fairly self-evident.
00:07:45.000 | This applies at both the big picture kind of philosophical, touchy-feely questions of lifestyle, like I've started with here.
00:07:57.000 | It also applies to the technical side of things.
00:08:01.000 | For example, let me prove my point.
00:08:03.000 | Let's say that we're going to talk about technical tax planning.
00:08:06.000 | And we say, "I'm paying too much in income taxes. I want to lower my income tax bill."
00:08:14.000 | Well, question. What do you want?
00:08:17.000 | Do you want to lower your income tax bill?
00:08:19.000 | A couple ways to do it.
00:08:20.000 | Number one, make less money.
00:08:22.000 | Taxes, unfortunately, are higher the more income you make, so make a little bit less money and you'll pay less taxes.
00:08:30.000 | You say, "That's silly because I want money."
00:08:33.000 | Well, do you want to pay less income taxes or do you want less money?
00:08:38.000 | Got to ask the question.
00:08:40.000 | Now, the follow-up would be, "I want to earn a higher income and pay less taxes."
00:08:45.000 | Okay, we can do that.
00:08:46.000 | So how are we going to do it?
00:08:49.000 | Well, are you willing to give money away?
00:08:51.000 | Do you want to give money away?
00:08:53.000 | The more money you give away, the more charitable deductions you can take against your taxes,
00:08:57.000 | and the more money you'll have and the less money you'll pay in income taxes.
00:09:03.000 | Say, "Well, I'd like to keep the money."
00:09:05.000 | Great. Well, now we know the next thing.
00:09:07.000 | "I want to earn more money, pay less money in taxes, and keep it."
00:09:11.000 | Do you want to save for the future?
00:09:12.000 | If so, then you can choose to participate in retirement plans that are going to give you some tax deferral or tax deductions.
00:09:20.000 | You can choose to align your expenses in some way where you can apply some of your expenses in a way that's going to be advantageous in the tax code.
00:09:34.000 | A little confusing. I don't want to go too deep into that right now.
00:09:37.000 | But it all starts with what do you want.
00:09:40.000 | Let's say you're working on your estate plan.
00:09:42.000 | What do you want?
00:09:43.000 | Do you want your kids to get the money or do you want charities to get the money and why?
00:09:46.000 | Do you want someone else to get the money?
00:09:48.000 | Do you want to spend all the money?
00:09:50.000 | You've got to start with what you want.
00:09:52.000 | If you want to spend all the money while you're alive, there are some great plans and features and options to do that.
00:09:57.000 | If you want to leave behind a huge amount of money for your descendants, there are some great planning ideas and ways that you can accomplish that.
00:10:05.000 | If you want to give a lot of money away to charitable causes at your death, there are some wonderful ways to accomplish that.
00:10:12.000 | So again, what do you want?
00:10:14.000 | Until you know what you want, it's hard to know how to plan.
00:10:19.000 | The second question is why?
00:10:23.000 | If you know what you want, then you've got to ask yourself, "Why do I want this?"
00:10:27.000 | Because what you might find is that you don't actually want that thing that you first thought you did.
00:10:33.000 | I'll use the example of a house.
00:10:36.000 | Many people say, "I want to own a home."
00:10:38.000 | Why?
00:10:40.000 | Well, it's because of what you're supposed to do.
00:10:43.000 | Who says?
00:10:45.000 | "I want to own a home because it gives me a place to live."
00:10:48.000 | You can live in a lot of different ways in a lot of different places.
00:10:52.000 | It doesn't always necessarily have to be cement and wood or concrete and metal and glass bolted to the earth in some way.
00:11:00.000 | You can make a home in a lot of different ways.
00:11:03.000 | I think if you dig that question through, what many people might find is they say, "I want to own a home because it gives me a sense of security,
00:11:11.000 | a place to go to, a place that I can call my own, that I can transform to be whatever it is that I want it to be."
00:11:18.000 | Now we're getting a little bit better, a little bit closer to the truth.
00:11:23.000 | Ultimately, you may decide to make the same decision before you know what you want and after you know what you want,
00:11:30.000 | but you might do it for very different reasons.
00:11:34.000 | So with financial planning, what do you want?
00:11:38.000 | What do you want out of life?
00:11:40.000 | My goal is to bring both philosophical ideas, case studies of people living inspired, focused lives,
00:11:49.000 | and extreme examples of tactics and things that have worked for people in the past.
00:11:58.000 | But a lot of it is mainly designed to give you inspiration and ideas for things that you can apply to your own life.
00:12:04.000 | Ultimately, you're the only one who knows what you really want.
00:12:08.000 | If you don't know that, spend a lot of time doing that and work towards the next thing that you can see that you think you want while you're figuring it out.
00:12:18.000 | Now, with regard to financial planning, let's talk about some options.
00:12:24.000 | Do you want to work?
00:12:28.000 | Some people would say yes.
00:12:30.000 | Some people would say no.
00:12:32.000 | Working is, you know, hear me right, working is an optional choice.
00:12:37.000 | Most of us are going to have to do it, but the reality is that a lot of people criticize a lot of other people for not working,
00:12:45.000 | living on the welfare checks and the good graces of others.
00:12:49.000 | I don't advocate that route, but let's be frank, it does exist.
00:12:54.000 | You might also decide that working is optional for a period of time.
00:12:58.000 | So that would lead us towards working towards an early financial independence, early retirement type of scenario.
00:13:06.000 | How much money could we work, how much money, if we save the money and get the money working for us,
00:13:11.000 | could we then get ourselves in a situation where we don't need to work anymore?
00:13:19.000 | If you don't want to work, could we find something that we would love so much, love doing so much that we wouldn't call it work?
00:13:26.000 | This is probably a very doable thing.
00:13:31.000 | Many people, if they could find something that they really love doing, wouldn't mind doing it so much.
00:13:40.000 | But most of us have made certain life choices that have put us in a situation where we're not able to do those things that we truly love
00:13:47.000 | and truly enjoy doing because of the choices that we've made.
00:13:52.000 | One example I've used a lot of times is retirement and what people would do after retirement.
00:14:00.000 | I've asked people, "What are you going to do when you retire?"
00:14:04.000 | I've had people tell me, "I'm going to retire and go fishing every day."
00:14:08.000 | My question is, "Why wait until you retire to go fishing every day?"
00:14:14.000 | If you really want to go fishing every day, why don't you arrange your life in a manner that allows you to go fishing every day?
00:14:23.000 | On just about every lake or ocean with fish in it, you're going to find fishing guides who go fishing every day.
00:14:31.000 | That's what they do.
00:14:34.000 | They happen to earn an income from it.
00:14:37.000 | It might not be a huge income. I don't know.
00:14:42.000 | But they get to go fishing every day and they didn't have to wait until they were 75 years old to do so.
00:14:49.000 | Think about it.
00:14:50.000 | I'd read books every day.
00:14:52.000 | What kind of job would put you in a position where you could do that?
00:14:56.000 | There are people out there that do that.
00:14:59.000 | You can fill in the blanks for yourself.
00:15:02.000 | They ask you the question, "What do you want? Why do you want it?"
00:15:05.000 | Is there a way that you can short-circuit the process?
00:15:10.000 | Over the past few years, I've seen the topic of hacking come into play into our modern lexicon.
00:15:19.000 | Hacking loosely defined as I would define it is finding a better way to achieve the same result.
00:15:24.000 | I have no idea if that's the actual correct definition or not, but that's my definition.
00:15:28.000 | Finding a new way of achieving the same result.
00:15:32.000 | You have sites. You have Lifehacker.
00:15:34.000 | You have study hacks and life hacks and work hacks and all of these different ideas of how to get the same results for less effort.
00:15:44.000 | Let's apply some hacks to financial planning.
00:15:50.000 | Number one is if we know what we want, let's figure out a way to do it faster and better and to do it now and get paid for it rather than having to flip it and just save and invest and wait for it.
00:16:05.000 | Seriously.
00:16:08.000 | Why not?
00:16:11.000 | There's no reason not to.
00:16:14.000 | I guess that's technically not correct. There are lots of reasons not to.
00:16:17.000 | But many times if we pick those reasons apart, we're going to quickly find that there are more reasons why we can than that we can't.
00:16:36.000 | I'm not sure how much more I have to say on this subject today.
00:16:40.000 | I don't want to go on and on and create a long podcast simply saying the same thing over and over again just for the sake of filling up the air.
00:16:49.000 | But I do think it's an important question.
00:16:53.000 | What do you want?
00:16:55.000 | Why?
00:16:58.000 | How can you achieve it?
00:17:01.000 | I think I will add one other thing that's been helpful to me.
00:17:06.000 | I'm interested in your comments and the things that have been helpful to you.
00:17:11.000 | Share the comments in the show notes on the blog.
00:17:16.000 | Just go to RadicalPersonalFinance.com/episode2 to find this episode.
00:17:23.000 | But I think goal setting is a process.
00:17:26.000 | It's a moving target.
00:17:29.000 | It's probably something that you never actually get to the end of.
00:17:37.000 | Years ago I listened to Brian Tracy recording.
00:17:40.000 | Brian Tracy, a business coach and speaker.
00:17:45.000 | He would talk about the process of goal setting.
00:17:48.000 | He said that one of the most valuable things that was helpful to him was to take out a fresh sheet of paper every morning and make a list of his top ten goals.
00:17:59.000 | I think he did it also at night as well.
00:18:02.000 | But to make a list of his top ten goals.
00:18:05.000 | He would encourage people to write them in the present first person tense.
00:18:10.000 | I am such and such, I have such and such, I feel such and such, I am doing this or that.
00:18:21.000 | By having people write them in the first person present tense, you can start to identify with them.
00:18:27.000 | I did that exercise for quite a while.
00:18:30.000 | What I found was that often times I would write ten things down that I thought I wanted.
00:18:36.000 | I would write them down every day for a period of weeks and then I would decide I didn't really want them that much anymore.
00:18:45.000 | A lot of the things that we tell ourselves or that we tell other people that we really want, we actually don't.
00:18:59.000 | And that's okay.
00:19:02.000 | We get to choose the path that we follow in life.
00:19:08.000 | It may seem that there's a prescription for the path that we're supposed to follow in life.
00:19:15.000 | I think our society does place that prescription upon us.
00:19:19.000 | But it's our choice whether we choose to accept it or not.
00:19:24.000 | I personally believe that living out on the extreme fringe is probably a lot more fun than living in the mainstream.
00:19:31.000 | I hope in this podcast to explore the origin of keeping up with the Joneses and explore the origins of the lifestyles that we choose now.
00:19:40.000 | But it's our choice whether we accept it or not.
00:19:48.000 | I think the common script in society is study hard in school, finish high school, get a college education, get married soon after college, buy a house,
00:20:00.000 | raise some kids, get a dog, put your kids through college, save money in your 401k and retire so you can live the good life.
00:20:10.000 | That's fine if that's what you want. I think there are a lot of wonderful joys to be had in that type of lifestyle.
00:20:17.000 | I probably live that lifestyle more than most people.
00:20:20.000 | And yet, is that what you really want?
00:20:27.000 | I want to challenge assumptions and challenge beliefs.
00:20:31.000 | Each one of us needs to challenge assumptions and challenge beliefs.
00:20:35.000 | For ourselves, for our own good.
00:20:41.000 | I personally think that personal happiness should be a goal that we set for ourselves.
00:20:47.000 | I think that many people, if they really would find the courage to dig through the detritus of life and to dig through the list of societal expectations,
00:21:01.000 | I think most of us would put on our list of goals, "I want to be happy."
00:21:09.000 | At least that's on my list.
00:21:11.000 | I want to be happy.
00:21:14.000 | I want to live a life filled with joy and love and hope and health.
00:21:20.000 | I want a life of abundance.
00:21:27.000 | I want a lifestyle that's full of love.
00:21:30.000 | I want to be at peace.
00:21:33.000 | I want to be happy.
00:21:35.000 | Well, the good news I think is that happiness is very achievable, and it's achievable far more quickly than financial independence.
00:21:43.000 | I think financial independence can play a role in happiness, but we're going to talk about how do you define financial independence.
00:21:53.000 | Financial independence could be defined in many ways.
00:21:56.000 | It could be defined in not having to work for money.
00:22:01.000 | That's one definition.
00:22:03.000 | It could also be defined as not being a slave.
00:22:07.000 | A lot of ways to achieve it.
00:22:09.000 | You can get yourself in the position where you don't have to work for money if you just simply save and invest enough money to pay for your living expenses off of the interest or dividends or principal.
00:22:23.000 | You can also be in a position of financial independence if you pay down your bills so that there are no set creditors coming after you, calling you,
00:22:35.000 | and have a little bit of money in the bank to, even for the short term, make some different choices.
00:22:42.000 | It's up to you.
00:22:50.000 | Choose carefully.
00:22:54.000 | You hear people say the common saying in our society, "Time is money."
00:23:01.000 | Well, maybe yes, maybe no.
00:23:06.000 | I would say the other way around.
00:23:08.000 | I would say that money is, in some ways, stored up time, but even that falls short.
00:23:15.000 | Because you know what?
00:23:16.000 | You can save money.
00:23:17.000 | You can't save time.
00:23:19.000 | You've got one life to live.
00:23:25.000 | One life to live.
00:23:30.000 | No matter how hard we try, none of us are getting any younger.
00:23:37.000 | And with that, I think I'm probably done for the day.
00:23:41.000 | I had more that I had thought about talking about, but even just recording this short podcast has caused me to be introspective for myself as far as considering what do I want.
00:23:57.000 | You know, I'll be vulnerable for a moment.
00:24:00.000 | Not quite sure I know.
00:24:03.000 | Really not.
00:24:04.000 | I have a lot of things that I think I want, and I work after those things, but I'm not quite sure that I know sometimes.
00:24:12.000 | But that's okay.
00:24:16.000 | It really is.
00:24:17.000 | Because there is no prescription for the way that life has to go.
00:24:22.000 | And that the pursuit of happiness is something that perhaps can be an end in and of itself.
00:24:38.000 | Perhaps can be something that will help us as we work our way towards it.
00:24:47.000 | Hope this made sense.
00:24:50.000 | We'll get better in the future.
00:24:51.000 | But those are my thoughts.
00:24:52.000 | That's where we start with financial planning.
00:24:54.000 | What do we want?
00:24:56.000 | Why do we want it?
00:24:57.000 | And then that leads us to number three.
00:24:59.000 | How do we accomplish it?
00:25:03.000 | Come by the blog.
00:25:04.000 | Leave a comment.
00:25:05.000 | Shoot me an email.
00:25:06.000 | Email address joshua@radicalpersonalfinance.com.
00:25:09.000 | Let me know what you think of the show.
00:25:11.000 | Give me some encouragement.
00:25:12.000 | Give me some tips, advice.
00:25:14.000 | Share with me what questions you have that would be helpful to talk over and to answer.
00:25:21.000 | Leave a comment.
00:25:23.000 | Again, radicalpersonalfinance.com/episode2.
00:25:27.000 | Have a great day.