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My name is Joshua. I'm your host. Today is Friday. It's a live Friday Q&A show. I have four callers waiting on the line. If you would like to join me for a live Friday Q&A show, they work just like call-in talk radio. Go to Radical Personal, go to Patreon.com/radicalpersonalfinance, patreon.com/radicalpersonalfinance and you'll see all the details that you need there to sign up to support the show and gain access to these calls.

We begin with Zach. Zach, welcome to the show. How can I serve you today, sir? Hi, Joshua. Thanks so much for taking my call. Before I get started in my question, I'll just give you a brief background on my situation. So I work as a project manager and for the last couple of years, I've been contracting through a contract firm.

So I was laid off a couple of months ago, obviously due to the coronavirus, but luckily I was able to land a new position yesterday. In the process of searching for jobs, I spoke to several recruiters, but one recruiter had brought up the option of receiving my income through my own LLC.

So the way I see it, essentially my options would be to work as a W-2 employee. So where I would get an hourly rate from the contract firm, I could get paid through the LLC. This option, so the LLC would be the employer who hires me would be paying me through that firm, that contract firm.

This option would pay, as I understand it, about three to ten dollars more an hour. This is an hourly rate. So and then the last option, which is something I've been wanting to do, but want to hear your thoughts on this, is to kind of cut out that middleman completely, set up my own LLC and maybe pay like a finder's fee to a recruiting company.

So I'm just hoping you could discuss some of the pros and cons of these options and let me know what you think. It's a good question. The first thing to begin with that you have to start with is, are you a contractor or are you an employee? This is an area where the IRS has started to become much tighter in recent years and it's an area that's under dispute.

I guess most famously when California recently passed new legislation affecting contractors and making it even harder to be a contractor in that state where you saw Uber and the various ride sharing services and affected by that where they're trying to classify the contractors as employees and that is leading to major problems.

But the IRS regulations on the subject are fairly clear and if you'll begin with those regulations, then you'll get an idea of which path is best to go. So if I just use these words without actually defining them, if I just simply use these words of employee and contractor, are you an employee or are you a contractor?

So that's the thing. I could be a contractor. Whether I get paid through a W-2, I'm still contracting to the contract firm who sets me up with the employer that needs the work done. Okay. So in this situation, the company, the hiring company is going to hire a contract firm and either you will be an employee of that contract firm or the employing company will hire your own contracting firm.

Do I understand that? I believe so. I think what you're saying that second part is they would be I would have my own LLC and then it's a little confusing but like that that the contract firm is kind of the middleman. So regardless if I'm paid through W-2 or paid through like a 1099 independent contractor, it would go through the contract firm.

Okay. So in your situation, this may work out fine for you to be deciding this. But in my experience answering this question, much of the time when I'm asked this question, the answer is simple. You just simply go and ask what does the IRS say about whether you're a contractor or an employee and let's follow that.

And I'm going to give you how the IRS defines that and then move on to answering your specific question. But the IRS uses three distinct categories to create a set of facts that will lean in one direction or another. And those three categories are behavioral control, financial control, and the relationship between the worker and the employing company.

Behavioral control. A worker is an employee when the business has the right to direct and control the work performed by the worker even if that right is not exercised. And that is probably the most significant one. By the way, why is this important? Because there are significant penalties for the hiring company if they misclassify somebody as a contractor who is actually an employee.

And so the biggest danger is not for you as the worker, it's actually for the company. But if the company has the right to control the work performed by the worker, then you are an employee. Behavioral control categories are the type of instructions given, such as when and where to work, what tools to use, or where to purchase supplies and services.

Receiving the types of instruction in these examples may indicate that a worker is an employee. Degree of instruction. More detailed instructions may indicate that the worker is an employee. Less detailed instructions indicate less control, indicating that the worker is more likely to be an independent contractor. Evaluation systems to measure the details of how the work is done points to an employee.

Evaluation systems measuring just the end result point to either an independent contractor or an employee. Training a worker on how to do the job, or periodic or ongoing training about procedures and methods, is strong evidence that the worker is an employee. Independent contractors ordinarily use their own methods. Those are all indications under behavioral control.

Secondarily, financial control. Does the business have a right to direct or control the financial and business aspects of the worker's job? Consider significant investment in the equipment the worker uses in working for someone else. Unreimbursed expenses. Independent contractors are more likely to incur unreimbursed expenses than employees. Opportunity for profit or loss is often an indicator of an independent contractor.

Services available to the market. Independent contractors are generally free to seek out business opportunities. Method of payment. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time, even when supplemented by a commission. However, independent contractors are most often paid for the job by a flat fee.

So those are all factors of financial control. Number three, relationship. The type of relationship depends upon how the worker and business perceive their interaction with one another. This includes written contracts, which describe the relationship the parties intend to create, although a contract stating the worker is an employee or an independent contractor is not sufficient to determine the worker's status.

Benefits. Businesses providing employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay, have employees. Businesses generally do not grant these benefits to independent contractors. The permanency of the relationship is important. An expectation that the relationship will continue indefinitely, rather than for a specific project or period, is generally seen as evidence that the intent was to create an employer-employee relationship.

Services provided, which are a key activity of the business, the extent to which services performed by the worker are seen as a key aspect of the regular business of the company. So you need to think about those things with regard to your situation, and I want other listeners to think about them as well, that if you are going to classify yourself as a contractor, you need to be a contractor, which means that you need to go through this list and make sure that on as many of those things as possible, your structure of work, the structure of relationship, reflects a contractor status.

On the other hand, if you're an employee, there are less risks with simply being classified as an employee, but it would be fairly evident in that list of ways to look at it. So let's proceed forward on the assumption that you are eligible to either be hired as an employee of the contracting firm, or you're eligible to establish your own contracting firm.

How would you decide between these? There are three major potential areas of benefit. Notice I say potential. They're not guaranteed areas of benefit, but they are potential areas of benefit. Number one is tax, number two is deductions, and number three is benefits. So let's talk about them. Tax, deductions, and benefits.

The first thing to understand is the potential tax savings from being as an employee relate to your employment taxes. So if you are an employee and you're paid $100,000 per year as an employee, you pay employment taxes of 7.65% that's deducted from your wages. So that's $7,650 that is deducted from your $100,000 wages, and you see that reflected on your paycheck.

Your employer pays an additional $7,650 of taxes that is not reflected on your paycheck. So the total cost to them is the cost of salary plus the cost of the employment taxes that they're paying plus any other costs or benefits, costs of insurance programs, costs of maintaining an office for you, etc.

And so you're going to be paying in that situation $7,650. Now if you generate in your own company that is listed as a contractor to this employing business, if you generate a $100,000 profit for this company, you will owe, if you are a sole proprietorship, you will owe 15.3% of your total compensation to the IRS in the form of self-employment taxes.

That would be a total of $15,300. The opportunity that you have is to take some of your wages and change the classification, sorry, let me be precise, I used the wrong word. The opportunity that you have is to take some of your income and instead of classifying that income as wages, rather you classify it as profit, and you do this within the context of your own S corporation, then you can possibly classify some of that as profit and avoid paying employment taxes on it because you don't pay employment taxes on profits or dividends.

You only pay employment taxes on wages. So let's assume that you have $100,000 of potential profit in your business classified as an S corporation, and you now say, "I'm going to pay myself a $50,000 salary." With a $50,000 salary, you're going to pay 7.65% as the employee, but you're also the employer, so you're going to pay the other 7.65% as the employer.

So your total tax bill is on the $50,000 is $7,650. However, you can then issue yourself a dividend reflecting your profit of $50,000, and that $50,000 would not be subject to employment taxes. So in that situation, you've now created an opportunity for you to generate $100,000 worth of income, but only pay $7,650 of taxes.

Now the reason I use round numbers, it should be is that on this particular scenario, it should be obvious to you that you haven't won. You haven't gained anything here. So if these numbers are different, for example, if you were previously being paid a $300,000 salary, but now you could as an employee, but now you could change and you could be paid a $30,000 salary as an employee of your own business with a $270,000 dividend, now the numbers would be wildly in your favor.

The problem is this is an area that's subject to significant abuse, and so you need to get the numbers right. The IRS will not tell you what is their definition of right. Basically, it's a subjective analysis by an expert who looks at it and says, "I think that this is a reasonable amount of compensation." If you're a doctor working for your own medical practice, it would be unreasonable for you to pay yourself a $20,000 salary if somebody that you hired in that position was going to be earning a $120,000 salary.

But it would be reasonable for you to pay yourself, say, a $100,000 or a $110,000 or a $120,000 salary if you would need to hire somebody in that position at $120,000, and then you could take the additional $200,000 in profit rather than as wages. So that's the tax consideration, and it's significant, but it's not always a clear-cut choice.

And the reason is that if you're going to play this straight, you need to create a salary that will be reasonable if subjected to an audit. Now, there are a few wrinkles associated with this potential tax savings that many people ignore. For example, if you do this, you will need to establish an S-corporation.

That's fairly easy. The most common way to do that is simply to establish a single-member LLC and for that entity to elect to be taxed as an S-corporation. That brings modest records requirements, modest filing requirements, et cetera. But "modest" does not mean "none." So you still need to keep corporate records, you still need to file corporate tax returns, and so there may be additional costs involved for accounting fees or additional costs of time.

If the decision is simply between "should I be an employee" and "should I run my own business" and the tax savings are of only modest comparison, there's not an obvious winner, stay an employee. It makes your life simpler. Get a WT2, you can do your 1040 in a few minutes instead of hours, you have fewer corporate record-keeping requirements, et cetera.

So that's the tax situation. The second area of potential advantage or disadvantage has to do with the area of deductions. And when I use the word "deductions" here, I mean, are there things that you would be able to deduct if you were running your own business that you wouldn't be able to deduct if you were not?

So let's use an example. Let's assume that as a contractor, you can choose to live in Salt Lake City, Utah, or better, Park City, Utah, or Aspen, Colorado, or Telluride, Colorado, some beautiful little ski town. And as a contractor, you can choose to live in that location. That is the center of your operations.

You do most of your work from that place, but quarterly, you fly to New York City and you spend two weeks in New York City consulting with clients, working with them in person. Well, now, all of your travel expenses going from your home location to your client's site now become deductible expenses.

You're not incurring commuting costs. It's all part of just simply business travel. Your hotel expenses, all of that stuff becomes business travel. But if you were an employee of the company, maybe they wouldn't let you live in Park City, Utah. Maybe they wouldn't let you live in Telluride. And so you, in that situation, now have to live in New York, maybe New York City, and now you have to commute to an office, and it's their headquarters.

And perhaps you incur significant expenses commuting in from your office. Well, those are commuting expenses as an employee. They're not a deductible expense. And so the question is, if you run your own company, is there some kind of expense that you would be able to move over onto the business books that you wouldn't be able to expense if you were an employee?

And this, again, is also not always clear cut. It depends very much on the spending profile, on the lifestyle profile, and on the individual negotiations that you might make with the company. You could, with some companies, simply negotiate the fact that you work from your home in Telluride, Colorado, and on occasion, the company flies you in for quarterly meetings.

And so you don't have to create your own company to do that, but sometimes it's the only way to actually accomplish that. And so if you look at your expense profile and you say, "There are some deductions that I could take that could potentially be significant over here." The common ones that are attractive to people are travel expenses, entertainment expenses, etc.

And if you can set that situation up in an advantageous way by running your own company such that you can take more deductions, then it can help. So now let's go back to my $100,000 example. Let's assume for a moment that the profit of the company was probably going to be $100,000, but through a very careful reading of the tax deduction laws for businesses and through an understanding that you can generate ordinary and necessary business expenses in your business that obviously qualify for full deductibility, and you can do this in a proper way, you can decrease that taxable profit from $100,000 to $70,000.

And now you can then make a good argument that your salary should be pegged at $30,000 with a dividend payment of $40,000, totaling $70,000. Well, now, yes, you still are going to incur a total cost of 15.3% of employment taxes on your $30,000 salary, which would be just under $4,600, total $4,590.

But that's less than the $7,650, and you did it in an advantageous way. Your expenses were not expenses that— you gained some fun, some pleasure from those expenses by being able to go into the contractor or some other additional benefits. So that's where we talk about deductions, and there may be significant deductions that you can incur as a contractor that you can't.

And it all has to do with what is the setup that your company gives you for unreimbursed employee expenses versus do they give you an expense account? You know, what do they actually provide for you? What's the total compensation of pay, the package that they're willing to offer to you?

We'll come back to that in a moment. The third area has to do with benefits, employee benefits. And so here we would talk about things like insurance programs and also things such as— things such as retirement programs. So let's say that you could generate a $100,000 salary, but the company that you would work for has a mediocre insurance policy and no 401(k).

But you, on the other hand, are a whiz with your personal finances. You can live on $2,000 a month, $24,000, but you have a daughter who has special needs and has a massive annual bill that just generates huge medical costs. And in addition, you really want to save for retirement because you think that these medical costs in the future might force you into bankruptcy.

So what you could do in that situation, if a fact pattern like that emerged, would be to establish your own company. And in your own company, you would do two things. You would go ahead and secure a very nice medical insurance policy, which now would give you large— the ability to expense large amounts of your medical costs in a totally deductible way towards your company because it would cover your minor dependents.

You might also even take it to the point where you set up a self-reimbursed medical plan where you could set that plan up and you could arrange it to— maybe you have 10 children and all of your children have the world's crookedest teeth and you're facing $4,000 per year— or I'm making up silly facts— but you have 10 children, they all have crazy crooked teeth, and you're going to generate $15,000 a year of orthodontia bills for the next 10 years.

Well, in that situation, you would set up a self-reimbursed medical plan in your company so that you could reimburse all of that massive orthodontia bill, which is ordinarily not an inexpensable cost under a standard group health insurance plan. And so back to the sick daughter, you get a Cadillac plan, maybe a self-reimbursed medical program that you set up that pays you for— maybe you have to commute, your daughter has cancer, and you've got to commute two states over.

Well, you go ahead and set up a mileage reimbursement as part of your medical plan and you reimburse yourself for all that commuting mileage to medical appointments. And then you establish a 401(k) plan and you set up a solo 401(k) or you have a 401(k) for you and your assistant or you and your fellow employees of the company, and you set that 401(k) up in such a way that you can defer and contribute the maximum amount of possibly as much as $50,000-something per year into that 401(k).

And so a situation like that, for someone in that weird but not unrealistic fact pattern, a situation like that would mean that you could set up a benefit structure in your own company that would be highly advantageous to you in a fact pattern like I described, where you can now deduct massive numbers of medical expenses.

That lowers your profits. You reduce your taxable income in your company to a very low level, possibly that qualifies you for some kinds of subsidies or government benefits. And then by establishing the 401(k) and deferring huge amounts into the 401(k), you establish a creditor-protected pot of money so that if your daughter's illness drives you into bankruptcy in the future, you have some bankrupt-proof funds, some exempt funds that you would be able to merge on the other side of bankruptcy with.

So those are the three levels of analysis. I know that's complex. I know that's a lot. What I would say is, to keep it simple for your situation, if you think about those three things, if there's not an obvious, clear winner based upon those three factors for you, and it's kind of a toss-up, and to me, $3 to $10 an hour sounds like a toss-up.

$10 is very different than $3, but you can do the math. But if there's not an obvious, clear winner, just take the employee package. It'll be simpler. Your life will be simpler. And then what you do is take the employee package and then start your own little business on the side in something related or something else, which will give you, as long as you can generate some income there, it will give you most of those benefits without having to deal with all of the hassle of being a contractor.

Now, I've done this analysis for many clients, and there have been answers that emerged both ways. Some people, it's a clear winner that they should go to being a contractor. In others, it's a clear winner that they should go to being an employee. And I would say that there are other little benefits.

So, for example, are you thinking about buying a house? Well, if you're thinking about buying a house, you'll find that your W-2 wages secure a mortgage for you much more easily than your profits do. And so those are the three factors that you'll need to look through to make your decision.

- Okay, yeah, I think that's a very detailed answer. I think, you know, the third option is definitely where I was leaning, meaning if I could make it work, because I think there are, like in a situation, I don't necessarily have any medical bills or children or anything, but the retirement option, for example, is something that I think could drop that taxable income significantly.

So I think I need to do a little bit more research, especially on the how much I can get paid more. Like you said, there is a big difference between $3 and $10 an hour. You know, I think also, and again, you can clarify for me, I think the reason it is more, and this is why I want to investigate further, is because they don't have to pay me those benefits, right?

They don't have to offer the 401(k) and the health insurance plan, et cetera, et cetera. And so I can get that back in a higher hourly wage. - Right, and this is why the IRS is so careful about misclassification, why they hold the business responsible, because it's very much in a business owner's interest to misclassify people as contractors rather than as employees.

Because in so doing, they save significant expenses. They also save significant liability. So is it the cost of benefits? Yes, it's the cost of benefits programs, the cost of health insurance programs. It's getting classified as a big company instead of a little company and having more stringent requirements. It's the ability to save on paying unemployment insurance, all of those things.

I don't want, you know, with my business, I prefer to always avoid hiring employees, because employees generate significant headaches, significant administrative problems, and major expenses. And most employment contracts are structured in such a way that they require ongoing costs. You know, you have to pay your employee $5,000 a month, and you gotta pay your employee $5,000 a month regardless of how much work they do, regardless of how much work you do.

So what I have sought to do in my business is to work exclusively with contractors. And I work exclusively with contractors because that allows me to save all of the legal liability, the administrative expense of providing office space and equipment, et cetera. They can provide their own equipment. It allows me to hire and fire with total freedom, not to worry about this employee's gonna sue me for a wrongful termination.

It allows me to adjust the amount of work that I buy to the amount of work that I have. So if it's a simple hourly thing, and I just pay for the hours I use, if I'm not working, I'm not paying. And so it's a vast, for a business that can function on a contractor basis, from a business planning perspective, it's vastly superior to hire contractors, even if you pay a higher rate because of all of the total savings.

However, only some businesses can function on contractors. You can't, there's many businesses that you can't just have a different guy coming in every day. If you've got a store and you need a manager for that store, you can't bring in a different manager as a contractor every week of the year, you need a manager.

And so that system, while superior on paper, will often be completely destroyed by the nature of the business. You have to have employees. And so yes, it's well within their interest to pay you as a contractor because they don't owe you anything at that point in time. If they lay you off, they don't have to pay you severance.

And obviously, the severance is not a legal requirement, but it's a custom in certain kinds of industries. And so from a contractor, they just don't renew your contract. So you have significantly less security as a contractor. And that's why I say the increased compensation needs to reflect that. Now, what I would point out to you is that one additional area of analysis and with this we'll wrap up, but I would say you need to also think about your personal lifestyle benefits as a contractor.

So if you're an employee, are you required to be there Monday through Friday from eight to five? That's a lifestyle cost. I've never wanted to be an employee because I haven't wanted to work, trade time for money ever. The last time I traded time for money was in college and I didn't like it.

I want to trade money for results. And so if I can get my results on Monday from noon till midnight and Tuesday noon till midnight, and then I can get on an airplane on Wednesday and travel Wednesday, Thursday, Friday, Saturday, Sunday, to me, that's a major lifestyle benefit. And I've never been scared of the insecurity that comes with being a contractor because I crave the flexibility that comes with being a contractor.

And so there may be major benefits to you for doing that, especially if you're interested in early retirement, financial independence. As a contractor, you have the ability to allocate your time probably more freely. And so that means that you can always be trading in clients, trading up clients and massively increasing your income.

As a contractor, you can change your contract prices at your demand, not at the company's whim. You have more room for negotiation. You have more room to prove your value. So you can potentially increase your income significantly. Or if you can't increase your income, you can potentially change your lifestyle flexibility.

In some industries, it's totally reasonable that somebody could secure four contracts per year. And the contracts each take them eight months, right? So they work January, February, they do a contract and they take March off. Then they work April, May, and they take June off. And they work July, August, September off, October, November, December off.

And so as a contractor, if you are genuinely working on a contract basis, then there can be major lifestyle benefits from that type of approach. I've recommended this to many people who are leaving their primary job. They don't want the personal responsibility and lifestyle constraints of being an employee any longer.

They have some savings, but perhaps not so much that they're comfortable living exclusively on investments. They still want to work. Well, the natural shift is to move from being an employee to being a contractor. And if they can do a few highly paid contracts per year, then things work out and everybody's happy.

It's a really lovely way to work if you can handle the perceived risk. So consider all of that as well as you make your decision. - All right, that really helps, Joshua. Thanks so much. - My pleasure. - All right, we move on. We're on the backup recording system today.

So we move on to Jeremiah. Jeremiah, welcome to the show. How can I serve you today? - Hi, Joshua. Thank you for taking my call and for your show. I've really appreciated it. And can you hear me okay? - Sounds great. My pleasure. Thank you for being here. - Could you, my question's a two-part question.

And if you've already talked about this in the past episodes, I won't be offended. If you just direct me to that episode. But could you possibly explain like negative interest rates for the average American and how much that would affect them in their daily life since it's looking more possible that we could see that in the US in the near future?

And basically, what's your thoughts on the effectiveness, negative or positive of negative interest rates on the economy in general as compared to other countries like Japan and Sweden, et cetera? How much money do you have? - Like net worth wise? About 900,000. - Okay. So you're in the range where this is starting to be significant because it can affect your investments.

The reason I begin with that question is in my experience, many of the people who obsess endlessly about economic forecasting and prognostication, et cetera, just simply don't have any money and it's a waste of time. The reality is if you don't have a lot of money, then you need to focus on your income and keeping your income up and your income will adjust with the economic environment in a straightforward way and interest rates are really only an academic concern.

Even if you have modest amounts of money, they're still just relatively an academic concern. They're not particularly interesting that you should focus deeply on it at any one particular time. On the other hand, when you start to generate more money, it does make a big difference because the interest rates that are reflected in the investment prices that are available are going to drive what returns are available.

If interest rates go negative and you have negatively priced government debt, then now that's going to affect the risk-free rate of return. That's going to affect the returns across the board of your portfolio. It is difficult. Let me keep it simple and say this. If you think about why interest rates would go negative, and so to be clear, we're not talking about somebody getting negative interest rates on a home mortgage, right?

That's not going to happen. You're not going to go down to the local mortgage broker and say, "Hey, can I get a mortgage from you?" And the guy says, "Yeah, sure, we'll give you $200,000. And not only that, but we'll send you a check for $5,000 a year to cover this negative interest rate." That's not going to happen.

It's not going to happen to your credit card company. Your credit card company is not going to send you a letter in the mail that says, "Here's a credit card with a $1,000 credit limit on it. And if you take the $1,000 and spend $1,000, we'll cut $100 off your bill and you'll have to pay us $900 back." So when we use the term negative interest rates, what are we talking about?

We're talking about the interest rates on the bond market for government debt, government bonds. And interest rates do go negative. They have gone negative at various times over the last few years. I'm not equipped with the charts, nor have I recorded a standalone show on this to show. But they have gone negative over the past few years in a number of different places.

And so you ask yourself, "Why would a German investor buy German bonds with a guaranteed decrease?" Well, the reason is always safety. The reason that people do it is because you get safety. And you reach a certain point in the investment markets where you're just desperate for something that can— you're desperate for something that can be returned to you.

And so you say, "Well, at least if I put my money here, yeah, I might lose some in terms of— theoretically, in terms of the negative interest rates. Then I'll at least get it back." So that's how it works. And you see investors still taking that debt. Government bond markets function— it's a free market.

A government has to pay what the market requires in order for them to get money. And so Argentina might do a bond offering, and they have to pay 22% on their government debt in order to get anybody to trust the government of Argentina. So they'll just list it as 22%.

And then if history is any advice, then they will default on it a number of years later. On the other hand, Germany can offer negative interest rates on its government debt, and people will lap it up because they understand the fiscal constraint of the German nation. Beyond that, I don't have anything intelligent to say other than to say that if interest rates go negative, it's a sign that there's a flight to safety.

And what to do in that from an investment perspective, I don't know. I don't know. So I don't think that I have a very good answer for you other than that little bit of introductory commentary. If you want to specify your question more, fine. What I would say is my answer is always going to come down not to what the particular interest rate environment happens to be at a certain time, but rather, do you have an investment plan that will satisfy that interest rate environment?

Last week, I posted on Twitter that I've become much more of a fan of the old Harry Brown permanent portfolio concept because of its ability to give people something that is understandable so that they don't bail on their investments in bad times. And I've done several shows on the permanent portfolio that I've talked with Jake DeSilis about it, did a standalone show on it.

It's just one of those very interesting concepts. The concept for the uninitiated is that you divide your investment assets into four different investment classes. You invest 25% into stocks. You invest 25% into government bonds. You invest 25% into gold. And you invest 25% into cash. And you maintain that 25% ratio.

And the idea is that you have part of your investment portfolio that will function effectively for you in any market condition. And so if you have negative interest rates, number one, of course, you'll have older bonds that are— I won't go through all the permutations. So what I like about that, while I don't know that the permanent portfolio is the world's greatest approach, people have tweaked it and taken that concept to a diff— you know, famously Ray Dalio, you know, built off of that with his ideas.

But what I like about it is it gives people the confidence to know that they own an asset that will function in every economic circumstance. And that's what your question makes me think of, is simply if interest rates go negative, look at your asset classes and say— your investments and say, "Do I have something that will continue to perform in that period?" But beyond that, I'm not particularly concerned beyond that.

- Okay, that makes sense. So do you think banks would charge a fee for storing your cash in their institutions? Because that's my main concern, is working on the $100,000 savings that you had mentioned in previous episodes to hopefully retire here early in the future. And I mean, obviously getting zero interest is horrible, but having to pay them money to save my money is even worse.

So I'm concerned about that aspect of it. - This has happened repeatedly over the past years. This is nothing new. This has happened repeatedly over the last few years. I don't have the articles at my fingertips, but there have been a number of banks in Europe that have charged for this.

There have been a number of banks in the United States that stopped taking large accounts. And what they do is the bank says, they send you a letter, right? They said, "Now we're going to start, I'm sorry, but for now we're going to start incurring a monthly service fee on your checking account, your savings account, your CD, et cetera." And so when that happens, and that's where the bank has to protect themselves because if interest rates go negative, what do people do?

They withdraw cash. And so they withdraw cash and they sit on cash, which wipes out the bank's reserves and make things very difficult for them. And so this has happened repeatedly over the past few years. What I would say is you basically come down to, in that situation, you come down to what do I do?

You know, I just found an article. This one's from 2016 with just a quick search, but from the Telegraph. "Savers fear negative interest rates as NatWest," that's a UK bank. "NatWest warns businesses they might have to pay to hold cash." I'm sorry, I can't pull them in real time from the United States, but search for how this has happened.

You'll find a number of times this has happened, mostly with large accounts. Mostly with large accounts is the primary thing. Here's one from Reuters from a couple years ago. "Jyske Bank, Denmark's second largest bank, said it would introduce a negative interest rate of 0.75% for all corporate deposits and for private clients depositing more than 750,000 Danish crowns," which is $111,100 U.S.

dollars, "from December 1. A month ago, it said clients depositing more than 7.5 million crowns would be charged negative interest rates of 0.6%. Last week, Denmark's central bank cut its key deposit rate to -0.75%, a record low among developed economies. Earlier the same day, the European central bank cut interest rates and resumed buying bonds.

The rate cut means that Jyske Bank now loses even more money. Chief Executive Anders Dam said in a video statement on the bank's webpage, "It is a lot of money and we have to pass on part of this bill to our customers," he said. "I don't hope that we will have to go lower, but I don't dare to promise it." Denmark was among the first to introduce negative rates in 2012.

In August, Jyske became the first to offer a negative rate on a home loan. Well, here we go. In effect, paying customers 0.5% to borrow money for 10 years. Maybe I need to check what I said earlier because maybe I got it wrong. Denmark's largest bank, Danske Bank, blah, blah, blah." So the point is that this has been happening all around the world, so it's not a hypothetical concern.

What I'd say is that in that situation, why does the bank want the money out of there? Well, they want the money out of there because it's costing them more money to have it than to not have it. And so in your situation, if you're only dealing with $100,000, and I understand that word "only" is a relatively loaded term, but you're not going to have a problem.

If you have a million dollars in your bank account, this is going to have a problem. $100,000 is probably not a problem. If you're in doubt, take out $50,000 in cash and put it in a safety deposit box and just sit on the cash, and then negative interest rates are not a problem.

And then when they start paying you money again, then you can go ahead and start depositing money again. But it's a simple solution when you're in that world where you can simply take out a $50,000 withdrawal and store it in physical cash. No problem there. - All right, thank you very much.

- My pleasure. - All right, we move on to... Let's see. This should be Benjamin. Benjamin, welcome to the show. How can I serve you today? - Hey, good afternoon, Joshua. Thank you for all you do. And also thank you for doing a show on the Facebook group. Question.

- Oh, my pleasure. Are you the Benjamin that asked the question there? - Yes, yes, I am, Joshua. - How did I do on my answer? - You nailed it, Dylan. Thank you so much. That cleared a lot of things up. I'm one of your listeners who, like, when you say something, I'm writing it down and I'm telling my friends and anyone I could tell about it.

- I appreciate that. - For years now, and I very appreciate what you do. And just to clarify, that cash position, it's actually brought a lot of opportunities, I think, to clarify, put on that comment. Like, opportunities we would have never even seen before. And even though we have lost, theoretically would have lost market money, we've gained a lot of opportunities and investment opportunities.

And the peace of mind has just been, I don't know if I could put a price tag on that through this last six, seven months now, with my family and extended family knowing that worst case scenario, we were good for years in certain situations. So. - I'll comment on what you're saying there because to me it is, it's something that I'm learning in real time that nobody taught me.

And so I'm a little bit on thin ice generating ideas that are, I'm not saying they're exclusively original to me, but I'm generating ideas in an original way based upon my experience with regard to holding savings. I was trained in what I would call the mainstream school of financial planning, which has a few basic tenets that are generally accepted.

Number one, you want to invest money continually. And the best and often only type of investment that is discussed is stock market investments. Buying mutual funds, often within a retirement account. That's usually what people think of when it comes to investing. The second thing is money that's in the bank is unproductive.

So you want to minimize the money that's in the bank because it's not earning you very much. And this has been especially true throughout my financial planning career. I wasn't around in the 80s when you could get, I was around, I wasn't working in the 80s when you could get double digit rates of return on your savings account.

My entire life, I have gotten less and less and less and less and less and less interest on my accounts. I remember when I opened my first money market account when I was 18 years old. And I don't remember what it was, but it was a few percent. And I would get these online banking things of, I think, 4% and 3% on my online bank.

And then it's just gone down, down, down, down, down, down, down. To the point where today it's practically 0.0. Basically for all intents and purposes. So, and then the third tenet of mainstream advice is you should have savings and emergency funds that provide you with three to six months worth of expenses.

And what I was taught in my certified financial planner training is that you tell a client that it's six months of expenses if, for example, you have a single income household, if you have, everyone's relying on one job. But then on the other side is three months worth of expenses if there's a dual income household because it's more likely that if one person loses their job, the both aren't.

So it's three to six months of expenses. And I don't have a problem with that advice. I don't think it's bad advice. I don't think it's wrong advice. What I think it is is short-sighted at times. And there's a whole other side that I didn't understand. And for me, this has been personal.

It's been personal experience. When I realized that by having money, I could change my lifestyle into a lifestyle I didn't want to retire from, it changed my perspective. When I realized what I have taught in public is that if I tell a 24-year-old, "Listen, if you got 10,000 bucks in the bank, even if you don't have any savings, but if you got 10,000 bucks in the bank, you can do anything." And then I see those 24-year-olds pursuing all these interesting paths.

Some people buy a motorcycle and ride a motorcycle for a year. But out of that, they generate the creative inspiration to go and start some business. And I recently was reading a story that Kevin Kelly wrote. He's the founder of Wired Magazine. And he was writing an article about...

Kevin's just a fascinating guy. If there's one person that I would just enjoy spending a few days with, he's the kind of guy. And he was writing this article about him back in, I think, the '70s, traveling around Asia by himself. And he went and, again, traveled Asia by himself for a very long period of time in a day when there were no guidebooks.

He didn't speak any of the languages. He didn't have any money. He was just bumming around. And yet he came back and then proceeded to build a fascinating career. I've been reading the autobiography of Steve Jobs. And I learned in that autobiography something I hadn't previously known, that Jobs spent a significant amount of time in India when he was younger.

I don't remember exactly, at least six months, bumming around India, maybe longer. And then he came back and went through a series of jobs that later ended up in his career work. What I regret is that I didn't have the clarity of mind to do more of that when I was that age.

I did a lot. Compared to most people, I've done more. But in hindsight, I could have done a lot more. But I was so focused on invest money. And I put so much money in my Roth IRA, which I then invested. And I knew I couldn't touch the money in my Roth IRA, that I said no to a number of experiences that in hindsight I wish I'd said yes to.

And so when I recognized that the problem was that I was so focused on putting money into mutual funds in my Roth IRA, and that if I'd had more money in my checking account, I would have done more interesting things. And who knows where those interesting things would have led.

Those interesting life experiences are wildly unpredictable. I can't tell somebody, "Hey, if you go and buy a motorcycle, then you'll travel and travel for three months, you'll have some experience." I have given that advice. Last year I was counseling a friend of mine, and he had lost his job, but he had a lot of money saved.

And we were talking about career options, and he had no imagination. He had no interesting ideas for his life. He had no idea what he wanted to do. He didn't want to marry. He wasn't interested in... But there was nothing he was interested in. And so I counseled him very strongly.

I said, "You need to go. You need to load up a pickup truck, put a truck camper on the back, and you need to go and work your way across the United States for six months, a year, a year and a half, just doing odd jobs. Grab a job here as a waiter for a few months.

Be a... Work in the local skate shop that some guy... You need to meet some people and have a little life experience." Now, he didn't do it. He tried to, but then he wasted all his money partying and ran out of money and got a job. But what I saw in that situation was that life experience would have helped him to see more interesting avenues.

So when I reflect on the life experience of some of these men that I admire, men like Steve Jobs or Kevin Kelly, who... And I see the impact of their life experience, I believe it's important to spend money on things like life experience. Now, when we add on all the other things that can be done with money, the things that I didn't conceive of, because I was so busy, I didn't have somebody come along and trained me on how to flip washing machines and dryers on Craigslist.

I could have made a bundle at that. And when I think about the dumb jobs that I did in college, that where I was paid, you know, 10 or 12 or 15 dollars an hour, versus what I could have done if somebody had given me a little bit of entrepreneurial training, it would have been so much more profitable, but I needed money to start that stuff.

And so... And time, out of my own frustration with taking the mainstream path, I've changed some of my philosophies and I've tested them. And the farther I go in testing them, the more convinced I am that I'm right, at least for me. I wouldn't presume to tell someone else that they're wrong for working a job and putting their money aside and having a three-month emergency fund.

I would just explain that in my experience, this has been something helpful to me and I've accumulated enough stories and data and observations from other people that I see the value in this and you can consider it. And this is where, when it comes to holding cash, an interesting conversation emerged in the Radical Personal Finance Community Facebook group a month or so ago.

And some of the members of the community were commenting on the statement that I had made, that where they said... I had made a statement on a show where I said, "The $100,000 emergency fund is going to be the new status symbol of choice in the wake of the COVID pandemic." That it's going to...

People realize how vulnerable they are to significant events. And it feels like, in the modern age, it feels like the pendulum of change is swinging bigger and faster. The pace of change today is faster than it's ever been and we seem to have these really significant crises more frequently.

Now, is this guaranteed? I don't know. But what I mean is that there've been economic crises throughout history. But many times they're separated by centuries, if you go back and study the history. Or they're localized, they're not global. But if you look at the modern world, we're living in an age of global, massive crises and tremendous instability.

I remember long-term capital management, when all of Asia was about to implode. And then you've got 2001, then you've got 2008, and now you've got 2020. And in my lifespan, being a millennial, I know nothing but crisis to crisis. That doesn't mean that the market doesn't, you know, recover in five months.

That doesn't mean that we don't have a historic bull market from 2009 to 2020. That doesn't mean any of those, that there's anything wrong. It just means that our lives are filled. Whereas our grandparents and great-grandparents would go through decades of their life with, I guess I want to be careful in saying that, you think about World War I and World War II, but you could go through periods of time of great stability.

I've never known a world of stability. I've only ever known a world of instability. And so when you realize how these crises seem to be getting bigger, more significant, who knows why, right? Some of us have some ideas, but who knows? Then having more reserves makes sense. And so I made that comment, and it was being discussed, and several listeners said, "I think Joshua's just gone too far.

Like, there's a big cost to maintaining that much cash." And the idea was, "Well, if I'm getting 0% on my cash, but I can go and I can get 7% or 10% on my investments, that's too big of an opportunity cost to hold $100,000 of cash." I grant the argument, but I rejoined with this comment.

I said, "I don't see it, the difference as 0% versus 10%. In my experience, when people start to accumulate cash reserves, they start to realize the options that they have for investment that they didn't previously see. And so I could very easily see somebody who didn't have cash, then they started to save cash, then they realized, "I don't like this job." And they quit their job, and they go get another job that they do like.

How do you measure that in a rate of return? I'm convinced it's significant, but I can't put a number on it. Or somebody who says, they're driving past, I'll pick on, I've been enjoying the food truck CEO, Brent on Twitter, and I've watched his story. And he and his wife got out of debt, and then he was working in a corporate job, and he started making pizzas on the side.

And then a year or so ago, he quit his corporate job. And now he's got two pizza wagons, and he's selling tons of pizzas, making lots of money, growing all over the place, and just loving his new business. And I've often thought, I can imagine one of my listeners driving to work on a Monday, on a dreary Monday morning again, driving past the food truck with a for sale sign in the window, and saying, you know what, I'm going to do it.

And they go, and they take 30 grand, and they go and buy the food truck, and start a new business. And those kinds of lifestyle changes are accessible to people with money, that they're not accessible to others. What I have found, simple things, and I don't talk much about my own life, but simple things like having $100,000 in the bank means that you can emigrate into most countries in the world.

Things that aren't previously available to you. I've been thinking about doing a show on, I did a show on immigration to Canada with my friend Brandon, that was very well received. And by the way, I've heard that many of you went to him, and got his book, and engaged his services, and I think that's great.

But I've been thinking about, okay, maybe I should do a show on some of the other places, the UK. The UK has this fabulous, fabulous new visa program, startup visa, and an innovator's visa, that in the wake of Brexit, they're trying to encourage new entrepreneurs to move to the UK.

And so there's this really interesting wrinkle in the UK immigration system, where you can come in, and if you can come in on an innovator's visa, and bring a business to the United Kingdom, and you can demonstrate 50,000 pounds, which is something like 80-something thousand dollars, I think, about 50,000 pounds of reserves.

By the way, on the startup visa, you don't need the money, but there's different sources. I won't get into the details of the visa program. But it opens up the opportunity for you to emigrate to a new country. And so, how many people's lives would be improved if they could leave one country that's not a good fit for them, and go to another country?

You can easily get a visa to Mexico, a person of means visa. And so if you want to go to Mexico, having $100,000 in the bank makes it easy for you to do things like immigration. And so I know that these are the non-common things, but I'm convinced that the rate of, that the analysis, the opportunity cost on holding the cash is not 0% versus 10%.

It's some significant number versus 10% or 7% in the stock market. And the more I experience it myself, the more convinced I am of that, and the more stories I hear of guys like you, the more convinced I am of it. So go ahead. I cut you off a little, Benjamin, but if you had more stories to share, go ahead.

- Oh, no, exactly that. I'm sure there's opportunities that we had been around that we'd be able to see and analyze them and actually think do we want to pursue these or not? And it feels great. We've had just a, I don't know, it's a weird thing. When we first did it, it was kind of like, ah, like, what are we doing?

The more that time has gone on, I can't see any other way at this point. (laughs) It has felt so good. And there's been this strength level through all this, it's dropped a cup completely. And we've actually made a lot more money and more opportunities since we made that decision.

Oddly enough, I don't know how that works, but. (laughs) - Well, it's encouraging. That's how it should happen. I'll give one more example. By the way, Benjamin, did you have a specific question or you just wanted to share your story? - I just wanted to reach out to you to share a story and say thank you.

- Good, good. So I'll just, I'll wrap up and move on to the next. Thank you for calling in and for asking the question and for doing that. I enjoy, one of the things that I've always tried to stress, I enjoy pushback. It forces me to be better. And so I encourage any listener who disagrees with anything I ever say, call me up on a Friday show and we'll chat about it and have a positive conversation.

And the commitment that I made before I ever started speaking in public was simply that if I'm wrong, I'll just admit it. And so I really appreciate the comments and the suggestion. What I would add is, like, here's a practical way that I think people's lives change. I've watched a few people that I follow online who've recently needed new cars.

And they've needed to get new cars because their previous cars were failing. And a simple thing that can have, I'm convinced, significant financial impact in your life is simply buying cars before they're needed. Buying cars before they're needed. We know that things like cars have a useful lifespan. And so I have a practice that anytime anybody I know is selling a car, I always consider buying it.

And the reason is, the biggest risk that you have in the used car marketplace, which is, of course, in many markets, especially North American market, where there's an abundance of high quality used cars, not the same on a global basis, but in North America it is. The biggest risk that you have in the used marketplace is purchasing a car that is either a lemon from the factory due to that model in some way or that particular unit in some way, or a car that's been abused or not taken care of.

And you can't control for that when you buy used cars with an unknown history. If you go to the auction where a car dealer accumulates their cars, there's nothing said at the auction as to why the car is there. The car may be there because the guy got to the end of his three-year lease and decided he was done with it.

On the other hand, the car might be there because the guy had put $15,000 into it and still couldn't get the thing working right. And he said, "I'm just gonna take it." And car dealers dump cars all the time at the auction. Now, the car dealers take that risk on.

They buy cars, then they try to inspect them, fix them, et cetera. And then to some degree, they take some of the risk of providing you a working automobile. So it's not that buying a used car at a dealer is forever a problem, but it's certainly something that is fraught with danger.

On the other hand, if you know your buddy has a car that he bought new seven years ago, and now he's just decided to upgrade, if you can go to your buddy and say, "Listen, can I buy that car from you?" You know the history. Your buddy will give you a fair price, might give you a little discount from what the dealership will give, might not, but I would rather pay a premium to buy from somebody that I know versus a car that I don't know.

And so as a simple car-buying strategy, I think the most intelligent strategy is to not drive a car into the ground necessarily. Some I think it's wise to, but not necessarily. But buy cars in the second-hand market that you know the history of, drive them for a number of years, and then when another replacement car emerges on the market, go ahead and buy it, and then sell your car at a high retail price.

And it's a lot easier to sell a car when you don't know anything wrong with it, when everything is working fine. You know that certainly there's gonna be some maintenance items that are due, but it just makes more sense to sell the car rather than to wait until you have $1,500 of expenses.

Then you have to go and buy the other car. Then you have to fix up the car. Then you have to go and sell it at that point in time and talk about all the new things that are done to it. But in order to do that, you need money.

But most people don't have any money. And so there's a way of saving thousands and thousands of dollars by simply having money. And instead of waiting until you need a car, or instead of necessarily waiting until you've budgeted for a car, you just recognize, "Hey, here's a good car "that's available.

"I'll go ahead and upgrade us now." And you do this regularly when good cars come into your network, and you're ready to go. So there's just an example for other people to consider. And I appreciate hearing your story, and I appreciate hearing the question. All right, we finish out today's call-in show with, it was Lenore, Lenore in California.

Oh, looks like we may have changed. Is that Peter or is that Lenore? - Hello? This is Lenore. - Yep, Lenore. Okay, go ahead. I've got another caller that jumped on after you, so I didn't realize. Go ahead, Lenore, you're up. - Okay, great, thanks. Thanks for having me on.

It's interesting that you're just talking about vehicles because my question sort of has to do with that. - Okay. - My husband and I are homeowners. We live in the Redwoods just north of Santa Cruz, California, and we were recently evacuated for two weeks because of the surrounding wildfire.

Our home was spared, but this event kind of had us wondering if the money that we've saved to renovate our house could be better spent on making sort of a tricked-out evacuation vehicle that we could both store our valuables in and sort of live in temporarily rather than living in our friend's spare bedroom.

We don't have any children, but we do have a parrot, so it would kind of be nice to be able to roll her cage up into like a customized wheelchair-accessible passenger van and take that with us. But of course, we have enough money to buy an already-made RV that has everything set up already.

We're engineers, so we like the idea of a project, but at the same time, we don't want to sink a bunch of money into something that could take us a long time to complete since we are still in fire season. So I wanted to know sort of am I crazy for switching gears from increasing our home value to buying a vehicle?

And as an RV-prepping newbie, just kind of wondered if you had an opinion on the bus versus the RV. - Let's pretend you bought an RV, maybe something modest, whatever your ideal version of an RV is. Pretend you bought one. Do you think you would use it for fun?

Like, would you and your husband take trips in it for fun, or is this exclusively an emergency thing? - No, we were actually thinking about getting one for fun before because my family is located on the East Coast, and my husband is from Europe, so we do have like major road trips across the US planned for the near future.

- Okay, so that to me is really worth thinking about. I don't care for the, that was too strong. I believe it's hard and dangerous to focus exclusively on doing something for an emergency because the chances of an emergency happening to you are always so relatively low that if you spend a lot of money on something for an emergency, and then the emergency doesn't happen, you can feel foolish.

So if you bought a $100,000, maybe a beautiful road-trek camper van, right? I like road treks. Just a great little, for two people, that's what I would recommend is like something like the road treks. And so you buy a nice road trek, maybe you get a used one, but you spend $100,000 on this, or $80,000, or $120,000.

Of course, you can do it cheaper, and then you park it in your driveway so that you have something to live in. If a fire comes through your house, you're going to hate the thing because it's going to sit there, you know it's sitting there rotting, you know it's fading in the sun, you know you got to put new tires on it every five years, whether you put a single mile on those tires or not.

Everything in an RV starts breaking if you don't use it. And so now you're paying to have the thing maintained, and it'll sit there in your driveway for four years, and then you'll be like, "This was stupid. I should have done something else," and you'll sell it and you'll be annoyed with yourself because you're not using it.

On the other hand, if you bought an RV that you really liked and you used it, and it was the kind of thing that, hey, let's go ahead and go across to the East Coast, or let's go up and down the Pacific Coast Highway, or you know what, it's Friday night, would you like to go to the lake for the day tomorrow?

And you buzz out Friday night and you go to the lake on Saturday. I mean, RVs are awesome to have if you could imagine using your lifestyle. In that situation, you'll be thrilled to have it. You'll go to a concert and you'll say, "Well, let's just take the RV, and that way we can stay on the lot when we go and see the big band," or, "Let's go up to the mountains and go skiing, and we'll just stay in the ski lot.

We'll make it a quick trip," and you'll love it. Like, having an RV is awesome if you could imagine yourself using it, and to me, that's where I would begin. So if you begin with whether you'll use it or not, then that'll drive you in one direction or another.

Let's assume that you are going to use it. Well, if so, then I would say keep the fire evacuation idea in the back of your head, but keep the primary idea simply, what kind of RV would we like to have? And there are so many good options of things that you would like to have that you don't need to have something fancy.

Any RV will work for fires and a fire evacuation plan if you're early enough. I guess the only area where things get risky is if you bought a trailer, a towable RV. You know, you see some of these horrible videos of people driving through a fire, and I imagine myself towing some 30-foot trailer through that.

That's not very good, but what I would do if I were in that situation, if I bought a trailer, and because I decided a trailer RV was best for me, is I would say, "If there's a fire threat, "we're gonna leave any time it looks like "there's any kind of fire threat "because I don't wanna be stuck here "trying to get a trailer out on the roads, "and we've got a trailer, so it's easy.

"So we're gonna choose four locations, "one in each direction, of four cool little parks "or friends' houses that we could park at, "a nice little state park with cell phone access "so we can work, and if there's a fire threatening our area, "we're just gonna go to that park that's one hour away, "and that's gonna be our destination." So you can solve for that.

What I would say is if you just wanted an emergency vehicle, being engineers, you can do it much more efficiently and provide the basics with all individual components. So it doesn't take much. Depending on how much fanciness you want, you probably, being a household of two engineers, you, I'm sure, earn a decent income, you have money, you're probably not the kind of people who would be totally thrilled about camping regularly in an old cargo van that you converted into a camper.

In that situation, you'll enjoy having some of the creature comforts of a purpose-built RV. But for an emergency plan, that's what I would do, is I would just get an old cargo van, I would put in that cargo van a bed, I would install the bed, I would put in it, I would use camping gear that could be taken out, so I wouldn't install a standalone stove, I would just put a simple little Coleman propane stove, the kind that you camp on the picnic table with, and I'd put some propane bottles in there.

I might just put in a simple 12-volt refrigerator or a cooler, and I would make sure that I had, that I had just the basics that I needed to be comfortable if it were just an emergency thing. The other thing that I think you should consider is even before you do all that, I think that you should consider, rather than evacuating with your stuff, I think you should consider installing a fire shelter in your home, and especially if you're doing some home renovations.

I don't know if you've thought about this or priced it, but you could install a fire shelter in your home, and the ideal system would be an underground shelter buried in the slab with a good solid hatch on it that you could store things and that would be fireproof even if your home burned down.

If you think about the options, so of course you can install a fireproof safe, but those fireproof saves are heavily due to, subject to actual, the time and the intensity. A fireproof safe is not always fireproof, but it's a good start, and so that can be a good way to protect some of your valuables.

You could, and I think this would actually be a real asset that you could possibly increase your home value, but you could purchase and install a purpose-built bunker of some kind in your home. There's a company that's well-known in the bunker space called Atlas Survival Shelters. They sell a specific fire bunker that's designed for this purpose.

They call it the FireNATO. Now the FireNATO is not designed for human use, so you could install a proper bunker into your home, and a proper bunker with a filtration system, with beds in it, with a sink, whatever. You can just do a small one or a big one, and if you have a proper air system built into it, then that would be safe as a retreat for you if a fire came to your place.

I think this, if I lived in a fire-prone region and I was living in the urban interface where there were a decent chance that a forest fire would take my house, and if you had the money and it wasn't a crazy expense, I would look at that and I would seriously consider installing a proper bunker with an air system, an air filtration system, that would be a safe place of retreat.

So if the roads are blocked, and this, of course, if you lived in a place where maybe you didn't have a good escape route, if you got four good escape routes in four directions, you don't need it, but if you lived in a place where you didn't have a good escape route, I would install a proper bunker for people, for human habitation during a fire.

But if you just wanted the basics, you could install the fire bunker, which is a lot cheaper because it doesn't have an air filtration system. You bury it in the ground, preferably in a garage floor or maybe an addition that you're adding to your house, although you could just put it in the backyard and put a little shed over it, and then make that the place where you store most of your valuables.

So your fire bunker can just be the place where you store your guns, your paintings, your jewels, whatever valuable items that you have. So it's always protected. And then if there's a fire threatening, then you go ahead and just move your belongings into the more of your belongings, into the shelter to protect them from the possibility of fire, and then you leave.

And so I would consider doing something like that in addition to the RV. I think that would be, it would be sensible to combine them if it makes sense for your family financially. - Yeah, great. Thanks. I just took a lot of notes on that. I hadn't even considered a fire shelter for our things, but we were considering building an addition on our house.

So I think like you said, maybe budgeting, see how much it would cost to put that under there is a good option. - That would be ideal. And that's one of the reasons I wanted to mention it because if your renovation costs were including an addition, it would be really ideal.

So there'd be a number of different ways that you could do it. If you just wanted to protect some small valuables, then right away you could install an in-ground safe. A recessed hidden in-ground safe of high quality is the safest home safe that you can have to protect your valuables.

It's much better protected from, and that's for two reasons. So you can, if you install a large safe, even a large fire safe, picture like a big gun safe in your basement somewhere. The problem with that is it's very hard to conceal something like that. And it's exposed to the full heat of the fire.

Less if in the basement, of course, but it's generally, the fire is all around it, and so it's exposed. And it's vulnerable to a thief breaking into it. You can break into most gun safes, even of popular brand names, if you have enough time with a crowbar. All they do is slow people down.

They don't stop thieves necessarily, they slow people down. But the safest option, if you have significant valuables, personal valuables, is to install an in-ground safe, and then to do it in an area of the house where it wouldn't be looked for, and to conceal it. So if in your dining room, if you're installing an addition, and in your dining room, you go ahead and install a small safe, and when I say small, I mean, you know, a couple feet deep, something like that, two feet around, and you install it under a hatch, and you put a, you know, a curio cabinet or a table over it, then, and a piece of carpet, that's the kind of thing that would be very unlikely to be seen by a thief, and it's significantly protected from fire.

The big threat to an in-ground safe is flood, because if water, you know, firefighters douse your house with water, everything in it is going to be flooded. So you need to be very careful about water damage for an in-ground safe, but that works really well. If you step up to a bunker, then it's ideal to install one at the time that you do your addition, and so you just simply excavate underneath it, underneath the slab, install the bunker, and then you pour the slab on top of it, and now you've got the fireproof room, which can, as I said, be a full-on blast shelter.

You can do a bunker with bomb blast capabilities. You can do a bunker with radiation capabilities. I mean, there's all options available, or you can just put a simple fire storage bunker, which would be your cheapest option, but if you're doing an addition, you definitely should consider doing that at that time.

And then I guess the third thing, which is possible, is I think it would be simplest to buy and best for your resale value if you purchase a high-quality, commercially-made one, but you could think through the engineering, and you guys are engineers, you could just think through and engineer a fireproof room in your home that would give you a place to store things, and so maybe you just dug out a traditional basement, but you went ahead and engineered it to be fireproof with your own engineering prowess.

That could accomplish the same thing, but without purchasing the commercial options. - Yeah, that sounds like a fun project in itself. - All right, Lenore, thank you. Anything else before I go on to the last caller? - Nope, that's it. Thank you so much. - Thank you for calling in, and I'm glad that you guys are safe, and I'm glad that your house is safe, and may it continue in that way.

All right, final call of the day. We move now, Peter, you just got in. Peter in New York, welcome to the show, sir. - Hey, Josh, how are you? - Very well, sir. - Quick one. I just took a loan from a whole life insurance policy. Now what do I do?

- What did you use the money for? - I used it for a down payment on a house. - Okay, so what I would do is I would just wait, secure the house, wait. If you have other funds, and it makes sense to pay it back from other funds, fine.

But what I would do is I'd wait a couple of years, see if the house appreciates in value. If it does, calculate the cost of a refinance, and if your house appreciates, and you have additional money, then I would refinance the house, and then take the mortgage and pay back the loan.

Otherwise, depending on your income flows, if this is the thing that makes sense for you, is just from your income, set up a repayment plan, and set out a modest timeline. You don't have to do it right away, but at some point over the few years, depending on the ratio of loan, income, et cetera, set up a payment plan to pay it off within a few years, so you restore the cash values in the policy.

- Okay. The policy is pretty old, actually, so the interest rate on it is 8%, interestingly. - That's not due to the fact that the policy is old. You can buy a life insurance policy today that will have an interest rate of 8%. What most life insurance companies will do is they'll offer you the choice of either a fixed interest rate or a variable interest rate, and you need to choose at the time that you take the loan out.

So the 8% gives you the knowledge that no matter what, I'll always be able to take out the 8% loan. But if you take the variable interest rate loan, right now the variable interest rates are far lower than 8%, and so you need to call your insurance agent and see what the current variable interest rate loan rate is on your policy, and if it makes sense to decrease it, which probably does right now, it's probably 4%, something in that range, maybe five right now, depending on the insurance company that you have, decrease it to the variable interest rate.

That'll drop your interest payments. The risk of going variable is that if interest rates adjust significantly, then you may wind up, because that's now an indexed rate, you may wind up paying 10%, where you could have borrowed at 8%. So what I do with all my whole life insurance policies is I always keep it at 8% as a standard, because that way, if interest rates are, if we're back in the 1970s, and interest rates are 15%, I know I've got a source of an 8% rate on my whole life insurance policy.

But I would keep in mind, if I were gonna take a policy loan, especially a significant one, like for a home down payment, is I would probably switch to the variable rate, which would be lower, especially right now. So that would be my suggestion. - Sounds great, thank you.

- Okay, one other suggestion for you to consider. I don't know, have you taken my credit card course yet on how to borrow? - Absolutely, yes. - Okay. - Yep. - So assuming that you've taken that course and you've captured the knowledge from that, if your credit profile, once the house is all done, you're in it, like everything is done, right?

'Cause you wanna be really careful when you're qualifying for a mortgage or playing the credit card games. But once you're in that situation, what I would do is I would start the process of moving that whole life insurance loan onto credit cards at 0%. For that to make sense, you need to, I mean, you've taken the course, right?

It needs to be at 0% or something close to 0%. I'm happy to pay 3% balance transfer fees. That's cheaper than the loan on my life insurance. But life insurance and the credit card game are perfect partners because you have no variability in your life insurance cash values, right?

They're only going up. And so you know the money is there. And you can put it in and take it out willy-nilly. And so what I would do in that situation is I would go ahead, apply for a swath of new 0% cards with the goal of, in the ways that I teach in the course, with the goal of moving the balance out of the whole life insurance loan onto the credit cards.

I would extend those credit cards for the maximum period. And then if I need to pay down the credit cards, let's say that you've maxed out your borrowing limits, you got a bunch of 0% cards, you moved your money over onto there, but your credit score is starting to go down.

And now you need to surf the balances again. You just simply take the money back out of the life insurance, pay down the credit card balances, wait for the balances to cycle through, wait a couple of months for your credit card, sorry, for your credit score to recover. Once your credit score recovers, apply for a new swath of credit cards.

Once those cards are issued, use them in the way, you know, in the appropriate way by the, based upon the terms of the cards, use them to max out the financing and then pay down the policy loan again. And so this is one of the best uses that I like with whole life insurance.

I think it works awesome in this application. I use whole life insurance policies for the bulk of my emergency fund. And the reason I do that is because it gives me all the advantages of having cash, but it eliminates some of those disadvantages that I was talking about earlier in the show of a low rate.

And, but the way I would access the money, could I access the money with a policy loan? Certainly. But the first move that I would make is I would access the money with a 0% credit card loan before I would access it with the policy loan. And you can surf this back and forth, back and forth.

You got a hundred thousand dollars of credit card, of policy values, and you got a hundred thousand dollars of credit card debt. Well, because you have no investment variability with that policy, with that whole life insurance policy, because there's no fluctuations, like there would be if you were doing a 401k loan or something like in this purpose, because there's no fluctuations, you always have that as a source of funding.

And so it always works to, if the credit, if you come to the end of a 0% cycle and you can't surf the balance over to another 0% card with a 0% balance transfer or a 3% balance transfer or a 5% balance transfer, then you just simply take the money from the life insurance policy.

You pay off the credit card that ends that contract. You wait, as I said, go ahead and get a new one. So if you've taken that course, and if you understand the concepts that I taught in there, that's what I would do while you're waiting to either refinance the house or to either waiting to refinance the house and take the money from there to pay it down, pay it off totally and have no credit card debt and no policy loan, or whether you're just paying it down out of income.

I think both of those are really good solutions. - Great, awesome idea, didn't think of it. - Thank you all so much for listening to today's show. If you'd like to gain access to next week's Friday Q&A show, I would encourage you to do that. Just go to patreon.com/radicalpersonalfinance and sign up to support the show there.

And as you can see from the content of today's show, we can talk about all kinds of interesting things. You gotta give me this, I may not be the world's best podcast host. I may not be the easiest person to listen to. I may actually be too long-winded. All of those criticisms that are very fair, I may have strong opinions, but tell me this, is there any other podcast, a financial podcast in existence on the marketplace?

Is there any other podcast on the marketplace that you can begin with a question on contracting versus being a contractor versus an employee? You can talk about negative interest rates. You can talk about buying cars and having cash on hand. You can talk about evacuation vehicles from a fire and bomb shelters in your basement, and then finish it up with a conversation on whole life insurance and credit cards.

I mean, you gotta give me that. I hope that this is the most interesting personal finance show that you listen to. So in addition to supporting show on Patreon, in addition to buying my wonderful products, which are available at radicalpersonalfinance.com/store, including the course called How to Borrow Money Safely and Never Pay Interest Using Credit Cards, which I have said again and again, if you have a credit card or if you think you will ever have a credit card, or if you've ever had a credit card, you need to buy my course, because I just heard from the telephone call there with Peter.

It can be a phenomenally useful system. You heard everything I said there. It's a very, very good system. What I just described. But in addition to all of those things, it's been a while since I've asked for reviews. If you would take a moment and just simply go to whatever platform that you use to listen to this podcast on and simply review the show, that would be awesome.

So if you're listening on iTunes, go to iTunes and leave a review on iTunes. If you listen on Spotify, leave a review on Spotify. Say whatever you want. But I would be grateful if you would do that. Leave a review now. It takes you 30 seconds to click the stars and write one sentence saying, "Joshua is the bomb." I'll take a five star.

And have a great weekend. We'll be back with you guys soon. The Jeep Black Friday sales event is here with incredible deals on a wide selection of Jeep 4x4 vehicles. Now, well-qualified lessees get a low mileage lease on the 2024 Jeep Wrangler Willys 4xe for $399 a month for 36 months with 4,162 at signing.

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