When you're in winter's favorite town, the snow-covered mountains surround you, a historic main street charms you, and every day brings a new adventure. Welcome to Park City, Utah. Naturally, winter's favorite town. Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less.

My name is Joshua Sheets. Today is Friday, and Fridays, at least, whenever I can arrange the details, we do live Q&A. Usually we kick these shows off with a little bit of music, but my computer is failing me at the moment, so let's see if we can make the Q&A call a little bit smoother.

Any Friday that I can arrange the details, we go ahead and host a live call-in talk show. I've got one, two, three, four, five callers on the line. If you'd like to join us for one of these Friday shows, you can do that by becoming a patron of the show at Radical Personal Finance.

No, that won't work. Patreon.com/radicalpersonalfinance, and I would love to join you, or have you join me, on one of these Friday shows. We begin with Andy in Indiana. Andy, welcome to the show. How can I serve you today, sir? Joshua, thanks for taking my call. My question is basically about how to travel effectively.

I'm interested in the multiple flag theory, the relocation, internationalization type stuff that you've talked and thought about. For background, I've basically never traveled. I've lived in Indiana my whole life. I've only been – I mean, I've been out of the States, the United States and the U.S., only left the country one time.

So my only conception of traveling is like, I want to go to Disneyland or see the Hyde Park Tower and flying there and seeing a current infection and staying in a – probably a major American chain hotel. I don't feel like that would give me any idea of what I like to relocate to this place or consider moving here, an emergency or any of that sort of information.

I'm curious how you would recommend going about that. The secondary backup option of being able to move, I might be open to moving away from home permanently, but that's nowhere to start. Do you want the one-hour answer, the two-hour answer, or the one-day seminar on this one? I'd love a one-day seminar, actually.

You're laying up a softball for me, so let me give you maybe 10 minutes or so, 10 to 15 minutes on that just to give you some ideas. So for the uninitiated, the word that Andy said there was "flag theory." What is flag theory first and foremost? Flag theory, also sometimes known as PT theory, was a concept that was coined back in the 1980s by a famous financial advisor named Harry Schultz.

He and his libertarian buddies were trying to figure out how they could live freely in an unfree world. They were frustrated by what they saw as encroachment on their liberty happening on all sides. So they sat down and they said, "How can we live freely in an unfree world?" And they said, "Well, what we could do, one of the things we could do is we could stop trying to find or create the perfect country, and we could just use each country for what it does well." And originally they coined this as three-flag theory.

That was kind of the starting point. Then it became five-flag theory. Five flags is pretty good. Sometimes now people refer to it as six or seven flags. It just depends. So the concept of planting a flag basically comes down to where can I go and get something that one particular place offers me that does a good job on it?

And this is something that for me has been quite useful in my life. In fact, it was something that provided a number of years ago kind of an escape valve. I was frustrated with some of the political trends happening in my native country of the United States, and I was just wishing things were different.

But I had watched my life, my entire life, basically seeing many of the trends that I cared about going against me. I wasn't winning on virtually anything. So along the way, I as a frustrated, libertarian-leaning, conservative-oriented person, I stumbled across the concept of flag theory. I read one of the original books called P.T.

When I read the book, it just kind of opened up a new world to me. After a while, I realized that if you want to live freely in an unfree world, this is what you do. You basically, you don't try to change the world. You basically accept it the way that it is.

You stop looking for the perfect country, the perfect state, and you just use each particular place for what it already does well. And that gets you the closest possible that you can to freedom. And so that's flag theory. Now, the implementation of flag theory involves a few different things.

And I'll describe those things at a moment. But what I want to emphasize to you is that you don't have to do all of these things in order for you to engage in flag theory. Remember that the guys who originated the concept of flag theory were basically a bunch of millionaire libertarian playboys, a lot of them.

And they were trying to figure out, well, how can I live this internationally oriented libertarian millionaire lifestyle and engage in all of the libertine activities that I want to and pay no tax, et cetera. But you can still do it. And so the first thing to come that I would answer is you don't start necessarily by traveling.

You start by saying, what's annoying me? What's worrying me? What problem am I trying to solve? And then you start figuring out where could I plant a flag, meaning what action could I take that would start to solve that. Now, let me run through some of the big picture flags, and then I'll apply it a little bit more locally as well.

In the original conception of flag theory, there was a big focus on living tax free. And so one of the ways that you could do that was by planting a citizenship flag. That's flag number one. And so the way the idea is you want to be a citizen of a country that will leave you alone and will not tax you.

Now, obviously, right, Andy, you're from the United States. I'm from the United States. A huge majority of my audience is from the United States. So we don't necessarily have that privilege as being U.S. Americans. Our country thinks that it's right for them to tax us no matter where we go.

So you can minimize your taxes by leaving the United States. And that's something that I think has some benefit. It's something that I have done, I've talked about doing. You can earn a six-figure income in some cases if you've got the right circumstances, even a multi-six-figure income, and legally pay not a dime of federal income taxes, not a dime of state income taxes, and not a dime of employment taxes.

And that can be a significant savings. You know, for an average single individual earning $100,000 a year, by my calculations, you can possibly save about $30,000 a year, about 15 grand of employment taxes and 15 grand of federal income taxes if you'll spend the vast majority of your time physically present outside of the United States.

Now, you don't have to have a different citizenship to do that, but one of the things that you might want to do is, if possible, plant a citizenship flag in another place. Because in an ultimate scenario, especially if you're, you know, well, an Internet entrepreneur or something like that, somebody with the ability to make money, having a citizenship from a country that's not going to tax you and that's not going to impose a bunch of laws and regulations on you can be quite useful.

So that's a citizenship flag. Now, for you, you don't start necessarily by traveling there. You start by saying, "Is that something that's of interest to me?" I do think that most forward-thinking people would be well-served by preparing for themselves an alternate citizenship at some point in time. Whether that's because your country comes, you know, knocking and they want to draft you, conscript you for some war, or whether they impose some kind of weird new laws or regulations on you, you want to try to plant a citizenship flag.

And so there are different ways to do that, right? You could start by saying, you know, "Was my mom from Italy?" Or, "Was my great-grandmother from Ireland or from the UK?" Or something like that, and try to see if there's some kind of heritage in your family tree that you could help to facilitate planting, meaning filing for a citizenship application there.

You could go on and you could say, "Well, maybe I should move to another country and try to become a citizen there." And so if you've always wanted to move to Canada, you could move to Canada and you could just live there for three to five years, apply for Canadian citizenship, and become a Canadian citizen.

If you have a lot of money, and you really want to reduce that, you could do that by potentially purchasing citizenship in a country that sells citizenship, and thus getting for yourself another passport. If I'm talking to a guy and the guy says, "Listen, Joshua, I make $10 million a year.

I make all my money through the internet. I've got all these businesses, and I don't want to pay taxes legally, and I want to do it legally." Well, the answer is, you usually, in that case, you'd go to one of the five Caribbean islands that sells citizenship, and you would pay them for an individual somewhere around $100,000 to $150,000, depending on which program you go through, and they will sell you citizenship in their country.

It's entirely legal. It's entirely acceptable. You could choose a tax-free country, two totally tax-free countries, such as St. Kitts and Nevis. That's the first country. The second country would be Grenada. And you could purchase a citizenship for yourself. Then at that point, you could renounce your U.S. citizenship. There's some formalities there with that process.

But that entrepreneur making $10 million a year could move to St. Kitts and Nevis, buy citizenship, live on the island, become a tax resident of St. Kitts and Nevis, run his business from St. Kitts and Nevis, and pay legally not a dime of tax because he has a citizenship flag planted outside the United States.

So that's a citizenship flag. The second thing, the second flag is residency, right? Where is your residence? Now here, there's a distinction between residency and tax residency. If you are a U.S. American, you don't need to worry about the concept of tax residency because you are a tax resident of the United States.

This is a concept that is of more concern for citizens of other nations. So, for example, imagine you're from the U.K. and you're trying to figure out, "Hey, I make $10 million a year from my Internet business. How do I, you know, what do I do to change that?" Well, you can leave the U.K.

and retain your British citizenship. You can keep your passport. You can do that. You don't necessarily need another citizenship. But what you need is you need to plant a flag for a tax residency. And so you try to choose a country that may tax you more lightly or tax you not at all, right?

There's a reason that a lot of British businessmen live in Dubai. So you might move to Dubai and file for a residency there, get yourself registered as a tax resident, and now you can terminate your tax obligations to the U.K. government, and now you simply are a tax resident of another place.

And so that's a residency flag. A third flag is usually considered to be a business flag, right? Where do I run my business? And so the classic conception of the three-flag theory was this. You have your citizenship from a country that doesn't tax you and that doesn't conscript you and that will leave you alone and not impose all kinds of onerous reporting requirements on you for your bank accounts and your crypto holdings, et cetera.

You have a residency flag in a jurisdiction that will leave you alone, that won't tax you on your foreign source income, and that will give you a reasonable lifestyle when you're there. Then you have your business run in a third jurisdiction, and you choose a business jurisdiction that won't tax you, that has business-friendly laws, et cetera, and that's your business flag.

And so if you do this right, you can see that you can set this up in a fairly tax-efficient way. Now every business is going to be different, but these are the ways that you set up those three flags, and those are the three flags that make the biggest difference.

The fourth flag that is often conceived of is then also where is your money, right? Where do you store your money? So this is your banking flag. And what those early theorists developed was the idea that your money is probably safer in another place than where you're physically located.

So if you're physically located in the United States, and your money is physically located in the United States, then your money is quite a bit more accessible to somebody who has control over your person or who knows where you are. But if you're physically located in the United States, and your money is in the Cayman Islands, well, there's a degree of separation there, and you have a little bit more protection from your assets.

So the idea is can I choose the world's best place to store my money and to do my banking and to do my investments? So that's the banking flag. Then we get a little bit more esoteric. For example, some people go on and they say, "Well, where should I store my physical assets?

If I've got a bucket of gold, maybe it'd be best if my bucket of gold wasn't in my basement. Maybe that should be in another jurisdiction entirely, a place where they've got a better quality vault than my gun safe at home." You talk about your digital assets, right? Where should you host your website?

You don't want your website to get taken down and some kind of coordinated attack against you. And so where can you host your website or where do you hold your digital assets? So you can disconnect, disintermediate each of your assets, and you might move each asset to its best jurisdiction.

So let's talk practical now. These things, I believe, work really well. And if you're a committed individual, right, you've got big money and you've got big ambition and you've got big commitment to actually put in place all these different factors, then no question, right, you can put in place a comprehensive lifestyle spread all around the world.

And this will buy you greater security, greater protection, and greater freedom. And the early -- in fact, one of the things that I have proved is that -- is what the early practitioners believed that one of the things that you were better off is simply never actually living in a country where you have any flags planted.

So, you know, the basic idea was you actually want to spend your time as a tourist passing through destinations where you're simply a tourist. Now, again, these guys were hardcore, right? You read W.G. Hill and his original writings. I mean, they were hardcore, but Hill would basically live as a tourist, right?

And so you could imagine in especially today's world, the difference between today and back then was that those guys had to be millionaires and live off of their assets. Today, we have so many of us who can earn our living through the Internet that the options are much bigger.

But if you spend time as a tourist, you're pretty much left alone, right? Tourists are often treated -- it's my opinion that tourists are treated better by most countries than are citizens or residents of that country. It's funny. We were down in Costa Rica a couple months -- let's see, about two months ago.

Spent a month there in Costa Rica. And Costa Rica was having all of these -- they were having restrictions for coronavirus. And so I was speaking to some of the locals, and what I found out was that they had restrictions on when you could drive your car, and they had restrictions on when you could be out of your house.

So there was a curfew. You weren't allowed to be out at certain hours depending on where you were in the country. And then you were only allowed to drive your car on certain days of the week. So if you're trying to get to work, well, you can't get to -- there were some exceptions, evidently, for people to get to work, but you couldn't drive your car.

But who was exempt from that? Tourists. If you were a tourist and you were driving a rental car, then you were entirely exempted from the restrictions on driving. If you were on your way to a hotel or from a hotel, you were exempted from the restrictions, and no one was going to bother with you as a tourist.

And so it's kind of an example number 573 that I've collected showing how governments usually treat tourists better than they treat their citizens and their residents, right? I bought a piece of electronic gear recently when I was here in Europe. And when I was sitting there looking at the receipt, I was -- the guy told me, he said, "If you want to get your VAT tax refunded" -- because I'm a tourist here, right?

I came in on my American passport. I'm just a tourist here. But being a tourist, if I want to get my VAT tax refunded, which is 18% of my purchase, all I need to do is -- I had to just register my receipt, and then I could take it to the authorities in the airport, and they would refund me on my VAT tax.

And so all of the local European citizens and residents, they don't have that option. But since I'm a tourist here, I get a refund on my VAT tax when I leave the country. And so this is the world that we live in, and so you can do that as well.

Now, to your travel question, notice that each of those flags has its own thing, right? You could live in Indiana, and you may never want to do anything else. And so you would say, "Well, do I need or want another citizenship flag?" If your grandmother was from Ireland, right, get a file for your Irish citizenship.

But do you need to go and pay for another passport? Probably not, but you could, right, if you had a lot of money. I remember years ago when Neil Strauss wrote his book "Emergency." He talked in that book about how he had gone and purchased -- at the time it was $400,000 -- he had purchased citizenship in St.

Kitts and Nevis to create for himself a Plan B. He didn't -- as far as I know, Neil still lives in the United States. He didn't renounce his U.S. citizenship. He didn't do anything, but he's got that St. Kitts and Nevis passport that he paid for sitting in his personal effects.

And so most of the time you're not going to need it. But when would he need it? Well, there could be a global pandemic, and U.S. Americans couldn't travel. There was a time about a year ago when the U.S. passport just was basically worthless. But the St. Kitts and Nevis passport had a lot greater travel freedom at that time.

And so that would be one example of a little bit of travel freedom. Perhaps, depending on the right passport, a businessman might do that. For example, maybe a businessman who has a lot of business in Russia and China might choose to purchase Grenadin citizenship and have a Grenadin passport.

Well, citizens of Grenada can travel visa-free to Russia and visa-free to China. Now, they're still subject to entry rules as visitors, right? A little bit mixed up by the pandemic. But they have the ability to travel there without having to go to the embassy and apply for a visa like U.S.

American citizens do. And so for somebody with frequent travel there, that could be a big deal. In your situation, I wouldn't recommend that you make it a first target, but it is worth paying attention to. Now, to the travel question. Some of these flags require only a little or no travel at all.

So I think the best flag would be something like banking, right? Anybody can move some money offshore. And I recommend that you do it. You've probably heard me talk on the show about how I see this as very valuable preparation in case you run into a scenario where you have high inflation in your primary currency.

And so I recommend to people usually that the first place they should go is Canada. And the first bank account you probably should open would be a Canadian bank account. Why? Well, because you can drive there during normal times and they finally just opened the border. But you can drive to Canada, you can physically go, and the Canadians will open an account for you as a tourist.

That's not the same all around the world. Many countries in the world, you have to be a resident of that country. In some cases, you have to be more than a resident, but you have to be a resident of that country. In Canada, you don't have to do that.

And so you could just go and take a trip to Canada and take in the sights, stay at a nice hotel, and then open a bank account. But now you have, say, $5,000 deposited in a Canadian bank account. As long as your total funds held offshore are fewer than $10,000, you have virtually no reporting requirements to the U.S.

government. The Canadian government will still send a report every year to the U.S. government for you, but you don't have to file the disclosure forms to the U.S. government. And so now you can actually hold $5,000 there. But now you have a Canadian debit card ready for you. And so if you needed to put a lot of money into Canadian dollars because there was some issue with the United States, or if you needed to put more money offshore, you have that infrastructure set up.

So that's a banking flag. In some cases, you might plant a business flag. Now, for U.S. Americans, this usually isn't a good idea necessarily if you're living in the United States, but you could set up a business flag, or you might set up an offshore trust if you had more money and you're trying to do that.

That's flag theory, and none of that really interacts with travel necessarily. It's just a little bit kind of that's what it is. Now, with travel, what would you start? Well, I think that most people, the more I travel, the more I'm convinced that most people probably aren't going to ever want to leave their home country in the sense in live abroad, move abroad.

Most people aren't going to. Even though I'm quite comfortable as a traveler, I haven't lived in the United States for almost three years now, I think almost every day and deeply analyze, maybe I should move back to the United States, right? Maybe I should. There's a lot of good things going for it.

And so I think that the hurdles are too high and the difficulty is too great for most people if they don't have a compelling reason to actually go abroad. And so I would just say take some vacations for fun and get a little bit of experience. Choose a place that you want to go because you want to go there and go there because that in and of itself can be useful.

Now, I say that most people aren't going to want to go to live abroad, but that still doesn't mean that the circumstances might not change. So I've talked about how if there's some kind of major crisis, one of the best things you can do is leave during a crisis.

If there's a major crisis, I don't expect a broad scale crisis in the United States. But what I point out to people is that if you were from Venezuela and you saw that there could be problems in the future and you simply started getting exposure and maybe you went and set up a residency program somewhere so you could live outside of Venezuela, maybe you moved some of your money from Venezuela to the United States, etc.

Then by the time things got bad enough, you could simply go and you could have all of your affairs structured so that you could leave the place that there was a massive crisis. There's lots of people who did that. There's lots of people who still do that. There are people who regularly go back to Venezuela because they have their family there and their friends there.

But the guy living in Venezuela who has an Italian passport, who has a small apartment in Portugal and goes back to Venezuela for a couple of months to see family is doing a lot better than the guy whose whole affairs are there in Venezuela. So that was a 22-minute response to your question, kind of laying out the ideas.

But to your specific question, there's nothing that I would say other than just say go and try it. Pick somewhere that you want to go and just go for a short trip. And what I would do is I would not make it a hard place. Maybe go to Canada.

Canada feels in most things just like the United States. And so if you're in Indiana, it's an easy drive. Drive up, spend a week, you know, rousing around Canada, get a little experience. It's virtually the same experience. If you're going somewhere else, then pick some place that's relatively easy because of tourist infrastructure, right?

Go and spend a week in Costa Rica. Choose a place that is known for welcoming tourists fairly easily. And then while you're there, just start doing things that interest you. Along the way, you'll start to build those travel skills, right? Your flights are going to get canceled or they're massively delayed.

And so you're sitting there saying, "Okay, what do I do? How do I fix this problem?" First time it happens to you, it's a little overwhelming. Fifth time it happens to you, you learn to move quickly. You know, we were scheduled to fly from Mexico to Costa Rica, and our flight got canceled on us.

I had to sit there and just pivot, you know, and book a whole new itinerary. And so the answer is just start and go somewhere that you want to go. But the detailed answer on flag theory is don't start by saying, "I'm just going to move everything offshore," because you're not, right?

You're not going to do that. But think, "What could I do that would be a small baby step?" I could go and open an offshore bank account. I could look in my family tree and see if, you know, Grandma was from Ireland. And then just start working your way down the list.

If you're looking for kind of the original thing, go and find a copy of the PT book by W.G. Hill. That's the original book that focused heavily on the flag theory. You can find some good guys online that write about it in more detail as well. But I would start with the book.

It would be my suggestion. Good intro for you, Andy. Andy: Great. Yeah, thank you. Again, the only, like, maybe I started you off a little bit on the wrong foot with flag theory. It's just that, like, when you talk about your economic crisis course of maybe police in a bad time, don't you say just picking a country that seems nice and going there on vacation and doing various things is a reasonable way to experience that?

And I get, like, I might or might not want to go here if I decide living in the U.S. is not sustainable. Yeah, I think without question that's what you should do. You know, I worked with a private consulting client recently. And we were talking about some of these things.

And the client was quite wealthy and was -- but there was no chance that the client was going to, you know, move abroad. His wife didn't enjoy traveling, et cetera. And so I said, "Where is the place that your wife actually does enjoy going?" And he listed the particular place.

It was a small Caribbean island. And I said, "Buy a small vacation condo there." And the idea is that, you know, my wife would get on an airplane and go to Mexico with me. But most people wouldn't if they haven't been to Mexico, if they don't know anything about it.

And so where is, you know, where is your family actually likely to go? If you're actually concerned and you would actually leave in such a scenario, where would you actually go? Now, what I have become convinced of through the pandemic, one thing that's different, one of the things that I have changed my mind on when I did that course, after I recorded the original course, I released an update after six months.

And I said, you know, one of the things I've changed my mind on is the fact that I said that you don't -- that residence -- things like residency permits and such are not as important as I first thought they were. I was like, "You can just do this as a tourist." Well, I've changed my mind on that for two reasons.

Number one is we could see that in a pandemic, moving as a tourist -- movement as a tourist has been highly restricted. But those who had residency permits set up have had much more access. But more importantly, I have noticed and observed that most people aren't actually going to go somewhere if they don't have some kind of accommodation there.

And so you have to be thoughtful in terms of what makes sense with the amount of money that you have. But I am convinced now that having a vacation condo on the beach that you know that everyone likes to go to is worth it if you're actually going to try to convince your family to leave in an uncertain circumstance.

If you look at many disasters, right, we're talking about disaster planning, why do people get caught up in a disaster? Usually it's because they ignore the warning signs and they don't want to leave, right? The classic example would be sitting in hurricane country. And why do people get stuck in a bad hurricane and potentially run the risk of losing their life?

Well, because they don't have an escape plan or an evacuation plan that doesn't cost them a lot of money and doesn't cost them a lot of mental energy. They're sitting at home. They're like, "I don't want to take the -- how am I going to find a hotel where my pets can go," et cetera.

And they don't have the plan in place. So if in that scenario, right, I think it would be overkill to necessarily keep a vacation home. But just imagine the guy who lives in Miami who also has a vacation home in Jacksonville, even if it's a small, modest place, he has a much easier time saying to his wife, "Honey, we got to go.

We got to get out of Miami." And they just go a few days early and it just becomes a few days out of town, you know, or a few days at their favorite resort in Orlando rather than a big thing. So I'm convinced the same thing applies, that if you are -- if you would leave your city, your state, your country, then you probably do want to designate more money to actually having a place ready to go.

So that was a long answer, but I hope it's an interesting one. And my only comment would be, Andy, that I encourage internationalization, but I don't think that means you have to actually go somewhere and live somewhere full time. So hopefully you can figure out the level that you want to apply that stuff in your own planning.

All right, we go to Andrew in Michigan. Andrew, welcome to the show. How can I serve you today, sir? Yeah, it's a pleasure to talk with you, Joshua. My question for you is I'm 38. I own a real estate investment company and am at a point in my life now where, you know, personal debt's paid off and own a substantial amount of assets that both produce cash flow because I'm in the multifamily investment space.

And I'm starting to look at other investment strategies outside of the norm. And recently I was introduced to the concept of premium finance to create a life insurance policy for the purposes of whether it be retirement income or to create enough wealth for a family trust foundation, that type of thing.

And it's being a real estate guy who understands leverage and borrowing and that type of thing. It has piqued my interest. I was just curious your personal fundamental philosophical thoughts on captive finance strategies, you know, utilizing insurance to create wealth. All right. The basic concept is that you're going to borrow money from a lending company and you're going to use those borrowed funds to purchase life insurance, building up inside cash values.

And then how are you going to pay off the loan from your real estate cash flow? Well, so you actually pledge, you know, gap collateral or collateral to get a bank letter of credit, a standing letter of credit that you can then utilize, you know, at another bank to you to get the financing.

The collateral is paid off or the bank loan is paid off within the first 15 years based off of the ever increasing cash value of the insurance policy itself. And then after 15 years, the loan's been retired and then the cash value, you know, this cash render value continues to grow after kind of that reset.

And then if you're young enough, right after 30, 35 years, it produces a substantial amount of income. Which company did you quote the insurance policies with? So this is being quoted with an LPL guy called Affinity Insurance Partners. But the company that they use for this is North Star Funding Partners.

They're kind of the premium finance funding entity. So North Star is going to, so who's issuing the policy? Is it North Star, a company that's issuing the policy? Or they're just simply providing the money? They're providing the funding and the processing of the actual account. And then with which company is the proposed insurance policy?

I believe the policy is with Allianz. And what's the level of premiums that you're considering? Yeah, so in my current illustration I have set up pledging a million dollars of collateral and then have about a $50,000 annualized contribution for the next 10 years for a total of, you know, $500,000 of out-of-pocket costs.

So this is one where I would need to see the actual numbers and review the terms of the loan and everything. And so here is, so in concept I have no fundamental conceptual problem with really any kind of asset strategy, even including a financing strategy, as long as it fits into someone's overall situation at an appropriate scale.

And of course those are details that would be inappropriate to go into here. But I'm assuming the best from what you're saying. And so you just want to say, okay, does this make sense to me? Yes, and also downfalls or any pitfalls that you could see. You know, because downside risk management is incredibly important in my business.

And I'm looking at this, just to give you ballpark numbers so you can get an idea of the level I'm talking. So the $50,000 contribution at one point, you know, the loans up to $9 million. So it's a substantial loan, but obviously it builds a massive cash value. And after sitting for 30 years, based off of about a 4% annualized return, you know, you're pulling out or you have the ability because the cash value is big enough to pull out over a million dollars a year of non-taxable income.

Right. So let me slow down because this is interesting to talk through a few of the numbers. First of all, what's the face amount of the policy? Face amount would be gross death benefit of about $14 million. Okay. So they're going to underwrite you with an alliance policy for $14 million.

You're going to make an initial premium payment or they're going to make initial premium payment. Who's making the initial premium payment? The financing company is. And how much are they going to make as a premium payment? So the total premium schedule is about $675,000 a year. Right. So they're going to make an initial premium payment of $675,000 for a $14 million policy to alliance.

Is that right? Correct. Okay. You're going to pay out of pocket how much of that? $50,000. Okay. So year one, you pay $50,000 to the bank, to Northstar. Northstar makes a $675,000 payment to alliance. Is that right? That is correct. You're insured for $14 million. And this is whole life insurance or universal life insurance?

This is, I believe, universal life insurance. Okay. You're insured for $14 million. Year two, what's the premium payment that Northstar makes? Is it another $675,000? Same thing. Yeah. It's straight line $675,000 for 10 years. And you pay $50,000. Correct. Okay. They're going to fund the policy at $675,000 per year premiums into the $14 million policy.

After 10 years, they're going to quit paying. Is that right? That is correct. Yes. Okay. So we've got a total of $6,750,000 into it. You are contributing $50,000 per year. Is that right? Correct. So after 10 years, you're into it for $500,000. Is that right? Correct. And then after 10 years, you have no more premiums that are due as well?

That is correct. So now, in year one, you die. Who is the beneficiary? Is it a guarantee to them for more than $675,000? Or how much is endorsed to them and how much goes to your beneficiaries? Yeah. So the gross death benefit on day one, call it $14 million.

After death benefit payment, about $13 million. Okay. So really, and the reason I found this, just FYI, the reason I found this is because in my world of raising capital, I get high income professional business owners, professional athletes. And in talking to a friend of mine who does estate planning, he introduced me to this financial planner, and he specializes in professional athletes, college coaches, people who get big professional contracts.

And they actually leverage their contract to set this up as a strategy, right? You have a 20-year-old that signs a $30 million contract in the NHL. They utilize this, and sometimes with no money out of pocket, to set a policy in place so that for the rest of their life, when they hit 45, 50, 55, whatever, they have income.

And so that was the original concept or how I came across it. But being a business guy in real estate, understanding leverage, this had piqued my interest. It's just another bucket, right? Right, right, right. Yeah. So I'm just trying to walk it through and explain and get a sense of the numbers.

Okay. So in your... So fast forward 30 years, okay? Does the financing company always have some portion of the death benefit endorsed to them? Or at some point in time, do they get released from the death benefit? So after the loan is retired in year 10, they have no further death benefit that's owed to them.

So the idea is that in year one, they're going to come out of pocket $6,750,000. So basically, when you said it got a $9 million loan, you're signing documents to Northstar saying, "I'm going to pay you guys six point... I'm going to pay you guys six... I owe you $9 million because you're promising to make these payments to the life insurance company." Correct, yes.

So the risks. So first of all, let's go three years in. Your business takes a dump. You can't make your $50,000 premium payment. What happens then? So it's my understanding that you can either abstain at the policy at that time and then just build it off of what is there, which would be a much smaller number.

Or you can defer and then pay at a later date. I was actually thinking about putting the money aside ahead of time in a cash equivalent account and earmarking it for it. Yeah. So I don't have a great answer for you because it's one of those giant "it depends." And I'm not sure...

So just imagine this, right? There are people all over the world that have lots of money. And people who have lots of money want a return on that money. And if they can get a return on the money, then they're happy to lend it to you. You know this being in real estate, loads of people line up and lend you money.

Why? Because your money is secured by real estate. So from that perspective, money that's secured by life insurance is a phenomenal reason for someone to lend out money. Why? Well, number one, you have tremendously valuable collateral for your loan. First of all, you have a death benefit. So if the guy dies and he can't make $50,000, you're endorsed over a portion of the death benefit.

It makes you whole. Number two, you have some of the cash value endorsed over to you as collateral as well. So if the guy doesn't pay his loan, you still have access to some portion of the cash value that's been pledged to you as security for your loan. I'm sure that's in the contract.

And so you're covered there as well. Number three, the underlying asset is an asset that would make anybody happy, right? It's not up and down. It's just a guaranteed up asset. It's being managed by a giant insurance company that has a good investment team. It's very, very stable. It's very secure, et cetera.

And so it's a really good way for you to get a modest rate of return on your money by lending the money out. So it can make sense. So what is the limiting factor? The limiting factor is the insurability of the person. Why can't that company, right? Why can't-- I lost the name.

It doesn't matter. Northstar. Why can't the bank go out and just buy their own insurance policies? Well, they can as long as they find people that they have an insurable interest in, right? So Northstar can go and they can put key employee policies on all of their CEO and their CFO and their whole management team.

And I'm sure they have it, right? You mentioned the BOLI, the bank-owned life insurance, and the COLI market, corporate-owned life insurance. Companies who have the cash flow can put in place tens of millions of dollars of life insurance using the lives of their key employees. So that's doable. But the problem is that you run out of those.

And so if you have more money, what do you need? Well, you need people who are willing to say, look, put an insurance policy on me. The problem is that's a little weird, right? You don't go to the bum on the street who doesn't have any money and say, hey, listen, bum on the street, can we put a $10 million life insurance policy on your life?

Of course you don't do that, right? There's no insurable interest. And the reason-- and the insurable interest just simply means that there's too much incentive for somebody to come along and bump them off and you collect your $10 million. So that doesn't work. There has to be insurable interest.

In addition, there has to be financial capacity in order for this to make it worth it, right? The insurance company can't come along to a guy making $60,000 a year and say, listen, we're going to allow there to be a $14 million life insurance policy on your head. The insurance policy can come along to a guy who's wealthy, who can qualify financially for a $14 million policy and say, yeah, we're willing to issue the policy, and we don't much care where you get the money.

And so all the pieces are there for it to be fine. What are the dangers? I think you have to first think about what is the probability of performance by the insurance company. Now, I think that in this case, a universal life insurance contract is most likely the right contract to use, right?

This is a sophisticated application, and this is the inappropriate place for a universal life contract. The trouble that I have is that I'm stained by remembering all of the policies that blew up in the 1980s that were universal life contracts because they were quoted at 14%. So you've got an illustration showing a 4% return.

And my entire career when I sold life insurance and since then has been in a declining interest rate environment. And so I'm super sensitive to those projections, knowing that they haven't always worked out. I'm open, right? This insurance agent is no doubt a specialist, and I'm sure he knows his business.

So that's fine. I'm open to it, but I'm aware of it. The second risk is the risk that is not usually represented very well by the insurance agents is the risk when taking the flows out of the policy. And there's always two things that are glossed over because there are good incentives for the insurance agent to gloss them over.

Risk number one is any life insurance illustration is a projection of what happens based upon a set of returns. So in this case, it's being modeled at a 4% growth in the values of the company's general portfolio. Well, what if you don't get 4% growth? What if it's 3%?

What if it's 2%? That's a big risk because those numbers affect it massively. The second risk on the cash flow coming out is that this cash flow that's coming out is often modeled a little bit aggressively to make a nice number on the paper, which makes you feel good.

It's like, "Look, I can spend a million dollars a year." Well, you can take out loans against the policy, but you have to make sure that the policy stays healthy enough in order for it to continue in existence because if you lapse the policy, meaning you take out too much in a loan and you can't make the premium payments because underlying, right, when you're 85 years old, this insurance policy is going to be demanding premiums of, I don't know, $3.2 million or whatever the number winds up being inside the policy.

And so there has to be enough growth there in the policy in order for it to satisfy that $3.2 million premium. If you suck out all the money too early, then you may not be able to make it. And then what happens? Well, then the policy lapses, and then you have a taxable event, right?

Then all of your withdrawals, all of the loans, what was tax-free, you're now 1099 for that whole giant stack. So that's the other place where these policies can go wrong. And I would just want to go through and analyze and say, okay, in every scenario, what happens? The last point, and I need to make sure that the audience understands this, what is the other reason why the insurance company, sorry, the bank, can't find more of this business to place?

Well, not only do they need someone with financial capacity so that the insurance companies are going to be willing to issue the life insurance policies of big numbers, but they need someone who's young and healthy enough to make these numbers work. And so a lot of times, the guy who can make a $675,000 a year premium payment, or even a $50,000 a year premium payment, is often 58 years old, often 100 pounds overweight, and has type 2 diabetes.

Well, not a great risk. And so you're young enough and presumably healthy enough that this can work. So I'm not opposed to it. It's not an absolute no from me. I'm open to it. I would have to -- I mean, this stuff is specialized. The agents who do it, they have tremendous knowledge.

I would review the paperwork very carefully, and then I would take it -- I would take what you have with the actual illustrations and such, and I would take those illustrations to another couple of insurance agents, and I would say, "Tell me everything wrong with premium financing." And so I've been out of the insurance business long enough now that I don't have a pre-prepared script as to why everyone doesn't do premium financing.

But I would take it to a couple of competitor agents, and I would say, "Why shouldn't I do this?" And then, of course, solicit some quotes with some other companies because there are other competitors, and you just want to make sure you're getting the best product. - No, of course.

I appreciate it. Thank you, Joshua. You know, again, this being radical personal finance, you know, this is such a, you know, little-known strategy, and it is complex. And obviously, the guys that write policies like this make big premiums, and it's a very expensive way to buy life insurance. But I figured it would be right in your wheelhouse for something.

So thank you for your analysis. - It can be a total win-win-win, and I know you've got to go, so feel free to go if you need to. It can be a total win-win-win across the board, right? If something's going to put potentially millions of dollars in your pocket, you don't mind your insurance agent getting a $100,000 or $200,000 commission check.

- Correct. - If he's the guy who brought you this, and he's the guy who's got the relationship with the lender, and he's the guy who's got the company, and he says, "Look, this policy design," et cetera, then you want him to make some money. And there's no question the money here is potentially huge.

This is very specialized, and these are the agents who work this, they work hard for it because they've got to work really hard to find the appropriate cases and then to put the deals together. They take a long time, et cetera. So I'm not opposed to it. It's just go through all the scenarios, right, and then make sure that you've got the financial capacity to make your $50,000 premium payments, and then make sure that you've got the capacity in a worst-case scenario, how much you're unhooked for to the lender, what happens if the lender goes belly up, et cetera, that you've got the ability to work it through.

I'm not scared of it. Just as with any big financial decision, get competitive quotes and go slow and make sure you understand all the options. - Excellent. Thank you again. - Cool. My pleasure. All right. And I mean, you know opportunity cost also, right? What could you do with that money, right, if there's a way that you could invest it better, always think about that as well.

All right. Lindsay in Wisconsin. Lindsay, welcome to the show. How can I serve you today? - Hi, Joshua. Thanks so much. I was hoping that you could help me crystallize my thinking about a decision that me and my family are trying to make. So our plan right now, me and my husband both work at W2 Jobs.

And in addition to that, we have a small and growing real estate business. And we're planning within five years to be able to leave our W2 Jobs and take our kids traveling, you know, thinking like world schooling. We've got three young boys. And go for at least a year to kind of try things out.

And the purpose of this is threefold here. You know, we want to have fun and travel and spend time as a family and, you know, really enjoy ourselves. The second is we want to look for opportunities, you know, looking to grow our investments and diversify our real estate business abroad.

And we'll be, you know, we're looking now also. But, you know, I think it's a lot easier once we're actually in the locales. And then the third reason that we want to do this, we want to kind of do this whole plan is to have options, you know, in the way of if things go bad here, we would like to, you know, be able to, you know, not be 100% tied to the United States.

So here's the decision. My husband has the opportunity through Ancestry to get Portuguese citizenship. And it'll cost him about $5,000 for legal fees and et cetera. And then after he gets it and it's a couple of years, it'll take the process. And then I can apply and I can get it and it'll be about the same cost if everything remains the same.

And then our kids can get it for a little bit less each. They can apply once we both have it. So this Portuguese citizenship, I would love your opinion about this. We, me and my husband have both traveled extensively and, you know, have been to Portugal. It's nice. But we don't have any specific desire for Portuguese citizenship, you know, and kind of similar with EU.

I know that there are some opportunities, you know, both for travel and investment. But anyway, you know, can you, we might be able to just invest the money elsewhere. We live in Manhattan and even though we, you know, we do fine, I'm not sure if we should go for it or not.

If I were in your shoes, even if I were totally broke, I would call up, I would go online, I would fill out whatever interest forms I could find for a 0% credit card and I would put the fees on a credit card in order to get the Portuguese citizenship.

And it's exceedingly valuable and without question you should be pursuing it. The question of whether or not you should file for Portuguese citizenship has nothing to do with where you might want to travel, how you might want to travel, where you might want to invest your money. It's an entirely separate and distinct thing.

And so there is no downside, I mean, actually let me pause that. Are either you or your husband involved in top secret government or military work? No. Do either you or your husband have any ambitions of being, you know, the President of the United States or a high-ranking politician where you could experience political blowback by being a dual citizen?

No. Okay. Then as long as those things are the case, you don't have to pass a security clearance, etc., there is no downside to your having Portuguese citizenship and potentially massive upside. How old are your children? Four, two, and one. Okay. And other than this option to get Portuguese citizenship, do you or your husband as of yet have a second citizenship from any other country?

Yes, my husband has an Israeli citizenship. Okay. So also excellent to have. And so he would be filing for Portuguese citizenship under the Sephardic Jewish option for – it's not Sephardic, what's the name of the Jewish – It is, it is. You got it. Yeah. Okay. All right. Phenomenal.

Okay. So yes, so there is – so it's even clearer. Yeah, no question. There's no downside to it. And it's worth doing without question. The Sephardic ancestry that both Spain and Portugal have offered due to their – I don't know what adjective to use – evil treatment of Jews.

They want the Jews back, right? The options there are – anyway, they're genuine and they are real. Now Spain has tightened up their program and changed that. And the thing with this program is you need to do this now. You need to go ahead and do it now. It sounds like if this is the Sephardic program, then the $5,000 is large going to be finding consultants who can prove the genealogical records, et cetera, to prove his heritage?

Yeah, it's actually working with the legal team. His uncle already got Portuguese citizenship. So the genealogy is really easy. Awesome. Great. So yeah, so the answer is very obvious. And let me tell you why. Because if you're going to spend five grand or however much it winds up being, let me tell you why.

If you're looking for an ultimate backup plan, having another citizenship is very valuable because even if you had nothing else as a backup plan – my course is funny. The earlier caller referenced my course. I give this example in my course about having something like a European Union citizenship, right?

And then you went completely broke. And you're living in the United States. The job market in the United States completely implodes. The dollar is a mess, et cetera. Well, if you can get on an airplane and go from the United States to somewhere in the European Union, you have the ability to work there in the European Union.

And you could potentially save your family by simply going and getting a job as a bus boy in a restaurant, right? To be able to put food in your children's mouths. That right to work by being a citizen of another country is an exceedingly valuable thing. And so the ability to know that for the rest of your husband's life, potentially your life, potentially of your children's lives, they could have at least one other country.

In your husband's case, he already has one other. But now he would have at least one other with Portugal. And what that means, because the European Union is potentially up to 26 countries in the EU, I think, now. So there's 25 other countries that he could go and get a job in.

That's so, so valuable. What about if-- the other examples I give in my course, right? What if you got sick, right? And your husband was totally broke. And you couldn't afford health insurance. And you're totally wrecked. Well, having access to another country, especially a country like Portugal, has a public health system that's potentially life-saving for you to be able to get medical treatment.

What if you guys lose it all, and you've got these three children, and you want them to go to college, but you lose it all? Well, the fact is that you could go to Portugal and enroll them in one of the government schools there, and they could get a college degree or any other school in the European Union without tuition money out of their pocket.

So it's an exceedingly valuable option for them. It's just-- and I could go on for another 20 minutes about the benefits of it. And so as a simple backup plan, anybody who has the option to get any kind of second citizenship by inheritance or by heritage should definitely start that process going.

The only reasons you wouldn't do it is if it caused you a problem with your career-- that's why I asked about the medical things-- or potentially sometimes if the country that you're getting the citizenship from has some kind of significant restriction. So for example, there are a very small number of countries that if you are a citizen of those countries, you simply cannot be the citizen of another country, countries like Singapore, right?

And so if your mom was Singaporean, or his mom was Singaporean, and he was considering, should I really file for Singapore citizenship if this is an option? Well, you can't be a dual citizen, or in his case, a triple citizen, with the United States and Singapore. So that could be a no-go for him for that reason.

Or sometimes a country might impose something like military service. And so here, a country like Israel is a big consideration, right? You have to think, do we want our children to have Israeli citizenship, knowing that that will subject them to potentially military service? And there are some other countries as well.

But Portugal has none of those downsides, right? There's no mandatory military service. Portugal has no problem with dual citizenship. And it has access to the European Union. And so having that access to the European Union is extraordinarily valuable, both from your ability to be a tourist, both for your ability to travel.

The Portuguese citizenship, if coming up in five years, your family is world-schooling, the ability to travel on Portuguese passports is much more neutral than traveling on either Israeli or US American passports. And so that can quite literally make you safer in some parts of the world than traveling on either of the other passports.

And so as I see it, the trip is irrelevant. The fact that you may or may not want to own property anywhere in Portugal is irrelevant. It's only a matter of the fact that having that second citizenship, even if he never does get a passport or not, doesn't matter, just having that option is very, very valuable.

I had a friend of mine who was in a really difficult place because of the pandemic. And she had a lot of health problems, et cetera. And she was living in a poor country. The country didn't have a lot of options. She had been divorced. She was in a really rough place.

But she was an Italian citizen. And I persuaded her and convinced her. And I literally paid all of the costs and am still supporting her to move her to Europe. And why? Because the country that she was living in had nothing like the economic clout of Europe. And I told her, I said, listen, let's say that the COVID economic crisis is bad like I think it's going to be.

This was a year ago. I said, if the recession lasts for two years here where you're living, it's going to last for 14 months in Europe. If the vaccines arrive in three years here where you're living, they're going to arrive in 18 months in Europe. I said, the fact that you have the ability as an Italian citizen to move to Europe means that you can access what at the time was a better solution.

And it has turned out to be better for her, better to access to a job market. And so if she didn't have that, there was just no other options. She couldn't go and apply for access. There was no other big country economy. She had no ability to go to the United States, no ability to go to Canada, no ability to go to Spain or to Italy.

Without that, she would have had no options. But because she had an Italian passport, it was such a valuable backup plan. And so I'm pressing the point to impress upon you that this has no connection to where you might want to travel or where you might want to invest.

It's worth pursuing as a very, very cheap long-term insurance plan. And you'll be grateful to start the process. Do it now and move it as fast as possible because the Portuguese government may change those rules in the coming years. That's what Spain has done and is doing. And so do it now and go as aggressively as you can to start the process going.

And again, even if I didn't have the money, I would borrow the money to make it happen. Super helpful. Thank you so much, Joshua. My pleasure. I'm going to leave you in no doubt about what my opinion is on that one. All right, Parker in Washington, welcome to the show.

How can I serve you today? Hey, Joshua, thanks for taking my call. My wife and I recently listened to your Seven Rings of Freedom and the Spousal Liberty episode really kind of struck a nerve with us, a chord with us. We are expecting our first baby here pretty much any day now.

She's due at the end of this month. We've spent the last six months since we heard that episode working hard to pay off as much debt as we could in order to try to get her to stay at home. But we had to go through IVF to have our baby and we've still got about $45,000 of credit card debt from that.

And basically, my income covers our expenses just about exactly and within a little bit of room for personal care and entertainment and things like that. But just trying to get a perspective of what would you do? I mean, basically, if we were to have any flexibility to try to pay down this debt quickly, and we do play the 0% balance transfer and charges game.

So we've got them all on 0% interest credit cards. We've been kind of cycling through that, trying to get them paid down a big chunk, about $35,000. The 0% interest promotion ends in October. So coming down to have to move that around again. I've got like $200,000 in available credit limits.

So I can keep moving it. But without her working, it's going to take us a long time to get that last little bit of debt cleared up so that we can have more freedom to be able to travel and things like that, which we love to do. So I'm just trying to figure out if you have any ideas.

Like we have 401(k)s, each about $53,000 in our 401(k)s. And we have about $18,000 in an HSA that we could pull from because we've had all the medical expenses. So I'm just trying to figure out if you have any ideas. I mean, she could work two days a week, and we could pay off that debt in a year and a half.

I mean, what are your thoughts on all the situations? >>Trevor: What kind of work do you do? Does she do? How much do you earn? Does she earn? >>Toby: I earn about $110 before tax. I'm a rehab director and do physical therapy. And she's an RN. So she's got a lot of flexibility in her schedule.

Like she could pretty much do whatever she wants to do. >>Steve: And when is the baby expected? >>Toby: August 27th. >>Steve: Awesome. So any day now. Great. So first of all, congratulations. >>Toby: Thank you. >>Steve: And this child will be very precious to you. Anytime I have ever worked with somebody who has invested a lot of money into conceiving their baby, it has made me appreciate afresh how precious children are.

Many of us have not had to invest money into conceiving our children. For most of us, the actual conception of our children has been far more fun. But it just makes me appreciate how precious children are. And they genuinely are an investment. And I pray that you have a beautiful delivery of your baby very soon.

First thing is -- >>Toby: Thank you very much. >>Steve: Yeah. First thing is I wouldn't do much at this stage financially other than pile up cash. Kudos to you for saving money and for trying to pay things off and for working as much as possible. At this stage, though, with the child's birth imminent, I wouldn't be paying anything extra.

What I would do, since you are playing the credit card game -- and by the way, have you taken my -- did you take my course on that topic? >>Toby: I haven't. Actually, before you came out with that course, we had been doing this for a few years. And I've just kind of researched on my own and got a pretty good handle on it.

>>Steve: You should have taken my course just to make sure that there are options there. But what you want to make sure that you do -- it sounds like you're doing the stuff right. And so let's assume that you know everything there is to know. Good. So while her income is high, apply for as many -- before she stops working, before the baby is here, apply for as many new cards as you can find using an appropriate level of strategic thinking.

And make sure that you have moved the debt onto the longest term offers that you can get at reasonable prices. And so what I mean is if they offer you 1.99% for 18 months or 0% for 11 months, right, take the 18-month offer. And just stretch things out as much as possible.

Don't be silly, but I would go ahead and take any 3% fees they offer. Try to stay away from the 5% ones, but even that, if necessary, fine. But try to get all this debt stretched out to as long as possible and as stable as possible so that you have breathing room.

That's the first thing that I would do. And then beyond that, I would not pay any extra right now. When the birth of a baby is imminent, in your general financial flows, you want to have as much money available as possible. Because if something happens with the birth that makes it complicated, you want to have a war chest of cash so that you can fight that problem.

I've had friends who, you know, I'm just thinking of one of my friends, their child, I forget the medical name of it, but anyway, they had a child in the NICU, right? Child in the NICU, even if all the medical bills are covered, right, and what people don't understand is even if all the medical bills are covered, right, you're still going to not be working.

You're going to have expenses for staying in a hotel, expenses for food, all that stuff that's there. And so I'm just always conscious of the fact that, hey, sometimes things are difficult. And because of that, pile up, pile up cash. The next thing is wait for the birth of the baby.

And then once the baby's here, enjoy the birth of the baby. The most important thing you can do in the first few months of a baby's life is take care of mama and take care of baby. And so don't feel any pressure for her to get up and go to work, for you to get up and go to work unnecessarily.

Just take time. It's a very special time, and you've invested a lot into getting this to happen. And so you want to make sure that you take time, and you want her to be totally emotionally free from all of this. One of the most important things that I think that you can do as a husband in this situation is isolate her from any financial stress associated with this and isolate her from any stress.

From my research, both academic and in practical experience as the father of four children, the single most important thing that you can do that will help your wife to have a smooth and easy childbirth is to eliminate all sources of stress from her life. Most importantly, work with her to eliminate all sources of stress from the birthing process, especially as a first-time mother.

Most first-time mothers in U.S. American culture have a lot of anxiety around birthing. And so I won't give you my speech here, but anything you can do to relieve that anxiety is very important. The example that I use, we did a hypnobirthing class before our first baby. And in hypnobirthing, they have you do this fear release exercise.

And you can do it. You don't have to go through the class. I'm sure you've done other classes. But the most valuable thing that we did was I had my wife make a list of every single thing that she was fearful of related to birth. And the number one -- and then I looked at the list with her and we thought, okay, how can we relieve it?

And the thing that for her that made a big difference is my wife does not like to be rushed. She hates feeling like somebody is rushing her. And so her biggest fear -- she was convinced that, look, the baby will come when the baby's ready, like I don't need to be worried about this, et cetera.

But her biggest fear was being hurried or being pressured at the time of childbirth. She didn't want her friends calling her and saying, "Is there any news yet?" and like, "Do you feel anything?" Like she did not want that. And so what we figured out was that we could avoid that by simply not telling anybody when the baby was expected.

And so what's become a standard operating procedure for us is that should we find ourselves expecting a baby, we don't tell anybody when the baby is expected, right? The EDD, the estimated due date, is a date that has a two-week wiggle room on both sides for a safe, normal, natural, healthy birth.

And so, you know, if the date -- if our date were August 27, we would tell our family, "August or September," you know, something like that, something towards the end of August, right, or towards the beginning of September. And the idea is that if they don't know, then they can't ask.

And we made it clear, like, "Sorry, but we don't tell anybody this, and we're not going to get this information to you." And so by doing that one simple thing, it relieved my wife of a tremendous amount of emotional stress. And so I encourage you to do that. Now, financial stress, same thing, is that don't put on her some expectation that we just got to have this baby and get it over with so you can get back to work, right?

That may create emotional stress. And a woman's body responds physically to that emotional stress. I've talked to enough doulas and enough midwives and enough doctors who have given me stories of just emotional distress that women feel and how that causes their bodies to have awful childbirth experiences. And so to the extent that you can relieve that, relieve that and include in that financial stress.

Second thing is I am convinced that there is plenty of evidence that the single most important thing that you can do in the first few months of the baby's life is obviously allow time for the physical recovery of your wife and of the baby, but just allow time for them to get to know one another.

You know, the first three months of a baby's life, some people call it the fourth trimester, because a baby is still developing outside of the womb. Human babies, when they're born, are not fully developed. They are still developing outside of the womb. And so you want to give time for the baby to develop and for mama to heal.

And then the more time that you can give to your wife and the baby, the better will be the relationship, right? That's the start of a lifelong bond between a mother and a child. And what's interesting is that I've always noticed my wife, like she doesn't, my wife often doesn't have a lot of attachment to a baby until the baby is there.

Like she isolates, she segregates in like sections parts of her thinking off sometimes. And so like she's looking forward to the birth most of the time, but it's like, you know, she's not really connected to it. And then I just watch in the first few days, watch them bond.

And after the baby is a few weeks old, she loves the thing, but she didn't love it like right at the beginning. It took time for that bond to develop. And it's fascinating, even biologically, right? The best thing you can do is just provide lots of time for, you know, mom and baby to snuggle, lots of skin on skin contact.

Biologically, a mother's body will change the chemical makeup of her breast milk in response to the scent of the baby, the scent of the baby's poop, the scent of the baby's hair. She'll change, her body will change what the baby's nutrients are receiving based upon that time. And so all of this is emphasizing to you that as your financial advisor, I hereby command you to ignore the finances for a few months.

That's the point I'm trying to impress upon you is that there are times in which you work like a maniac and you deal with your finances and there are times in which you don't. Are you receiving that point loud and clear? Yes, very much. And I'm actually the one that I'm more like we can take as much time as we need to pay this stuff off.

Like I'm not concerned about that. She's like I have to, she's very debt aware and has always, she's an immigrant, her parents are immigrants and they like there's a lot of pressure on her to work versus stay home. Sure. And so I'm trying to, after listening to your episode, really hammer that about home that she doesn't have to feel that pressure and we can do things differently.

We have a long term positive outcome already planned with retirement accounts and we've got two homes. So we've got a long term covered. It just might take us a little bit longer to get there but we'll enjoy the road a little bit better. Sure, sure. So as long as you've heard my first point, then to the second point.

Yeah. To the second point, if you and your wife see value in some of the things that I have said, you desire for her to be a full time mother, then you'll have to work on how to make that happen. Now the nice thing is that nursing is one of those careers.

If your wife is a nurse, it's one of those careers that's easy for her to keep her foot in the job market without it being an all consuming thing. And in many cases it's probably advisable, right, because she worked hard to get her licensure, et cetera, so she can pull one shift a week or go in on the weekend, something like that.

Then if that's not too disruptive to your family life, then that may be a very valuable thing that she'll want to keep current on everything. What I would do, I mean I'll just tell you my opinion, right, what I would do is that, is simply this. If we had a financial problem, I'm going to solve the financial problem and I will go make more money.

And I would do whatever I needed to do to go make more money. And that's what I've always done. That's what I'm good at. And I believe that my family will be better off if my wife is there with our children, even if I'm not there because I'm working a side hustle or I'm building a business on the side, et cetera.

Our children are going to be far better off with that scenario than if, you know, she's working every Saturday and Sunday and I'm working Monday through Friday and it could just, that's no fun. Now, can you do it? Sure. But what I would challenge you on is the same thing I would challenge anyone.

When's the last time you sat down and made a plan to make more money? Most people don't ever actually sit down and figure out how can I make more money. And so, okay, you made $100,000. Great. What's your plan to go from 100 to 150 in the next year?

What's your plan to go from 100 to 500? Is that doable in what you're doing right now? Okay, if it is, then what do you need to do to prepare to do that? If it's not, then what can you do to put yourself on a different trajectory where you have an actual plan in five years to go from 100 to 500, or at least to put yourself onto the track where that's a possibility?

I'm not worried about $45,000 of credit card debt if the balances are served appropriately for someone who's making $100,000 who incurred the debt for IVF. It's not a big deal. You'll pay it off quickly enough. You'll budget some of it, and most likely you'll make more money. What I would challenge you on is have you been serious about actually sitting down and saying, "How can I make more money?" And as a man and as a husband, if you will grasp and take full responsibility for that and then start working on a plan for that, I believe that you'll be well-equipped to take care of the debt and then put your family onto a very different trajectory.

So the next time, you've got to pay $50-whatever-thousand or whatever the total bill was. If you wind up doing that again, you'll cash flow it. And so my challenge to you is take responsibility for it, relieve your wife of the responsibility of being the provider for your family, and then you make a plan that allows you to increase your income until you can provide the kind of lifestyle that you want to provide.

The answer to most financial problems is simply make more money. And most people don't ever actually sit down and make a plan to make more money. It's not the answer in all situations, but in your situation, almost undoubtedly, it's just make more money and take it seriously. You're a smart guy.

Use your intelligence and your brain to sit down and analyze your income, analyze your career, and make a plan that conceivably has you making triple what you're making four or five years from now. And in that scenario, the credit card debt, you'll have it paid off pretty quickly. - Okay.

All right, that sounds great. So keep the investments untouched and just do what we can and try to get some more income flow in, which I have been working diligently on that. We've got some property and we're going to rent it out on Hip Camp. - Good. - Yeah, we've got a couple of ideas going.

- If your credit cards are properly managed and they're all at low interest rates and if you have good borrowing capacity so that when those terms run out, you can roll them over again, you can do that for years. Most people have not put in place what you do, but you've got $200,000 of available credit, you've got these high household incomes, et cetera.

So I don't mind having the $45,000 of credit card debt temporarily. It was there for a reason, from what you described to me, it was there for a reason, a very good reason. The second thing is I would definitely not take money out of investments to pay it off.

I wouldn't empty my bank account to pay it off. I wouldn't take money out of investments to pay it off. I certainly wouldn't take money out of my 401(k). Would I take some money from my HSA? Maybe, but not if they'll let me roll it over at 3%. Now, let's say that you've got $35,000 that's at 0%, but then you've got $10,000 that kicks up to $14.9.

Well, yeah, I'll take a $10,000 distribution out of my IRA and put it in -- or my HSA and put it there. Or I'll take out $10,000 from my savings account. I'll pay the balance down by $10,000, and then when I can get another 0% card, I'll go ahead and put the money back into my savings account.

And since you were unwise and didn't take my course, wink, wink, one of the things that I emphasized is what's most important when you're surfing credit card balances is never to ever wind up in a position where you're broke. And so you don't ever want to run out of money.

And so you don't cash out investments. You don't spend down investments. I hate it. If somebody wakes up with $50,000 and they've got $30,000 in the bank and somebody gives them the advice, "Oh, listen, go take $30,000 and pay off $30,000 of the 50, and then you'll only have $20,000, but you'll only have $1,000 in the bank," my opinion, that's a bad answer for most people.

Maybe not everyone, but that's a bad answer for most people because the worst place to be when you have debt is broke because then you can't pivot, you can't maneuver, you can't adjust. So keep your money and just figure out how to make excess money to pay off the debt in your situation.

Okay. All right. That's very, very clear. Thank you so much, Joshua. I really appreciate it. My pleasure. And thank you for indulging my little birthing conversation. I just think it's so important to pay attention to that and not to put finances where they don't belong. So don't think about money when you're in that phase of life.

Tell yourself, "All right, two months after the baby's here, then we'll start thinking about money again." Joshua, welcome. How can I serve you today, sir? Hi, Joshua. I wanted to ask you a question regarding setting up a consultancy-type business while living abroad, and what would be the best way to structure that, assuming that you're an American citizen, to avoid taxes, especially self-employment taxes, or minimize those if possible?

I've done a little bit of reading, not too much, but some of the suggestions seem to be that you can structure as an LLC, taxes an S-corp that pays a reasonably low salary. That seems to be probably the easiest, or potentially do an offshore C-corp. So I just wanted to get your thoughts and see what recommendations you have.

Do you sell any kind of product, or is it all personal services? All personal services. Okay. So this is the first thing, is that you cannot 100% eliminate your taxes as a U.S. American living abroad when you're doing all personal services. Personal services do not fall under the same regulations as a business.

So the first thing I would say is, can you design your business where instead of doing your services, can you design a business or part of it where you sell a product? So if you take some area of personal knowledge and you package it as a product, an info product, a seminar, et cetera, and then sell that, that portion you can get truly tax-free.

What I would encourage you to do is go to ustax.bz, and that's a guy there, ustax.bz, it's Stuart, I forget his last name. But on that site he sells some courses, and one of his courses is for a freelancer, and that's what you are. So he has a course called Tax Savvy Expat, which is a freelancer, and if you go through that course, he gives you the whole structure and walks you through it step by step.

Okay, how do I do this analysis, what do I go through, et cetera. So the first thing that you can do is, just to make it simpler though, before you go and start filing for companies, et cetera. First of all, how much money are you making right now from these services?

Well, this would be for my spouse, but she'll make maybe like $120,000 or something like that. Okay, so basically it comes down to is there a way to reduce her self-employment taxes. So as an American living abroad, you can eliminate her federal income taxes using the foreign earned income exclusion.

What I'm struggling to remember is I took Stuart's course, I bought it, and that's how I learn all my stuff is I find the people who are teaching me and then I go and send them a camera, I send them $1,500, $1,000, something like that, I took all his courses.

And what I can't remember is actually the structure that he teaches in that course. And so I can't remember what it is for freelancers at the moment, but that's what I would do is set it up. Well, you can make an argument and you can say, "Should I bother trying to reduce my employment taxes?" Remembering that if she's making $120,000, she's going to be maxing out her Social Security credits based upon the Social Security wage base at that number.

And so, yes, she's going to pay 15% of her income in that towards Social Security and thus be better off. I cannot remember. Stuart goes in that course, he goes over the calculations as to how much you can reduce it legally as a freelancer, and I cannot remember the number.

And so you have to check that out to find out that structure. But that's where I learned the freelancer structure. I just can't remember off the top of my head what the unique things were about it. What I would encourage you is see if she can productize it to some degree.

And then I guess the only thing I would say is that it's also one of those areas where maybe you go ahead and set up a business to do. I guess what I would tell you from having done it, the tax savings need to be worth it to you to deal with the cost of maintaining a business.

So I pay--I have an offshore structure. And in the very cheapest jurisdictions, you're going to pay several thousands of dollars a year to deal with the jurisdictions, et cetera. And you're going to deal with the complexities of filing your tax forms for those offshore corporations. And so unless you, like me, are kind of like a hardcore, "I don't want to be involved in the Social Security system," a bunch of scam, giant Ponzi scheme, blah, blah, blah, gnashing of teeth.

Like if that's you and that's her, then yeah, go ahead. And I'd rather pay $3,000 a year to a jurisdiction to go ahead and set up an offshore corporation, blah, blah, blah. But if you're a little bit less of a grumbly person than I described, the answer is just stay offshore.

Take your deduction, take your exclusion for the federal tax, and then pay your employment taxes. File a Schedule C so that you can keep things simple. Because even just the form--when I first filled out my first thing, it's like the 5583 or something--I forget the name of the tax form.

But when I first sat there, it took me--I should be able to do it fast. It took me a long time, and I'm sweating bullets the whole time knowing if I don't get this right, they're going to put me up against the wall and shoot me. And so unless you're super committed to I want this--I don't want this $10,000 going into the Social Security and Medicare, then for $120,000, I would just say file a standard Schedule C and stay offshore and go ahead and pay the money for self-employment, save the federal income tax.

Make sense? Yeah, it does. And I think that's what we were leaning towards is kind of make it simple. In the end, it's not a whole lot of money because, like you mentioned, we wouldn't pay the federal income tax. It would just be the self-employment taxes. But anything we could minimize would help.

But I agree it's probably not worth going through the complexity of setting up offshore corporations. Yeah. The other thing I would caution you is just simply have her check her earnings record. I don't know what her earnings record could be, but it could actually be useful for her to get these $120,000 years on her Social Security record.

So depending on what she was earning earlier in her career, if every year she earns $120,000, she bumps off some year that she was earning $20,000, that's going to make a big difference in her long-term Social Security benefits. And while I don't recant my opinion of Social Security being a significantly dumb program and a giant Ponzi scheme, as a financial planner, it is a very useful asset because it is a guaranteed asset that is inflation adjusted.

It's a guaranteed annuity. And so you should take a hard look at it. You should pool her to do this properly. You should pool her Social Security earnings record from SSA. You should run the formula and say and see, okay, which year is going to get bumped out with this $120,000.

If she has a full earnings record of having always maxed out the wage base on Social Security, then this may not be so useful to her. In fact, it may be worth it to say, okay, I'm going to go ahead and pay $3,000 a year to save the seven, what it would be on Social Security and whatnot.

But if these years of making the $120,000 are bumping off some lower earnings years off of her record, then it can also be worth doing as well. So I would say I hate that 5583 form. I really hate it. When I first filled -- if that's the number, I can't remember the number.

But the first time I filled that out, I just thought, why didn't anyone tell me this? Why didn't anyone tell me I had to deal with this thing and go through and do this? And it just made me -- it's a bear. And so if she's not super ideologically motivated like I am to be done with the Social Security system, then I would say pay the self-employment taxes and move on.

Okay. Well, thank you very much. Hopefully -- I kind of have a hard time believing that really there's any woman in the world that's as grumbly as I am about things like Social Security taxes. So maybe they're out there, but most of the time there are a bunch of guys like me out there that will grumble about -- It's not fair.

It shouldn't be done. But she's probably better off going and paying them. And then depending on your assets, again, I don't need to repeat, but it's a useful asset for her. That's it for today's Friday Q&A. I want to thank you all for listening and for calling in. Thank you for accepting my apology that I haven't been able to do as many of these over the last few weeks as I've wanted to.

I love doing these shows. They're my favorite shows. But handling the logistics is just difficult. A lot of it is just even just the scheduling and whatnot. So I will bring them to you as frequently as I am able to do so. And I look forward to talking to you on the next one.

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