Sweet Hop is an online marketplace curating the best in premium seating at stadiums, arenas, and amphitheaters nationwide. With Sweet Hop's 100% ticket guarantee, no hidden fees, and the personal high-level service you expect with a premium purchase, you can relax knowing you'll receive the luxury experience you deserve. Visit SweetHop.com today to book your premium tickets to your favorite teams, artists, and all the must-see live events to Sweet Hop around LA.

It's more than just a ticket. It's Friday, and today, live Q&A. 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, August 20, 2021, and today, we do live Friday calling show. You call in, we talk anything you want. If you're new to the show, I want to welcome you to today's episode. Every week here at Radical Personal Finance, in which I can arrange an appropriate internet connection and the necessary technology to record the show, each Friday that I can do that, we record a live Q&A show.

It works just like call-in talk radio. You call in, we chat about anything that you want, any question that you want to talk about, anything that's on your mind, any topic. Really, I don't screen the calls at all. I just go to the phone lines and we talk. If you'd like to join me for one of these Friday Q&A shows, I would love you to do that.

The way that you get into one of these is by going to patreon.com/radicalpersonalfinance, sign up there as a patron of the show on Patreon, and that will gain you access to these Friday Q&A calls. I do that to keep the numbers to a manageable level, so that they come out to somewhere between an hour and two and a half, I guess, honestly, but I try to keep them to about an hour or so, and so that keeps the number of callers manageable.

So go to patreon.com/radicalpersonalfinance if you would like to sign up there. We begin today with Caleb in Illinois. Caleb, welcome to Radical Personal Finance. How can I serve you today, sir? Hi. So I'm 21 and I am engaged and I just bought my first property. It's five acres in a semi-rural area.

And my concerns recently have been on physical preparedness more than financial preparedness. I've dived into a lot of your episodes going back, talking about scanning and the alpha strategy. And I was wondering if you had any updated beliefs on all those systems. Good question. So in the short answer, yes, I do have updated beliefs.

My beliefs are even stronger that it's a useful tool of preparedness. In fact, just this week, I actually recorded a podcast episode and I released it. About 150 of you saw it come in and started listening to it, maybe actually a few hundred of you, called the barbell strategy.

And the basic idea is that I have developed a new personal philosophy of risk management where my single biggest regret from when I was younger is that I have behaved too conservatively with my money. I didn't choose to be as aggressive as I could have. I didn't go after opportunities that I believe I could have.

And I just was excessively conservative out of a desire to not lose money. But in the final analysis, what I've realized is there's really no reason in the modern world for anybody to be conservative financially. The consequences of failure on a practical level are quite low. They're very, very low.

Now, the consequences of failure usually that we're worried about are not practical consequences. Rather, they are consequences that are more psychological, right? I'm scared of failure because I don't want to look like a loser in front of other people. I want to seem like a winner. And so I'm scared to take a risk because I'm scared of failure.

That's a psychological issue to overcome, not a practical issue to overcome. So I believe that the consequences of failure have never been lower for most of us and that it's actually quite easy to ensure against most of the consequences of financial failure. And so if we can do that and we can put in place an appropriate insurance scheme to protect ourselves against financial failure, then we can give ourselves more permission to be aggressive with our investment strategies, aggressive with our speculation, aggressive with our business buildings, etc.

And so one of the pillars of that insurance portfolio that I see is to take care of the basic needs of all times. And so as I see it, the basic needs are those things that we worry about. What would I do if I went homeless? What would I do if I were hungry?

How would I feed my children if I ran out of money, etc.? And so practical physical preparedness, stockpiling of relevant items, I think solves that insurance need better than almost anything else. So at the beginning stage, if I were 21 years old, newly engaged, just bought a property, something as simple as putting a debt-free couple thousand dollar camper that I found, a fifth wheel camper on my property, means that unless a tornado rips the thing away, I'm always going to have some kind of housing.

Putting in place six months of beans and rice and wheat and corn, setting aside a thousand bucks worth of long-term storage food so that I will always have calories. This makes a lot of sense. Putting those basic preparedness items in place makes a lot of sense. And I think that by doing that, you should put yourself in a situation where you're relatively bulletproof and thus are able to take more financial risk.

As I look at the world, in some ways, we're more connected to the financial world than ever before. Meaning it's hard to live without money and making money and having money, etc. But the flip side of that is it seems in some ways easier than ever before to live comfortably.

If you and your fiancé had a few thousand dollar fifth wheel trailer, you could have a roof over your head on raw land that is more comfortable than most of our forebears ever had. You could be totally comfortable and yet for a few thousand bucks, you've secured that. In addition, you can put a cell phone hotspot there and you have access to the world's best entertainment.

You can put a little generator in the backyard and a little battery backup system and have access to easy electricity. And so you can insure yourself pretty easily against those things. And then my concept is that now you should feel more comfortable knowing that your basic needs are met.

You should feel more comfortable speculating. You should feel more comfortable investing aggressively. You should feel more comfortable really going for it financially. So instead of sitting back and worrying about building up a few thousand dollars, then you're really going for it with big investments where you're headed for an eight-figure net worth.

Now the one thing I would say is I don't believe that it's necessary here to be excessive. So you could lay out and say, "What is my alpha strategy?" Well, the classic concept of the alpha strategy is basically buy everything you're going to need for the rest of your life.

I do think that at 21 years old, that would be a mistake because what that would probably do is encumber you with a significant investment into physical possessions, which could lead to decreased mobility and a general kind of heaviness of living. A friend of mine calls his lifestyle the low-drag lifestyle.

I've always loved that. Living low-drag, having simplicity in your personal effects. That's hard to do if you've got three extra sets of tires in the barn because you wanted to buy a lifetime supply of tires. And so I don't think that a 21-year-old really should go hardcore and try to go in the sense of buy everything you're going to need for the rest of your life.

But I do think that having some focus on physical preparedness is actually a valuable strategy to free you up so that you can move much more aggressively in your business and investing affairs. Yeah, that makes total sense. That's kind of what I was wondering is, do you believe that if you have almost a Dave Ramsey 1,000 saved, should you switch over to the physical and then worry afterwards?

So you've got three months of supplies saved up, then you can go to those more risky investments? How much money do you earn per year at the moment? Combined it's about $65,000. And this land that you bought, you said you bought five acres, does it have a house on it?

It does. Great. So do you have a mortgage on the property? Yes. And how big is that? It's $180,000. Okay. Yeah, so I think $1,000 is too little. There's no question that having $1,000 is very, very useful. But I think my number is $10,000. It's hard for me to...

With $10,000, there's not a lot that I can't see you're able to do. At under $10,000 though, it starts to get a little bit thin. And so I think the first number I would say is you should build up to $10,000 in savings should be a first goal before you do any kind of investments, right?

Physical preparedness though is kind of a mixed bag, right? What are we talking about? Are we talking about going and... I'm not talking about really anything that's expensive. You probably have already some stuff. If you're buying a house, one of the first things you're going to need is a few tools to work on it and fix on it, et cetera.

And if you're moving into semi-rural five acre environment, that's probably normal. And so get good at buying things cheap, paying for things for cash. Okay, a little bit of food stockpile, but a couple thousand bucks buys you a lot of food for two people. And I would focus in the early years, I would focus on just doing that the cheap way, right?

Get the sacks of beans and corn and wheat and rice and put them in a Mylar bag, put them in a bucket and stick them aside, right? A little bit of extra normal food in the pantry type of thing. Don't go and spend thousands of dollars on the expensive, fun, freeze-dried storage food.

Grab yourself a little generator, but you pick up cheap at a garage sale. At $65,000 of income, I think that your best bet is to stockpile money. And then when you find good deals, spend a few thousand dollars here and there on physical preparedness. But I think money is in most cases your most useful tool.

So I don't have a formula that I would give. I would just say if you find a good deal, get it. If you come across a great deal on a backup generator, meaning not a whole house, just a little portable generator somewhere, pick it up. It doesn't matter how much savings you have.

Because at this level of finances, these things that we're talking about are easily turned into money if you want to. And so I look at, let's say you're on Facebook Marketplace and somebody's selling a little 2,000 watt Honda generator, and you can pick it up for $350. Well, that's as good as money.

You can put that thing back on Facebook Marketplace any day you want, and you can turn it into $350 and you won't lose much. And so I don't have a formula to say here's all the things that you need to buy. I just know that having some things covered is useful.

But then what I would do is create some stability, save $10,000 or so, and then focus and say, "How can we go for it?" This is what I wish I had done at 21, is how can I go for it, not be conservative, knowing that I might lose money, my businesses might fail, my investments might fail, but how can I go for it?

Because at 21, there will never be a time in your life where the risk is easier to handle. There will never be fewer obstacles in your way. And so when you go for it, as whatever that means in your context, go for it in your career, go for it in your investments, whatever it is, go for it.

Because if it fails, it's no big deal. You're going to be fine. That philosophy really is the same at every stage, but it becomes more psychologically difficult down the road. So I hope that was clear enough. I don't have a perfect answer for you. I would do both. If I came across a great deal on something that fit into my personal physical stockpiling strategy, I would grab it.

And I would do it, but I would just be cautious that I don't overdo the physical stuff and underdo the money. Money is a valuable preparedness tool, and it's the thing that buys everything else that you need. Yeah, that sounds reasonable to me. Would you say someone at this life or at this stage in life, would it be better to, in my free time, try to find something else to create more income?

What kind of work do you do? Get the money, or would it be... I do design for construction. Design for construction, meaning like architectural drawings, CAD stuff? What does that mean? CAD stuff and conceptual stuff. Do you feel like this is a career that you're well suited for? Currently.

Long-term goals are very different. Tell me about your long-term goals then. Longer term would be establish small-time spin farming or getting to my own homestead and just basically having enough to coast on and satisfy my needs with that profit. So your vision is to work a very modest amount, earning just enough money to cover your needs and doing that in activities that kind of give you a general lifestyle that you prefer.

Is that right? Yes. And this current job that I'm in, what career that I'm in, would be the initial bank role for most of the things that I would need, land and equipment, to hopefully not take on debt right at the beginning. So why don't... Do you have a desire to...

Why at 21 years old do you want to do just enough to get by? I'm not very much into luxuries. I feel comfortable at a frugal level. So if I were to have enough to buy myself a certain acreage that I could just work on, that work is a fulfilling work to me.

I know you always talk about work towards something that you don't want to retire from and that's something I could see doing for the rest of my life. I think one of the things that you'll have to do here is you have to test this. And so the advice I would give is as quickly as possible, get yourself into the lifestyle that is your ambition and try it out and do it as quickly as possible so that you can see if that's actually for you.

I'll just simply share what I think is probably the case in many circumstances that are like yours. Notice I'm trying to be cautious. I'm trying to not tell you what your goals are, what your desired lifestyle is. But here's what I have learned. I think that if I put 10 young men in a room and of those 10 young men that told me, "I want to do just enough to get by.

I don't have big materialistic ambitions. I'd rather kind of live a day-to-day existence." I think that 2 of the 10 probably actually mean it and 8 of the 10 simply have not found something that turns them on yet. They haven't found something that they genuinely want to do. They haven't found something where they believe they could actually contribute.

I understand the desire to live a simple lifestyle like you're describing. I had it when I was in my early to mid-20s. I had a goal. I was like, "I didn't like being at work and if you told me at that time that I could build and develop a self-sufficient homestead and that would be kind of what I did." At the time, it seemed like a dream that I had and I thought that was what I really wanted.

What I have learned though, continuing on the process, is it was actually a lot simpler. I wasn't in a job that gave me any opportunity to really indulge my sense of ambition and I was trying to escape from a daily schedule that I didn't like. At this point, it's obvious to me that just working on a self-sufficient homestead was not for me.

Rather, what was better and more important was for me to get into a job where there was more of an opportunity to grow and that I was just in a bad job for me, not that I needed to get out of the work world. This was some of my own thinking as it changed over time with regard to the financial independence space.

A number of years ago when I was in my mid and late 20s, I would sit and consume nothing but early retirement blogs because I thought I wanted to retire early. Once I discovered the concepts of it, then it felt like, "Wow, this is my ticket out." But now, in hindsight, I see that I was simply in a career that didn't match my ambition and that had me too constrained.

At this point in time, I have walked away from any ambition of retiring early. I've walked away from any ambition of living on a farm and just farming every day because I've realized that I need much bigger challenges. Since I've now created a lifestyle where I have the freedom to do what I want on a daily basis and I'm not constrained by someone else telling me something, now my goals have gotten a lot bigger.

I don't know if that's you or not. All I can say is test it as quickly as possible. The two examples I would give would just simply be this. A lifestyle business, for example. When I started Radical Personal Finance, my goal was to build a lifestyle business. I wanted something where I could earn $100,000 a year from a laptop.

I did that. It took me a couple of years, but I did it. Once I got there, then I thought, "Wait a second. Is this what I want?" I realized, "No, I want to have a bigger impact on the world. I want to make a bigger mark. I want to be more useful." This isn't cutting it.

This feels good. Yeah, okay, because I'm hanging out, but why am I going to waste my youth hanging out? I'm not tired. I'm not worn down. Why am I going to waste my youth and my strength hanging out? I want to make a bigger impact on the world. That doesn't have to be money, but money is a really good marker of how well you're serving the community around, how well you're serving people that you love.

It's a really useful marker. I'm glad that I achieved it relatively quickly so I could realize, "No, I actually want to make a bigger impact." The second thing was I remember a number of years ago. My goal personally was oftentimes I always saw myself living out in the country on a little ranch.

A few years ago, a little ranchette that came for sale in the United States, and I was like, "This is perfect for me." I flew back to the United States. I went and looked at the ranch. I just remember just walking around the ranch. On paper, it was everything that I had ever dreamed.

I looked at it and I said, "You know what? This isn't for me. I used to think this was, but it's not for me." Those two experiences gave me a sense of clarity of the future where it allowed me to say, "Okay, I'm going to abandon those goals and go backwards." To me, it's strange that a 21-year-old man wouldn't be burning with ambition to make a mark on the world.

Now, whether or not that includes finances, whether or not that includes making millions of dollars or spending millions of dollars is kind of beside the point. I want you to be filled with a sense of passion and impact and purpose to the extent that you can find it. That could be spin farming.

That could be managing a property. I think just be careful and as quickly as possible test yourself actually doing those things so that you can see if that's actually a good fit for you, even to this point. Knowing what I now know, if I were 21 years old and I were working in a job that I wanted to retire from, like construction, I wanted to go be a spin farmer, as quickly as possible, meaning less than a year, I would put myself in a position where I could just go and do it so I could get a sense if that was actually for me.

If so, go for it or if not, build a different plan and a different goal. You may be one of the two of the ten that is contented with that kind of lifestyle. I'm not. I thought I was. I'm not. I'm one of the eight out of ten that wants to have the opportunity to grow and be bigger.

I'm not saying one is right or one is wrong. I am saying test those things as quickly as possible. Especially in your youth, the quicker you can achieve parts of your goals that will help to show you whether they're actually your goals or not so that you can move with greater and greater certainty going forward in the future.

Those are my thoughts. All right. >>Jay: Yeah, sounds good. It sounds like maybe I should look more into developing something along the lines that Jack Spierko would have done instead of just being a personal farmer, maybe doing what I can to help others and educate if that's what I actually want to do.

>>Steve: You can create it, whatever it is that you want to do. I just believe that you want to make the bigger the goal, the more exciting it is for me. Again, this has been the theme of my life over the last couple of years, I've thought. I've realized I was too conservative.

I was too conservative with my goals and too conservative with my finances and too conservative with my abilities. I have realized that playing a game at a bigger level is simply more fun. When you realize that it's all a game, then why not have the most fun possible? The bigger that you can go, the better.

There are arguments against it. I'm the guy who has a podcast called Why You Should Probably Lower Your Financial Goals. I stand by the thinking in that, but I have changed and grown and I've realized that the time that I feel the most alive is when I'm right on the edge of my ability.

We all have different levels of ability, but the time that I feel the most alive is when I'm right on the edge of my ability. I want to spend more and more of the coming years not pulling back to where I'm comfortable, but I want to spend more and more of the coming years growing and living continually on the edge of my ability so that when I look back decade by decade by decade, I can chart massive growth.

That's my ambition. What that looks like has lots of different answers, but that's my personal ambition is to live on the edge of my ability. Caleb, I love talking to you. Thank you. I think you're a new caller, new patron. I'd love to keep you keep calling in regularly and chat about some of this stuff because it's so exciting for all of us.

I think that most of us who are 15 years or senior, you think, "Oh, if only I'd known at 21." It's exciting to hear from you. I'd love for you to call in regularly. All right, we've got a Trey in Texas. Trey, welcome to the show. How can I serve you today, sir?

Hey, Joshua. That was a great conversation you guys just had. My question is going to be really boring compared to that. When you told them that you feel your best or you live your best when you're at the edge of your ability, I've always felt the same way. I always say the same thing differently.

I say I'm at my best when I'm in over my head. Right. I totally agree. Mine will be pretty easy. I wanted your recommendation. It actually kind of ties into what you guys were just talking about, but I actually did buy the little ranch yet about a month ago.

It's 109 acres. It's got two houses on it and a 10-acre pond. It's timberland. We're going to hunt out there. I'll have family and friends hunting and fishing. There's nobody that lives out there year-round. In the back of my mind, I've kind of felt this little bit of liability.

What if some teenagers go out there and are swimming or something and something happens when nobody's around? I wondered if you had any specific sort of asset protection strategies for that scenario. Maybe hold it in an entity rather than my personal name or different insurances and that kind of thing.

I think the first thing is you start with the practical stuff. Before you ever talk about ownership, which certainly is an important topic, but with liability, you start by protecting your – the way that you begin liability planning is you lower your liability by doing the stuff you know you need to do.

The first thing you do is you go out and you post the property with appropriate signage, right? No trespassing. Keep out. You make sure that you have a proper gate if possible. Put a gate on your road. Even if there's no fence around it, put a gate on your road.

You go out and you make sure there are no major hazards. There's no antique well that's uncovered. Go through and think what's all the bad stuff that could happen and then put in place protection for yourself. I really believe that's 80% of the battle is actually just doing stuff.

One of the things that has bothered me so much over the years studying asset protection and looking at asset protection is this. You can find abundant horror stories, genuine cases where somebody got sued for something so ridiculous and you say, "How on earth did this ever get to court?

How on earth did this person ever win?" Sometimes when you dig under the hood, you find that it's not as frivolous as it first appeared. The time-worn example of this is the classic McDonald's hot coffee case. I had grown up in my high school years hearing about the fact that somebody had sued McDonald's and won because this person poured hot coffee in her lap and she got burned and then she sued McDonald's.

I thought, "Oh, frivolous lawsuit." Then in my business law class in college, we read the case, the case notes, the briefing, etc. We talked about it and I came away saying, "Wow, you know what? She was totally right. If I had been on the jury, I would have awarded her damages based upon the facts of the case, based upon the way that McDonald's dismissed her claims.

She was totally right. This wasn't a frivolous lawsuit." Then when you actually follow the money through and everything, you realize, "You know what? The justice system in the United States worked. It actually did work. It did what it was supposed to do. It wasn't just a farce." I think my experience even talking to other people who've gone through law school is often similar.

You go through training and you realize, "You know what? This system may be imperfect, but it generally works." When I read these frivolous cases in books selling asset protection planning ideas, I always ask myself, "How representative is this?" My answer is, "I don't know. I have never found somebody who could tell me.

I haven't found any way to analyze it." But I believe, just because it makes sense to me, I've got to believe that yes, there are cases where if I were on the jury, I would disagree with the outcome. There are clearly those cases. Often I'm scandalized when I actually do follow a case closely, something that's in the news and I sit and I watch the briefings every day and I listen to the arguments and then the jury comes to what I consider to be the wrong decision.

I'm often really frustrated by that and it chips away at my faith for justice. But on these kinds of things, I still think 80% of your battle is won by simply paying attention to things. Go out to the property, look at it and say, "What are all the things that could happen and how do I do it?" Put in place an expectation of privacy.

That's what signage is about. That's what putting a gate up is about. That's what making sure that you lock the doors is about, etc. And if you'll do that, you'll probably put most of the things that you need. So I think first of all, that's the first step. Second of all, I think minimize the target.

One of the problems with rural property is simply it's going to be broken into. There is no lock that can keep someone out if they have enough time and if they have privacy. There is no lock, there is no door, there is no security system that can keep everyone out if they have enough time.

So most security thinking is simply designed around slowing people down for enough time either for an alarm to activate and for law enforcement to arrive or slowing them down and making it frustrating enough that they're too worried about getting caught and so they leave. You know, the classic example, why do you go and buy a gun safe and put one in your basement to stick your guns and your passport into?

You can get into a gun safe and the actual laboratory ratings are rated in something like five minutes, ten minutes, fifteen minutes. The standards, when you actually look at the ratings and you look at a rated safe and you realize, oh, this safe is designed to keep two guys with ordinary tools out for ten minutes and thus it gets a level two rating.

Forgive me, I can't give all the numbers off the top of my head, but I have looked at all the ratings. And you say, wow, that's ridiculous. But still, it's valuable because if you can keep two ordinary guys out with ordinary tools for ten minutes, that gives ten more minutes and it dramatically cuts down on the amount of time that stuff is stolen.

And so with a rural property, that problem comes into high relief because the thing that people have in a rural property is time and privacy, which means that you want to be very thoughtful about theft and what you have out there. If you had abundant personal property held at this location, then you need a caretaker.

You need some way to have eyes on it. So if there's a neighbor who can't see it with 109 acres, perhaps not, you just need to be careful and make sure that nothing valuable is out there. If there is anything valuable, it needs to be hidden and concealed more than secured.

Security is good, but hidden and concealed is better. And so you can strategize depending on the property. You can strategize different ways to do that. There are ways to conceal things in a home, ways to conceal things in a barn, ways to conceal things, etc. So I don't want to go too deeply into that.

Just recognize that there's a good chance that that stuff is going to be taken. Now, holding it in an entity. There are many good reasons to hold real estate in an entity. Asset protection planning might be one, but it will depend on the state. I think, is this property in Texas?

No, it's in Arkansas. Arkansas. So I'm just not competent enough to discuss the state level discussion of property in Arkansas. I think because, if I remember from a previous call, you own this with family members. I think here there is a good case for asset protection because you can put in place multiple owners.

And so you can put in place a trust, depending on what your local legal advisor would recommend to you. Perhaps a land trust, perhaps a land trust mixed with an LLC in some capacity. I don't know the details on Arkansas law, but I would put it into an entity held and then distribute the shares among you and your co-owners so that there is multiple ownership.

And so now you have a much higher protection from liability. And then just make sure that the insurance is in place properly as well. So is there going to be anything airtight? No, there's nothing that's airtight. But I think that 80% of the battle is just go out on the property and make sure that the stuff that should be done is done.

And then put in place proper insurance protection with liability insurance and then put it into ownership. And that's as good as you're going to get. Yeah, that's actually exactly what I did the very first weekend after we closed. I went down there and locked everything up and put the signs up and did that kind of thing.

So I guess I'm 80% of the way there then. Yeah, and then just fix the stuff. Do you have an opinion on how much personal liability is reasonable? How much personal liability insurance protection? I think you would answer that depending on the value of the property and then the value of your other assets that are not protected otherwise.

So if you've got a million dollars sitting in cash in your personal bank account for whatever reason you have that, then you're well served by increasing your liability insurance across the board to a high number. If you got a million dollars sitting in a 401k, which is already protected from liability and no cash assets, then now I think you can be a bit more modest with your liability coverages.

So I would solicit the advice of a local property and casualty insurance agent and I would look at – I'm not trying to just backstep it, but there's no other answer – and I would look at my assets and say what's exposed and then what makes sense to protect based upon the amount of assets that are exposed.

All right, perfect. Thanks, Joshua. Yeah, my pleasure. Congratulations on the property. I think there's a lot of cool stuff that you can do with a rural property and a lot of stuff – there are a lot of good ideas. What I would do is ask around in the prepper forums.

There's some great prepper forums online and talk about the situation and see what ideas people have come up with for how to secure things at a rural property. Everything from totally underground shipping containers and bunkers and all kinds of stuff. You can put in place stuff to protect whatever it is that you want to have out there.

But I think there's a lot of ideas. Just be aware of the fact that a lot of times when you have a rural property, there's going to be people wandering on it, right? Your local 15-year-old boys are going to be on the property. Most of them aren't there to cause trouble, but they're going to check it out.

And if there's something really juicy looking, they'll check it out. And if there is something that someone knows is of value, then they have time and privacy, which means they ultimately can gain entrance. So anything that you put out there, you want to do it with that thought in mind.

We go to James in Georgia. James, welcome to the show. What can I serve you today, sir? Hey, Joshua. Really appreciate the good work that you do. And I had a couple of questions. I can start with the first question, maybe if we have time to go to the second.

The first question that I have is around saving for retirement now versus saving up for a house. And a little bit of context for you. I'm 27 years old. I make about $80,000 per year and spend about $40,000 per year in after-tax expenses. And then right now, in terms of how much I'm saving for retirement, I max out a Roth IRA each year, about $6,000 a year.

And then I also have an HSA that I've also been maxing out. And then I do about 8% in my 401(k) enough to get the employer patch. And then I also have $15,000 emergency fund, and then about just $100,000 in relatively conservative investments. And my goal is to get a down payment of $150,000 saved up within the next couple of years as my girlfriend and I are on the track towards engagement and marriage within the next couple of years.

How much of a house do you want to buy? Yeah. Just thinking in my area, probably about half a million. And let me look here. Are there any more details that I need? Yeah, I think that's about everything number-wise. I guess the question is, do I think about maxing out retirement savings now or saving a little less for retirement and save up more for the house quickly?

And then how do I really go about saving effectively in terms of what investments to look at, where to park the money, that sort of thing? Are you stable geographically? Do you think that you might move away from where you are in the future? I think we both want to stay in the Georgia area, Atlanta area.

Can you buy a house with a smaller down payment? Probably so. I think that's an area that I need to do some more research, some more looking. So the question to your answer is not clear-cut. I'm sorry, the answer to your question is not clear-cut as I see it.

There are good arguments to make on both sides. So let me present a few of those arguments to you and then try to draw a couple of conclusions. The first thing is, I think you have to seriously question, is a house useful to me at this point in life?

And some people find a great deal of joy and value in being a homeowner. Some people don't. So that would be the first thing is, are you the kind of person who sees yourself gaining tremendous value in being a homeowner, especially a homeowner of a $500,000 house? I understand people who are like that.

I know people, they're real homebodies. They love to use their home. They use their home frequently with entertaining. They just enjoy being in there. I think there are some lifestyles where that makes a lot more sense. I don't know if you work at home, if your girlfriend works at home.

I observe that a lot of people buy houses that they barely use. There are many people, many young couples who own a beautiful home and they go there and sleep and much of the time they're not there. They might entertain once a month. They spend their days at jobs, at offices.

On the weekends they're frequently out with their friends and sometimes you wonder, is this really worth it? There's a big difference. My wife and I married at 26. There is a major difference in the usefulness of a house for us today with four children in our mid-30s compared to at 27.

Now when we bought a house, I bought a house when we were 27, so right at your age, it felt like the last checkmark on that life success chart. I was glad that I bought it, but then when I sold my house, I was glad that I sold it.

I can go back and forth. I do continue to believe that houses are often overrated for a lot of people. Not everyone, but overrated for a lot of people. When it comes to buying a house, one of the challenges is you're often buying more than you need at this point in time.

A young couple, let's say that you marry, you have a young couple, late 20s, you only need a house of about three rooms. You need a bedroom, a kitchen, and a dining room/living room. But often when you're buying a house, you're buying a house for future ambition. It's just kind of an inefficient approach, right?

So you wind up buying a three or four bedroom house and it's an unnecessary expense. So there are a lot of good reasons not to buy a house now and just simply to wait. If you go back in the early part of the annals of Radical Personal Finance, I've done multiple shows on should I buy a house or should I rent?

And in many cases, the raw costs of buying a house are simply higher than the raw costs of renting, if you're willing to rent a simpler property. And I'm not at all scared of not owning a house. Now, the flip side argument in favor of home ownership is there are many good advantages to owning a home, especially for those who are geographically stable, if you can do it at an early age and if you can stay put for a long time.

If you could buy a house at 28 or 29 years old that you then were in for the next 30 years, and if you bought a house that was suitable for your anticipated family structure, etc. locking that in at today's prices, setting it up on a fixed rate mortgage means that your financial life is abundantly simple.

If you have money saved, you have a job, you have a house and you pay off the house over just a normal time period, it's hard not to become wealthy in the United States if you do that. And for many people, their own home is one of their best investments.

In fact, John T. Reid, the real estate author, just wrote a new book called "Why Your Own Personal Residence Is the Best Real Estate Investment You Can Make". I haven't read the book yet, I just ordered it, it hasn't arrived yet. But here's a guy who made his career as a real estate investor followed by a secondary career as an extremely prolific and well-respected real estate author writing something like almost 20 books on real estate, various aspects of real estate investment with piercing clarity.

And at the very end of his career, he owned no rental properties and he wrote a capstone book basically stating why your own personal residence is your best real estate investment. And I'm familiar with a few of his arguments because I watched him develop the book. I look forward to reading it because I think there are good arguments to say that hey, even if you don't have the perfect house, even if you just have it for a few years, owning your own house can be a really productive thing to do financially.

I could go more but that's enough on the back and forth. So I'm not going to answer that question for you today. What I will tell you is the way that I would negotiate this tension you feel between retirement savings and house savings is simply I would put in place a smaller down payment.

I see no reason to make large down payments on personal residences. I see every reason to pay cash for a house if you want to and if you can. I also see every reason to put the smallest down payment possible that allows you to get good financing terms. But I see no benefit in putting large down payments in place.

And so if I were in your shoes and if upon reflection I decided we do want to buy a house, I would put down the minimum down payment necessary for us to get good quality financing, modest interest rates, etc. across the board. I would very seriously consider simply doing an FHA loan and putting down quite literally the minimum using an FHA loan.

That will come with some costs that you need to calculate, things like private mortgage insurance, etc. But I think that you will retain your flexibility career-wise, life-wise, etc. if you keep most of your money in savings and I believe that you should maximize your retirement account contributions versus money that goes into the home.

And the reason I say that is a few things. Number one, the United States of America has easy credit for homeowners and when people want to throw you hundreds of thousands of dollars at low interest rates and they want to do that secured by an asset with pretty good terms, a high degree of safety, I think you take them seriously and you consider taking their money.

When you do that, you compound that by putting your money into retirement accounts which saves you money and that money in retirement accounts is very, very safe from the protection from creditors. The amount of money you have paid down on the house does not affect your rate of return on the property.

If you put $5,000 down to buy a $500,000 house and that $500,000 house increases in value to $600,000, it would not have been a better investment if you put $150,000 down on the same $500,000 house. And in fact, it's far worse from a numerical perspective. So, most of the arguments are put down the minimum down payment on the house and keep your money in another place where it can grow and be productive.

And this makes a lot of sense for a personal residence where you're not depending on income from a tenant to pay it, etc. So, from an investment return standpoint, the argument is on minimal down payment and from a safety perspective, the argument is also on minimal down payment. Let's say that you put down $150,000 and your monthly payment winds up being $3,000 a month on the balance.

It would be a little high. Let's say it's $2,300 a month on the balance. But you have $0 left after you put down $150,000. Well, in that situation, you wind up with needing to make $3,000 every single month. But if you put $50,000 down, you keep $100,000 in reserves, and you have now a $3,500 a month payment, well, at $100,000 total divided by $3,500, you have 28 months of safety.

And so, I would keep $100,000 in my emergency fund, probably positioned inside retirement accounts, if I can get it in there. I would make my contributions to the retirement accounts every year, maximizing those, because every year that passes, you lose the ability to contribute to that account. Once this year passes, you will no longer be able to maximize those $401k.

You can maximize next year's $401k, but these $401k are lost. And so, I would maximize retirement accounts and buy the house with the smallest down payment possible, knowing in the future that I can always pay down more, and I can always refinance. But that way, I keep maximum flexibility, etc.

While keeping in mind that perhaps by purchasing a house, we're less flexible, less able to move for opportunity, more tied down. These things can be benefits, but I would consider those downsides to home ownership as well. Yeah, I think that that's a good book recommendation too. I think maybe a good follow-up is I really don't know the first thing about the real estate market.

So, what would be some good places to look to begin that education? So one of the beauties of that idea, the idea of just simply owning your own house, is you don't need a lot of education for the real estate market. And most of the real estate market is set up to serve you without education.

And so, it's actually quite simple. Now, I don't know how aggressive your goals are. I have also been an advocate for simply purchasing a series of homes, planning to live in them for a short period of time, and then rent them out as rental properties, the so-called Nomad Strategy.

I've recommended James Orr's book, O-R-R. He has a free book online that he published and a free series of lectures on this. Basically, the idea is you buy a house, plan to live in it for a year, and then after a year, you rent that house out and you go buy another one and you move into that.

And you repeat that three, four, five, six times, however many times, and then you quit and you just let your tenants pay down those mortgages for you over time. I'm an advocate for that as well. But you'll have to decide if you're willing to wait in and go for it.

And so, I think the key books that I recommend for people to start with, Read the Book is probably a good one. Again, it's on its way to me. He just got them published, printed and he has shipped them out. So, it's on its way to me and I look forward to reading it and reflecting on his comments.

You can read, I've been an advocate for John Shob's book called Building Wealth One House at a Time. Kind of a practical approach to say, "Hey, let's buy some rental houses." I've also been an advocate for, as I just mentioned, James Orr's book on Nomad Strategy. I think there are some other good books.

Brandon at Bigger Pockets published a couple of good introductory real estate books. John Reed has a good real estate book. I don't have one book for anything. I find that generally I buy five books on a subject, read all five of them or flip through all five of them.

Then I get a pretty good grasp of what the issues are and then I can narrow in on what my questions are and find the book that answers those questions. So, if you are open to that approach I think it's really good and I think it's a powerful. If you have a W-2 income and your girlfriend has a W-2 income, later your wife, one of the powerful ways to leverage that W-2 income is using the financial markets in the United States.

Banks love to lend to people with W-2 income. So, you can buy a house and just buy a house that you're going to live in and then turn it into a rental a year from now. You can also do multifamily, right? We buy a fourplex, live in one unit, etc.

So, there are many good strategies. Hopefully this gives you a taste of some of the options open to you and then if one of those strategies piques your interest then I'd be happy to discuss it further, maybe another call where we talk about it and say, "Hey, let's express this strategy to its maximum and see if it's exciting enough to you to want to go all the way with it." Cool.

That's a lot of good stuff to chew on. Thank you. Thank you all for listening to today's recording of Radical Personal Finance. I'm so grateful that you are here as you see. We're trying to do everything we can to get into it and be willing to talk about whatever it is that you want to talk about.

If you'd like to join me on next week's episode, go to patreon.com/radicalpersonalfinance. I will be with you very soon.