It's Friday and today, back from vacation to do 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.

Today is Friday, July 15, 2022 and today, after an extended break for a summer vacation, we are back at it with live Q&A. Open phone lines, call in, talk about anything you want. If this is your first time on a Friday Q&A show, welcome. We're glad that you are here.

These shows work just like traditional call-in talk radio has worked. You call in, you ask me about anything that you want, talk about any questions that you have, happy to talk about details of your personal situation, happy to opine on anything that you have questions on, anything you want clarifications, happy to hear any disagreements, anything that you want.

I don't screen the calls. Well, I don't screen the subjects of the calls. I do screen the calls in terms of publishing the phone number. If you would like to join me for one of these Friday Q&A shows, you do that by becoming a patron of the show at patreon.com/radicalpersonalfinance.

Search Patreon for Radical Personal Finance, become a patron of the show and that gains you access to the time and the phone number to be able to call in and join me on a Friday Q&A show. By doing it that way, it simply allows me to make sure that I have positioned things to not be overwhelmed with too many calls.

I try to handle anywhere from five to ten calls on one of these Q&A shows and if I didn't do that, I would simply have far too many. We begin today with John in Pittsburgh. John, welcome. How can I serve you today, sir? Hey Joshua, thanks for taking the call.

Welcome back. I had a question about opening a Canadian bank account. I thought it was going to be, I mean, pretty much seems to be the simplest, one of the early steps I can take to getting some money out of the US. But in calling around to the different banks I was going to go visit in the next few weeks, I noticed that a couple of them mentioned the same thing, which is that it's not possible to do a direct, once I have the accounts open, it's not possible to do a direct bank to bank transfer from the US to Canada.

Instead, you have to wire transfer the money. With that limitation, do you still think it's, I mean, it's probably still worth having those accounts established and set up, but it kind of takes away from some of the ability to do frequent transfers just to get them used to seeing the money going back and forth.

Yeah. Or maybe I'm just talking to the wrong banks. It is a limitation. So each bank will have a different system, but you're dealing with an international bank and the international banking system is different than what you're accustomed to with the domestic banking system. So usually you will do a wire over the SWIFT international transfer system.

And so you'll do a wire or a lot of times banks can take checks and you can deposit banks by, or you can deposit funds via a check. So it is possible to use a Canadian bank account for your regular banking, depending on the specific bank and depending on the specific features that they offer you.

So you want to ask them, but usually it doesn't make a lot of sense to do frequent transactions with an international bank account because of the increased fees due to international transfers. So usually it makes sense to have just a few transactions. And for example, at the most frequent, you might, again, if you have an account with check writing privileges, then you can write some checks and those will be cash based upon the terms of the banks.

You will find that because you're dealing with an international bank, if you're dealing with an institution that is skeptical about checks, and it just kind of feels like we're in the 1980s here, you do have an international, it's an international account. So you're going to have less acceptance with your check systems.

Your debit card will work fine. And so if you have a bank that has reasonable prices on international transactions, then the debit card can work fine. But usually if you were going to keep most of your money in an international account, then you would do something like keep your money there and then just pay your credit card bill once a month from it, things like that.

What you can do is check to see if your bank will accept paper deposits. Every bank will be different. Sometimes, for example, you might have some of your checks sent there. Sometimes you can just simply use the automatic bill pay function from your US based account and send a check that way that can minimize the fees.

But you are right. And so I don't think it makes a lot of sense to use an international bank account for day-to-day transactions. I think it makes sense to use a credit card for day-to-day transactions. And then if you really want to use the account frequently and not just have it as a savings device, then go ahead and set it up with just to pay your, you know, pay your credit card once a month.

So it is the information that you have is correct and the specifics will depend upon each specific bank that you interact with. Okay. That makes sense. Yeah. And to be clear, the only reason I'm looking to have more transactions or more frequent transactions both ways was just for the sole purpose of just having them accustomed to seeing transactions going in and out, not really for day-to-day banking or anything like that.

So, yeah, for that reason, I think I'm just going to go with a pretty low-end checking and savings type of account that has pretty limited withdrawals and stuff before you start racking up fees. But if it's just for emergencies only, that seemed to be sufficient. So, and now that I can go to Canada, I figured I'd get that done.

Exactly. And just, and as always, be aware in the international banking space, you will incur significantly higher fees than you're accustomed to in the United States. Yeah, seems like it. So it's just, you know, a monthly account maintenance fee is an extremely normal thing in the space of international banking.

It's fairly abnormal in the United States, but it's an extremely normal thing in international banking. So monthly maintenance fees, various fees, the fees are simply higher in the international world, practically, at least in my understanding, on a global basis as compared to the United States. I still think that's a cheap price to pay for the services that you are getting.

But if you are very fee sensitive, then it will impact you and you'll want to minimize those fees just through prudent planning. I don't think you need to do transactions on a, you know, on a multiple transactions per month basis. I think the most important thing to set up is to set up your wire transfer systems.

If you're using a Canadian bank account as basically kind of a relief valve, a backup plan in case you had to get money out of the United States, then the key is just making sure that you know how to wire money, you know how long it takes, you have all the information handy, so you could call up your bank and say, wire $50,000 from my US account to my Canadian account, and that you know how to do it and you know how long to expect that settlement process to take, etc.

So you don't need to, of course, start with 50 grand. The key is just go ahead and practice going back and forth so that when the time comes, if you ever needed to do it, that you can do it very quickly and you've practiced it. >>Yeah, no, that sounds good.

I appreciate that. That's exactly what I was going to do. Just put up a minimal amount that gets me, you know, semi-free checking accounts and probably open up one for both me and my wife. So we both have some options there. >>Yeah, the magic number is to have enough money in the account that you don't wind up incurring fees based upon the account balance, but to have, if you want to minimize your reporting requirements in the United States, to keep less than $10,000 outside the country so you don't have to file the extra disclosure forms.

It's fine to file the disclosure forms, but if you keep less than $10,000 total outside of the United States, then you can minimize those forms. We go to Lucas in New Jersey. Lucas, welcome. How can I serve you today, sir? >>Hey, Joshua. Thanks for taking the call. I'm underway on the Mexican temporary residence process, and so I'm pretty excited about it.

I got the temporary visa, so I found out part of that is going to Mexico to actually get the card. And from what the agent was telling me at the consulate, there's some requirements in there about time to renew the card within, I think it was 55 days before expiration to get it to the three year.

But she also mentioned that it would be difficult to say at this point how long that process takes to go from the temporary residence visa to the card. So a little more complicated than I initially anticipated. And I know previously you had recommended using lawyers in the local areas where you're planning to do any international planning.

And so, one, do you still recommend that, using a lawyer for immigration purposes, even for Mexico, which is pretty simple comparatively? And two, are there any resources that you've used to find international services like lawyers, accountants, things like that? I'm a little sensitive to hiring someone for a service like that who I haven't vetted, and I'm not sure how to do that internationally.

Understood. So, the answer is, so just to clarify, at this point you have gone to the consulate outside of Mexico, you've received the little paper sticker into your passport saying that – Correct. And now you need to go to Mexico for the CANJE. Is that right? Correct. Okay. So, yes.

So as I've said, in most things you can do most of the stuff yourself. Most countries have some kind of system that you can go on their website, you can work your way through, you can set the appointments, and you can do most of these things yourself. So you don't need to hire lawyers in the world of international immigration.

You can do it yourself. My experience, having done it myself and having hired lawyers, is that immigration lawyers or immigration consultants are worth every penny in terms of minimizing hassle and making stuff easy for you. So when I went to Mexico, I speak Spanish, I'm perfectly fine, I could have gone and figured it out, but it's just so much easier to use a lawyer who says, "Show up on this day and you show up, all the papers are signed, you show up, they walk you up to the immigration official, you sit down, they walk you up to the immigration official, the appointments are set up, the official has all the papers, everything's taken care of, you sit there, you walk out ten minutes later and you're done with the whole thing." And that's worth so much more than trying to navigate the world of bureaucracy, especially in Latin America.

There are some places where the bureaucracy is fairly streamlined. So can you do Canadian Express entry yourself? You can. I still think you should use a consultant, unless you're totally broke. I think it's worth your time just to use a consultant, but you can do a lot of it yourself.

But if you compare the Canadian system versus the Mexican system, the Mexican system is so much more... the bureaucracy in Latin America is really, really intense. And so basically what you pay for with a lawyer or a consultant is to make your life easy and to make all of your planning easy.

And my experience, again, having done it myself and having not done it myself, I have promised myself that going forward I'm generally just always going to use a lawyer. Because when I compare my experience with... I've done two programs with lawyers and consultants and I've done one program myself.

When I compare my experience in those areas, it's just night and day better with a lawyer. So yes, I do still recommend it. And I can't tell you how to actually navigate the bureaucracy yourself if you want to do it, because it will depend upon a state by state basis, a city by city basis, and even an office by office basis.

And it's very difficult to figure out what to actually do from the internet. You and I are generally fairly accustomed to doing everything online. But although there's been major modernization in many of the international immigration programs that you can do more things online, and in fact they'll often require you to do things online, right?

I'm sure the Mexican consulate required you to establish an appointment online and all that stuff online. But when you try to do it online with systems that aren't fully self-explanatory and you're trying to do it in a second language, and you're trying to interpret what the second language means in a legal context to figure out exactly how to do it, it is complex.

So the answer to question number one, do I recommend a lawyer? Yes, I do. If you hire a lawyer, right? I've had Miguel from San Miguel Legal on. If you work with him, Sanmiguel-legal.com, or not, sorry, not Miguel, blanking on his name. But if you hire him and his firm, basically you send him all the stuff, he arranges everything in advance, you tell him the day that you're going to come to Mexico, you show up in Mexico, you go to the office, his team meets you there, you basically need to be there for two days in essence, and everything is just handled.

And that makes the process really, really simple. And that's why I recommend it. I think time is money, and the hassle is pretty intense. Now, if you were, and this is clearly not you, but if you were 22 years old and you want to live in Mexico, and you're actually in Mexico, and you can go down to the office and you can talk to a person and they'll give you a brochure and they'll say, "Here, here's how you go through the brochure yourself, step by step." Yeah, you can do it yourself, totally.

So I want to be clear, it is totally possible to do it yourself, but it's just harder to do yourself not being physically in the country that you're trying to accomplish the immigration process for. Number two, how do you find international services? I'd say the two common ways, number one is through a referral.

If you know someone who has done something, has been happy with their service provider, that's usually the number one way. So when I make a referral, sanmiguel-legal.com, I'm pointing you and saying, "Hey, this is a good firm, they do a good job, reach out to them, see if you can get in touch with them." That's the number one way.

So if you have a friend of yours who's done it or you know someone who's done it, then that's a good way to get a referral. Or number two, I think it's perfectly fine to go with a firm that advertises their services in this way. There's not much of a vetting process necessary for this kind of thing, right?

This is not like you're hiring a lawyer to defend you for a murder trial, where you've got, that's a much more difficult thing to do. This is pretty much a, what's the right word, an administrative process and it doesn't require a significant, it just requires experience. So if you find a firm that advertises, that they say, "Hey, I want to do Panama," and you do a web search for Panama immigration lawyer, you'll find all kinds of firms.

And if they just feel legit and you talk to them and they sound legit, I think that's good enough. What you can simply do is you can protect, you know, search for reviews of course, but it's a fairly straightforward business and you'll generally make an upfront payment of some kind and then you'll pay the balance when the services are rendered and you'll be able to figure out whether the services are actually being rendered properly.

So there's, it is harder to do due diligence, but if an outfit is advertising their services, they're holding themselves out as doing this work with a website and they are maybe actually advertising somewhere and it feels normal, I think that's good enough. I'm not aware of this being an area of widespread fraud.

Now it is true that you will generally have a different service standard with kind of local firms, right? So one of the classic things is, let's say you go into a totally new country and you say, "I want to hire a lawyer." Well you'll find that you're going to get a different service standard if you just kind of hire a guy because his shingle out front says lawyer.

But the amount of work someone puts into their website is a good indication of their stability as a firm. So I've hired four lawyers in the international immigration affairs on different things and I've just done it based upon, if I had a referral I've used that and I've done it just based upon personally their website, finding them with a web search, saying, "Hey, this feels right," and going with it and haven't had any problems.

>>JAMES: Okay, great. Thank you. I may reach out to San Miguel Legal and ask for referrals in certain areas that if I'm going to be spending a couple of days in Mexico to do this, I'd like it to be in an area that is particular to my interests. So I'll start with that as a referral process.

I really appreciate it. Thank you. >>TREVOR: My pleasure. All right, we move on to Trey in Texas. Trey, welcome to the show. How can I serve you today, sir? >>TREY: Hey Joshua. So I made a pitch to my wife two nights ago about her potentially taking a couple of years off from work and staying home with our one-year-old and the potential new kids to come along during that time.

And then the very next day you dropped a new podcast that talks about how important it is to protect your income. I thought, "Uh-oh." So I kind of wanted to talk through that with you, and I'm happy to share numbers if you want. But how do you kind of weigh those two things against each other?

And just to give you a real quick picture of our scenario. My income is more than sufficient to cover our lifestyle, assuming that we downsize from two properties into one, which is a perfectly reasonable change to make. And then, yeah, that's basically it. So I'm fully remote, and I think it would make a big quality of life improvement if we didn't have to deal with two jobs where she's actually at a brick and mortar job.

And we could downsize into one property for a few years, kids start going to school, then school district or whatever we're going to do there, based on that. So I think it's important to begin. My answer to your question is, I believe the analysis is done from a different perspective.

Financially speaking, I can't think of a scenario where I could argue to say that you're going to be financially... There is... I can, so let me change what I'm saying. In most situations, if you have a dual income household, and you turn that dual income household into a single income household, there's going to be a financial cost to that decision.

You're going to have less money coming in the door, and unless there's an offsetting ability to increase income, then it's simply going to result in there's less income, we may have a lower lifestyle, financially speaking, and we may minimize our long-term wealth accumulation. The only way where that doesn't work is kind of the classic high performer profile.

So if you look at when you have a family where someone is a very high performer, I always think about, I don't know, for whatever reason, years ago when I worked at Northwestern Mutual, I think he's still the CEO as far as I know, there was a guy named John Schliske who was the CEO, and he had six children, and he was the CEO of this huge insurance company.

It is not possible for a guy like John Schliske to be the CEO of a huge insurance company and to have six children unless his wife is a full-time mother. It's simply not possible. You cannot do it. You cannot maintain that much responsibility, have a C-level job, have a huge business or a huge job.

You cannot do that and also be a parent unless you have a wife, or I guess it could be either way, unless you have a wife who is taking care of your children and who is managing their needs. Otherwise, your kids are going to be a nightmare. It's just a disaster.

It's simply not possible. Now, does it make sense for, in that situation, again, I have no idea. Maybe I'm wrong. Maybe John Schliske's wife actually does have some high-flying career as well. I don't know that, but I don't know what I'm saying for a fact. I always thought about him in this example.

If you try to maintain two incomes, then you can't do it if you're parents. You could do it as individuals without children, but you can't do it as parents because the stress and the constraints of children are going to mean that you cannot deliver at the very highest level in a job.

If John and his wife were both trying to maintain these jobs, they would leave the house at six in the morning, they'd get home at six at night, seven o'clock at night, see the children for an hour, and they would have to hire literally everything done for their children and they would still get bad results because they wouldn't have any kind of relationship with their children.

Now, if John can go to work and his wife is able to make sure that the children are properly kissed and get their teeth brushed when they're going out the door to school, and then when they come home from school, she can help arrange the taxi services to get them to their events, make sure their homework gets done, make sure she's there to listen to their successes and their failures, etc., that division of labor can work out really, really well for John and for his wife, in my example.

You can have John make, I don't know, $15 million a year, $20 million, I don't know, several millions of dollars per year, and his wife can benefit from a multi-million dollar per year income, and her division of labor is that she provides the warm, loving environment for the children, and John is there a little bit at night and a little bit on the weekends, right?

That's the common thing, and you see that. So if you go through the C-level suites of big companies and find high performers, I don't think you'll find high performers who are parents who are at the very highest levels who don't have a stay-at-home spouse who's able to take care of their children.

Just doesn't happen. So if you... so this is one of the big things. And again, I've had friends who I've watched go through this scenario. They're trying to build two careers, but they build two careers poorly because both people are struggling and they're trying to be good parents, they're trying to not, and they can't really get that extra...

they can't put in that extra work that's necessary to go to the very highest levels in the corporate world because they feel the intensity of their duties in their family life and in their personal life, their marriage relationship, etc. So if you can have the division of labor, sometimes that can free you up to really invest in your career at a very high level and you can make it to the top levels of management, to a seven and eight figure salary, you can build a business that's really big, etc.

Even things like travel. Travel is simply not possible. The kind of travel that's necessary for most high-level jobs, it's not possible if you don't have a full-time mother to depend upon to provide the stability that the family needs. You can't have two people managing ten days of travel per month.

It's not possible. So outside of that, I think we have to acknowledge that if your wife were to stop earning an income, that's going to be a decrease in the financial income for your family. Now is that something that you should do? I think it's very much kind of a matter of vision and lifestyle and a question of is there an investment into our family that can be made up for it.

So you can minimize the financial impact in some ways. So I will frequently help people do an analysis of a second income. If you have one income, let's say that your income is higher and she's still working but her income is lower, if you actually look and you say how much is it costing her to work, you can say, well, she's working, she's paying the highest marginal tax rate on her income, we have all these work-related expenses, etc.

Then you can mitigate and say maybe it's not as big of a loss as just her gross income number, but it is still going to be a decline. So you have to feel like you're getting something else out of it. You have to feel like you're getting a lifestyle improvement for you, a lifestyle improvement for her, a lifestyle improvement for your family, for your children.

You have to feel like you're getting some benefit from it that makes it worth the money. And that's my conviction is I believe, and my wife would affirm this if she were here, is that for us it's simply a lifestyle decision. Part of it is that I would not be able to do the things that I can do if we had to manage my job and her job.

Part of what I already said, so I'm focused on the deal I made with her is I'll take care of the money, I'll make sure that you're rich, I'll make sure that you have everything that you need for the rest of your life, you be part of my family and come along with me.

And that for her was not a high cost because she was never, my particular wife, never had a strong career ambition, she didn't have a career that was important to her that she wanted to build, etc. So that she was good with that. It was a good deal for her, it was a good deal for me.

But it's also a focus on in terms of the kind of family life that we want to have. We don't, we never wanted to have one child. Well one child you could do it, five children a little different, right? So you want to build a certain career and also we see it as an investment into our children.

So one major part of my goals in life and our family vision, a huge part of it has to do with building a dynasty. That's a very, very important component of my life vision is to build a dynasty and to impact and build the kind of family dynasty that I'll be proud of when I'm a hundred years old and the kind of family dynasty that will impact the world.

And I can't get that unless I put in place a system where I can see to the needs of my children in a really strong way. And so the investment, right now as I record this, my wife is doing Fun Friday with the children and they've done schooling all week, they've done all kinds of things and yet she's still there with them and she's training them and she's working with them.

We don't have a perfect family, we have many challenges, but she's laser focused on that and that's an incredible part of it. So if you look at the psychological problems that adults have and you trace them back, so much of that stuff is formed in childhood. And so when you look at it from an early education perspective, when you look at the values that are formed in children, you look at the vocabulary that is formed in children, you look at the academic ability that is formed in children, you look at the emotional security that is formed in children, those things are best formed with a close relationship with parents.

And if you believe that, if you're convinced of that, that's part of your family decision, it's not a matter of a financial question, it's a matter of this is the lifestyle we want, this is what we want for our family. Now you do need to be very conscious of the cost, right?

If your wife stopped her job, it comes with a couple of big costs that make her very vulnerable. Number one is if she stops earning an income, she's entirely dependent and your family is entirely dependent on your ability to earn an income. And so you need to make sure that you are a man who is worthy of that responsibility.

You need to make sure you have a decent income and that you have a strong growth potential for your income. You need to make sure your income is properly protected for her, disability income insurance, life insurance, prudent financial management. It will come with a significant cost for her in her career, depending on what her vision is.

If she's a mother and she takes six years out of a career and she comes back, she will from a career perspective, she'll be behind her peers who didn't take time off out of the workforce to raise children. If she is a longer term mother and say she takes 10 years out, it'll make a huge difference in her lifetime earnings, it'll make a huge difference in her relevance in the career field, etc.

So there are substantial costs for her if she made that decision. You have to be convinced that those costs are worth it and that this is something that you want as a couple and that you are committed to and it's part of your lifestyle. For me, I've never imagined it any other way.

I wouldn't do it any other way. I love, as I have stated publicly for it, I love the lifestyle that comes with the decisions that we have made. But it's not something that is without cost. It very clearly is and it needs to be something that's your conviction and her conviction and kind of your shared vision as a family of what you want and the kind of lifestyle that you want and not just, "Oh, okay, kind of a random thing." I think it's a pretty good deal for her if you're the kind of man who could do it.

My wife has a great deal. It's funny, I posted a tweet, Alex Hormozy tweeted out, I think he said something like, "Marrying rich is the least discussed pathway to passive income." I've often thought about that. It's kind of funny, but we don't discuss it. I've often thought to myself that marrying rich or marrying someone who wants a stay-at-home wife is one of the fastest paths to financial independence, a financial independence lifestyle that it can be.

It's hard to suggest that as an actual course of action given the various risks that are involved. But I think it's a pretty good deal. My wife, ever since we had our first child, she calls me money bag sheets. When she needs money, she comes to me and she's got enough.

Any money she has, she has no budget. She can spend whatever money she wants. She just simply has to maintain and help pull the home together. We work hard to make sure she has the support that she needs. I don't intend for her ever to have to earn income for the rest of her life.

It can work into a really great teamwork scenario, but it is one of those things that you've got to be very careful in the modern world where there's a very big difference in vision. You have to recognize that if your wife does that, it does expose her to some significant – it makes her vulnerable, more vulnerable.

You have a responsibility to honor her and to protect her in that and to make sure that she's going to be better off if she does that than not. This is where it's especially difficult. Marriage, family relationships are very difficult for men and women in 2022 because she has to think very carefully about making herself vulnerable in that way and come to the decision.

That was kind of a deep question. Let me say one more thing and then I'll let you respond. I would make all those things independent of the comments that I said about maintain your income, etc., unless there was something unique to your situation about it. The reason is – for example, let's say that you have a bunch of debt and right now you're trying to get out of debt and you're trying to figure out how to solve that and you're five months away from getting out of debt.

Well, yeah, keep her income for the next five months so you can get out of debt. But in terms of macro conditions of the economy or what might or might not have in the next few years, I don't think we can plan those things with enough certainty to actually make personal decisions on them.

So if I knew recession was coming, would I delay marriage? No, just get married, right? If I knew recession was coming and my wife wanted to be a stay-at-home mom or we wanted to have a baby, would I delay having a baby? I wouldn't. I would just have a baby.

How do I know recession is coming? How do I know? We don't have any clue, any certainty of that. And these things, these lifestyle decisions are too important to rely upon what might happen in the future from a macroeconomic space. If I knew recession was coming, would I not go and change jobs or start a business?

In the macro scale, no. If I knew that interest rates were going to triple, would I go and start a mortgage business? No, I wouldn't. But would I not go and pursue a job? No, pursue it. You want to live your life and focus on pressing forward. And as long as you're generally in a good prudent space where you've got most of what you need handled, then I think it just makes sense to press forward and ignore the economy.

Great. I mean, I think that last little bit that you said about making the decision independent of any kind of forecast about what the economy is going to do, it's exactly where I was on it too. My phone shut off in the middle of it. I was outside in Texas and got a heat warning on the phone and it just shut off.

But so I'll go back and listen to the entire comment that you made. But just to address a few of the things there at the end, from a security perspective, that was one of my main concerns too. Just going from two to one, one is a lot closer to zero income than two is.

But I've had a really stable career for my first 10 years post-college with the same company that a promotion like every two years for the last 10 years. And the most recent one was like a month ago. So I doubt they're going to lay me off. And then we've got just a stupid amount of cash that we've just held for no real reason.

I thought I was going to buy some kind of income property and just hasn't come up. And so we've got like 200 grand in the bank right now. But if we were to go through with this plan, we would sell one of our homes, move the other one, and we'd have like 400,000 in cash, which is like five years worth of cash living fat.

So there's just really not a lot of financial risk in my mind, I don't think. Yeah, I don't think you have any financial risk from this. The biggest risk would be for her. In terms of, and that's what I spent some time talking about, is her career something that's very important to her?

Is it a sacrifice for her to leave her career? Or is it just a job? Because if it's a career that she says, I've got this 30-year vision of where I want to be in this career 30 years from now, the biggest cost to her if she were to leave her job is not the income.

The biggest cost to her is five years of lost advancement and experience in the career. And so you want to weigh those costs because those are big costs for her. And they need to be carefully considered and make sure that, yeah, this is something that she wants and that she has a vision of.

And it's definitely not something you, it needs, I think it's as a husband, it's your job to share a vision and to share what you see as a family, right? And say, hey, here's my proposal, here's why I think it would be a good idea. But especially in today's world, based upon the situation that she's in, the advice that she'll hear, what her girlfriends will say, et cetera, this is something where she needs to be clear on the benefits and the costs and be sure that this is something that she wants and it's definitely not something that you would force her to do.

That would be a major mistake. >>Trevor: Sure. Totally appreciate that. And that would change everything if she had a career that she was pursuing and had some kind of 30 year vision of becoming something, but she loves her job. She's a professional, she's a pharmacist, she loves what she does.

She's stated many times that she does not want to be in management. She wants to be as sort of a staff type pharmacist, which I think you can go back and get at the end of being a stay at home mom whenever you decide to. >>Dave: Yeah. And in that case, I've worked with a lot of pharmacists.

Y'all just want to look and see, is there a way that, is there something where she does, you know, one or two shifts every two weeks where she can keep her connections alive, keep her head in the game, keep all of her licensing current and make a little bit of money and just have a little chance to be out of the house, a chance to do something different.

I think that's one of the things that is often challenging is simply because, so on, like I'm a stay at home dad, so I'm super in touch and in tune with this stuff because of how involved I am with my children by design. Having a job to go to is a wonderful relief from family pressures.

It feels so easy once you have been, it feels so easy to go to work once you've been a full-time father or a full-time mother because it's just an easy thing. You go to work, you come into your job, eight hours, 10 hours shift, whatever, you're done and you go.

And so having a little break from your home life is I think very important. And traditionally, this has generally been provided with community. You have a community where you send your children to school, you have mom can come over and help, you have neighbors, children can go play outside, etc.

One of the things that I think has happened in 2022, meaning just in our current day, is that it's actually become more difficult for you to be a full-time parent because the pressure is much more intense. And here's what I mean by pressure. Number one, parents find themselves, at least in my observation, with far less community than was once available.

And the community that is available is a very structured community. So if you went back 100 years and you were a new mother and you had a baby at home, it was common that in your block where you lived or in your apartment building or you had neighbors around that also had children.

But for various reasons, number one, one of which, meaning that we have many fewer children in today's day than we've ever had, is just you don't have that many people in your local area that have children. You can go to the suburb somewhere and yeah, there are some children, but there's not, in a row of 15 houses, there aren't five other mothers with babies.

There might be one other mother and she might have a three-year-old and not a baby. So there are just far fewer families, far fewer children. And then the places that you meet the children, we don't socialize much on a neighborhood basis or on a close geographic location basis. So maybe she goes to a mom's group at her church, but now that's drawing moms from all around a 20-square-mile area.

So if she's going to go and take the children and someone's going to babysit for her so that she can have a little break, she's got to make it a whole affair and a whole event, right? Got to load up the child, make sure we have the bag all packed with everything the baby needs, and then go over to Suzy's house and drop the baby off, and then I got my one hour and go back.

It's just not the same kind of thing of a break as when there was more of a neighborhood structure where you had other parents with children and they're physically close. In addition, we have in the modern age adopted very different standards for what is quality parenting and what is appropriate parenting versus our forebears.

So today, my wife and I very rarely are our children out of our sight. Very rarely are we ever physically apart from them, because we have all kinds of worries, right? We worry about molesters, we worry about them getting hit by a car, we worry about all this stuff, and we're constantly viewing everyone around us with suspicion.

"Well, is that person a closet pedophile? Is that person a..." You have all these fears and concerns that previous generations just didn't worry too much about. Now, should they have or should they not have? Obviously, they should have worried more in some cases. In some cases, we're a little bit overprotective.

But even though I'm into the concept of free-range kids and having your children have opportunities and be tested, but you still are super careful. Where let's say you went back a hundred years, a mother may have said, "Kids, get out of here. It's two o'clock. I don't want to see you until dinner time." And the children go out and they're gone for three hours.

That today is considered a form of neglect or abuse. And so parenting is in some ways a lot more intensive than it once was. I don't want to paint a one-sided picture. There are many ways in which parenting is much easier than it has been in the past. But I do want to acknowledge that these things contribute to make it difficult.

And these things contribute to making the life of a full-time mother or a full-time father pretty intense. And so having a break, having a day or two every two weeks where you go and do some shifts at the pharmacy, if you guys can figure that out with appropriate childcare, with the two of you working together, I think that can actually be something that is a big lifestyle improvement for her where she maintains her sense of professional capacity.

She maintains her ability to say to others, "Yeah, I'm a pharmacist." She maintains her connections. And then if she decides she wants to go back to being a full-time pharmacist in the future, it's easier because she's still visible and she's not coming in out of the cold. Dr. Tom Hanks Yeah, totally agree.

I made the same recommendation when we were discussing it the other night. You could go on to get a PRN job at a hospital or whatever you want to do just to keep your foot in that world if you want to, but you wouldn't have to. It's kind of up to her.

Dr. Justin Marchegiani Yeah. And the good thing about this is that none of this stuff is—especially with her being a pharmacist, she's highly employable, I would think, and so none of this stuff is permanent, right? If you guys try it out as a family and realize this isn't working for us, you can always make a change.

It's not hard to get—it's not hard to move it back. You don't have to—you don't have to have the next 20 years planned out today. Just next year or two and certainly you can afford it. If anything, it could be a nice sabbatical for her and an extended maternity break, which I think is a really welcome—really welcome thing.

Dr. Joshua Seifried No doubt. Yeah. Appreciate it. Thanks, Josh. Dr. Justin Marchegiani Yep. My pleasure. Alright. We go to the great state of Utah. Welcome to the show. How can I serve you today? Dr. Joshua Seifried Hey, Joshua. I have a pretty simple question compared to the last couple ones.

A few weeks ago—well, I guess probably a month and a half ago, we had talked about a Vanguard Lifecycle Fund and some people that were holding it in a non-taxable account and they got stuck with a big tax bill. And that episode you had mentioned, you thought there were better ways to invest money than a life cycle fund that could provide a little bit more return.

And I'm just curious to see if you'd maybe elaborate on that, on some options other than a life cycle fund for a non-taxable account. Dr. Justin Marchegiani Sure. So, at its core, my opinion is simply people overestimate the value of bonds in their portfolio and underestimate the value of stocks.

And life cycle funds generally operate on a principle of significant increases in the percentage of bonds in the portfolio as compared to the percentage of stocks. So let's begin—keep it very simple, but let's talk a little bit about modern portfolio theory. So in modern portfolio theory, the idea is how can we design a portfolio that gives us the maximum return based upon certain levels of acceptable volatility.

Notice I'm using the word volatility. Usually we'll use the word risk, but by risk we mean volatility, ups and downs in the market and ups and downs in the portfolio. From a retirement planning perspective, as we get closer to retirement and as we are in retirement, generally speaking, because we need more money from our portfolio, we're increasingly less willing to accept volatility.

People get nervous. If they've got $2 million to retire on and they got a 25% market drop and all of a sudden they wake up with a million and a half dollars in their portfolio, they get super nervous about that as they should. And so modern portfolio theory purports to create the most efficient portfolios for every level of accepted volatility.

And so the highest returning portfolio will generally be an all-stock portfolio. But the remarkable thing about modern portfolio theory is that they've proven that if you just have a little bit of bonds, yeah, maybe, maybe you give up a little bit of total risk—excuse me, a little bit of total return, but you gain a big dampening effect with less volatility.

So a portfolio of 20% bonds and 80% stocks doesn't return that much less than a portfolio of 100% stocks and you get a good dampening effect. And then there's the curve, right? The efficient frontier of how much volatility are we willing to accept. And you go back to the 60% bonds and a 40% stock portfolio.

So this is modern portfolio theory and this is what portfolios are built on. And that's what a lifecycle fund generally does. It says, "Okay, we're going to start you right now with an 80/20 stock to bond ratio and we're going to move you steadily towards a 20/80 bond to stock ratio.

That way if you're 80 years old, we think that 80% of your money should be in bonds and 20% in stocks." So my complaint about that personally is simply this. I don't buy that that's the right move for most people. And my arguments are simply these. Number one, volatility is not generally a problem unless you've done poor financial planning.

And so retirement planners are usually facing a constraint that the client says, "How do I get the most return out of my portfolio possible because I've just saved barely enough for retirement? And also that income has to be totally stable." That's a hard thing to answer, right? If you say, "Here's $2 million.

I want the maximum income and I'm not willing to accept any ups and downs in my income." You put a planner in a tight spot and the planner is generally going to take a fairly conservative approach, develop a conservative portfolio that has the highest probability of returning that stable income.

But what if you went to the planner and you said, "Yeah, I'm totally willing to change my spending from time to time if I had to. I just want to have a portfolio that gets as big as possible." Well, you wind up with a different portfolio. So all of traditional financial planning that creates these portfolios along the efficient frontier is built upon the mathematical proposition that you have to have stability of income and thus you want to maximize the return from the portfolio measured by stability of income.

That's the underlying assumption. If you take that assumption out, you could make something different happen. And so it's kind of like this, right? Let me use an example. If you came to me at 60 years old and you said, "Here's $2 million and I need as much income from that money as I can get every single month and I have to have a stable income," you would get a different portfolio than if you came to me at 60 years old and said, "I'm 60 years old.

I'm never going to spend a dime from this portfolio. I want to leave as much money behind to my children and grandchildren as possible." Does that make sense that you would get two different portfolios based on those constraints? Yeah, it does. Okay. So which of them would create the higher return?

Well, almost certainly, again, I have to say almost because we don't know what the future and past performance doesn't necessarily indicate future performance, but almost certainly any analyst who looked at that would say you would have far more money in portfolio B because you just said, "I want as much money as possible when I'm 90 years old." And you would generally in that scenario put the money all in stocks because you don't need the stability.

You don't need the volatility. You need the total return. So this brings me to point number two. So point number one is the model is constrained by a presupposition. The presupposition is I need stable income to last and I need to maximize the income from my portfolio and need it to last for the rest of my life.

So point number two is this. I believe that the reason stocks outperform bonds is quite simply that owners get richer than lenders. Owners of companies get richer than people who lend money to companies. And at its core, that's the difference between stocks and bonds. Stocks represent ownership in a company and bonds represent lending money to a company.

Owners get richer than lenders. And so while I certainly wouldn't make a forward-looking statement such as stocks always outperform bonds because it's not true, meaning we don't know the time period, but on the whole, I don't see how in a long period of time it would ever be possible for a bond portfolio to ever outperform a stock portfolio.

That's why bonds have lower returns because they're lending money to companies. And those are good and useful terms. Bonds are wonderful, right? If you're running an insurance company and you have to mathematically be certain that you can pay the claims of your insureds, then you're going to have a portfolio with a lot of bonds in it because you can get a good return with good stability.

But I don't want just a good return. I want a great return so I can maximize my lifestyle, which leads me to point number three. I believe that it's better and easier to train an investor to be comfortable with volatility than it is to kind of create... What metaphor to use?

I want to train an investor to be comfortable with volatility and then make sure that the financial plan reflects that rather than indulging the ignorance of the investor. Think of it like this. Use an airplane example. If you... Is it better, is it easier for you to build an airplane that will never bounce up and down in the air and the wings will never waggle on it?

Or is it easier to simply train somebody to say, "An airplane bouncing up and down in the air is not a big deal and the wings are wagging and wiggling because that's how metal works and that's just fundamentally how the physics of metal work." I remember one of the first airplane flights I was on with my dad and I looked out the window and I saw the wings wagging up and down.

I said, "Dad, isn't that a bad thing that the wings are wagging up and down?" I said, "Joshua, if the wings didn't wag up and down, the whole plane would fall apart because you can't create rigidity, perfect rigidity, and have something strong." The fact that the wings wag, that's just how it works.

For the rest of my life, it's always been normal. I explained to my children what airplane turbulence is. It's like we're just hitting waves. It's no difference. Then when you're on an airplane and the plane is bouncing up and down, it's generally not that big a deal. There can be, of course, indications where you drop a thousand feet in an air pocket or something, but it just doesn't matter.

It's just turbulence. The plane is built for it. This is how flying works. It's easier to educate someone about how flying works than it is for you to try to create some totally new technology where they can have a silky smooth flight and not see the wings bouncing up and down.

In investing, our job is to educate investors to be comfortable with volatility, an appropriate amount of volatility based upon their goals, but not to indulge the investor's ignorance and the investor's irrational fears of volatility. I would rather spend time educating—it's this classic thing with risk profile questionnaires. As a financial advisor, the way that you protect yourself from liability and the way the company protects itself from liability is to do risk profile questionnaires.

These risk profile questionnaires create a written record that the investor has considered the effects of market conditions on his investments. He's telling you, "Here's the kind of portfolio that's suitable for me." While you can push somebody a little bit, generally speaking, at least when I used to give risk profile questionnaires, I just gave them.

I didn't try to educate someone. I need to know what they say. But now here you face as a financial planner, let's say the person gives it back and they say, "Yeah, I'm not comfortable with swings in the value of my portfolio." There can be multiple reasons why an investor may not be comfortable with it.

One reason might be that the investor's budget doesn't allow for swings in a portfolio. "I've got $3,000 a month and I've got $3,000 a month of bills, and if I don't have $3,000 a month, I'm going to get kicked out of my house." You can't afford any volatility. But then the other thing is just the emotions of the investor.

It might be the kind of person who's just not comfortable with volatility. So let's say that somebody fills out an investor profile questionnaire. They hand it back to you as the investment advisor, and you see that they're not comfortable with the swings in the portfolio. What do you do?

What's the right thing to do? Do you just take them and say, "Yeah, you're not comfortable with turbulence on an airplane, so let's just make sure you don't ever fly." Or do you say, "Should I try to educate you to be comfortable with volatility?" And that's a really hard thing because I think it's generally the duty of a financial advisor to seek to educate that person to be comfortable with volatility, but that can come back to bite you because now you might educate the person into accepting a more volatile portfolio, then things go down, they freak out, they sell, and now you screwed up the whole thing.

So a lot of times you just kind of quietly accept it, and you let the client steer you instead of you steering the client because it just feels easier, and it feels like, "Well, I'm listening, and I'm respecting their wishes." Well, my goal is I want to educate the investor to be comfortable with volatility, and then I want to build a financial plan that accounts for it.

And so if there's no way in the world where you can have somebody with a 50-year investment time horizon, which we'll get to that in a moment, and them not be better off 50 years from now with owning a bunch of stocks versus owning a bunch of bonds. Next point, I've got to move faster.

People dramatically underestimate the risk of inflation versus the risk of volatility. They underestimate it. Inflation is a huge enemy with regard to investing. A normal 3% inflation rate is devastating to someone on a fixed income, let alone a 9% inflation rate. So the only way you can outstrip inflation is to have investments that are significantly outperforming it.

And so I believe that it's more important for an investor to maintain their lifestyle than it is to maintain their portfolio balance. You need the lifestyle. And so over the long time horizon, it's really important that we have a portfolio that's very tilted towards stocks and very non-tilted towards bonds.

Next point, people underestimate their actual time horizon. So if you're 50 years old and you're planning a retirement plan, I think you need to plan for a 50-year retirement. Certainly there's some people who will die at 70, but it's very probable that a significant portion of people at 50 today will wind up with a 50-year income.

And so you need the power of stocks. And so I'm continually trying to push people more into stocks and less into bonds for these reasons. So a retirement plan in a static retirement age-date fund that is systematically pushing people more and more into bonds is just antithetical to what I think matters.

And then the final point is this. Let's say that you're successful as a financial advisor in getting someone to invest heavily in stocks. And let's say that you have enough time for those stocks to do their work. Let's say that you get someone into a heavy stock portfolio, say at 55 years old, and then at 75, they're still in a heavy stock portfolio.

And let's assume that we've had good performance in the stock market. Well now, the person has far more money than they otherwise would have had if they had gone heavy into bonds to protect the volatility. And so now that they're richer, now they can actually afford to take more risk with stocks because they have a much bigger portfolio.

And as long as they don't need to maximize the income from the portfolio, the money can grow more. And so now we look at it and say, "Hey, you're 75 years old." But I would have no fear at all. Let's say somebody comes and says, "I've got $10 million in a portfolio.

I spend $100,000 a year." I would keep a 75-year-old, or I would at least want to keep, if it were my dad and he was 75 years old in that example, I would tell dad, "Dad, be all in stocks, 100% in stocks." Because now I'm thinking about what can the portfolio be worth when you croak at 100 versus what would happen if you went heavily into bonds.

There's no reason for you to go heavily into bonds. If you've got $10 million, you need to spend $100,000 a year. The stocks are fine. And so now you're richer because you took a stock portfolio instead of a bond portfolio. You're now richer. So now you can afford to deal with more volatility even though you're older and your whole family can benefit from the increasing growth.

So with the exception of somebody who needs a totally stable portfolio so they can maximize their income because they don't have enough money for retirement, I try to get people to move a portfolio more in favor of stocks versus bonds and ignore ever getting to the position where you've got a 60% portfolio in bonds and a 40% portfolio in stocks.

And then I try to solve with just good, what I call financial planning, meaning make sure you're flexible with your expenses and make sure you have cash on hand and solve the volatility problem with that and then educate the person to be willing to stick through during the difficult times versus the bailing on the portfolio because the market went down 30%.

So you said you were going to give me an easy question and it's not an easy question for those reasons, but that's why I say there's nothing wrong with a target date retirement fund but I don't like it. That's perfect. The airplane example is a good example. It's easy to understand.

So for someone who has been investing in life cycle funds, how's the best way to go about transitioning out of that to get away from a large percentage in bonds? Well, don't do anything because a random guy on the internet tells you to do it. That's first of all.

Make sure that you understand and it's for yourself because it's your money and you care about it more than anyone else's so you need to be more educated on it than anyone else's. So take what I've said and then do, you know, read a dozen books on investing and see if you still believe what I've said is true after you read a dozen books on investing and portfolio management at whatever level you wish to engage in that.

Then if you are sure about that, what you do is you sit down and you say, "What is my desired portfolio at this stage in my life?" And you always need to build a portfolio based upon your goals. What are my goals for the money? So if this is my 20-year money, you'll have a different portfolio than my three-year money.

So back to my example. If you're using a target life cycle fund as a college savings account for your 16-year old, that's not a wrong move. They do have funds for that but basically the idea is that having volatility with money that you definitely need to pay for your 18-year old's college, that's a good time to have money out of stocks.

So there's a reason why we say don't invest money in stocks that you're going to need in the next five years because we can't predict the volatility in the next five years and if we have a 30% market drop or a 50% market drop on the college money that you need for your 18-year old, that doesn't work.

So you need to apply your personal financial planning to your portfolio and put names and goals on your different funds. Then if you wind up with a portfolio and you say, "Hey, here's a million dollars over here," it's currently invested in a target date retirement fund that currently has a 37% exposure to bonds and I think what I'd like to do is actually move to say a 90/10 portfolio.

Then you simply sell the funds and you move it into new funds that will allow you to have your 90/10 portfolio split. Then you need to consider the tax consequences because some of these are in tax advantaged accounts and not. So you consider the tax consequences and figure out what those costs are and make sure it's still a smart move for you to do.

Then usually you'll locate your bonds inside of your retirement accounts and you'll locate your stocks outside of your retirement accounts to the extent that you have to locate those assets differently. Excellent. That's great. That's perfect. Good. Anything else? Yeah. So my wife and I kind of have accounts spread across a handful of things.

My 401k, my wife's 401k and then IRAs. Is there a good way to kind of keep track of those all together in terms of allocating a portfolio? Would you use one account for one specific part of the portfolio and another account for another part or would you do an even distribution of parts of the portfolio in each of those accounts?

If you will put the numbers down on a piece of paper of what accounts you have, how much is in them and then you put your goals down of what you want to own, why you want to own it, and then look at them, there's probably a fairly obvious way to set it up.

So that kind of question I can't and I'm not willing to answer in specificity here, but it'll probably be apparent to you once you sit down and actually just look at it. Having two 401ks and two Roth IRAs and two taxable accounts is probably not that big of a deal, especially when you're primarily owning mutual funds as you probably are in most of those accounts.

So the key is if you put them down, I am slightly sidestepping your question, but if you just write down your goals it'll probably be obvious. Let me just give you one example. If you said, "You know what, I want to have a portfolio that is, I want to put 80% of my money into index stock mutual funds, I want to put 10% of my money into bond index funds and I want to put 10% of my money into speculative accounts where I'm going to speculate on single stocks and I'm going to speculate on things that I'm interested in." Then you look at your portfolio and you've got $300,000 at your primary 401k, you've got $200,000 at your secondary 401k, you've got $50,000 in a Roth IRA and you've got another $100,000 in a Roth IRA.

Well the natural answer would be, and I didn't do my numbers right, I'm making this up on the spot, but you would say, "Okay, this $50,000 Roth IRA, this is going to be my speculative account. So I'm going to take this to a brokerage company where I can easily speculate, I can play whatever trades I want to play from this account and this is my play money account.

Then we'll go ahead and put our 10% of bond allocation into our secondary 401k because they've got a good bond fund available to us and then the balance we'll put in stock mutual funds across the other three accounts." So if you lay out your goals of what accounts you want and why and what your goal is for that account and then you look at what the options are that are available to you, it should be obvious.

It's obvious that you're not going to speculate in your 401k because generally you're not going to have access to single stocks. You're going to want that just to be one of your mutual fund accounts where they have a good fund, "Hey, here's a good index mutual fund." Whereas you put your speculation inside of your individual brokerage account or your Roth IRA with the brokerage where you can do the kinds of trades that you want.

So just put it on paper, write out your goals, put out your macro allocation and then meaning I want 5% of my money in gold, I want 5% of my money in Bitcoin, I want 10% of my money in bonds and I want 80% of my money in stocks.

Whatever your macro allocation is, then look at your more detailed allocation. If I want to do stocks, do I need to follow a more diversified plan? Do I want to put a total stock market index fund? Do I want to have a certain portion in the United States versus other countries?

And then follow whatever goal you lay out and look at the accounts through the lens of your goals. >>Joshua: Excellent. That's great advice. Thanks, Joshua. I appreciate your time. >>Trevor: My pleasure. Have a wonderful day and I believe that brings us to the last phone call of today. I'll just give you kind of my closing discussion here.

Obviously that same advice applies to any of us, meaning that the definition for what you should do with your money always is going to come down to your goals. Those goals need to be personal. So a goal of beating the market is irrelevant. A goal of having a certain amount of money to retire is relevant.

And I should have said this when I was answering the question, but there are reasons to minimize volatility. So there are good reasons where someone might say, "I don't want to take any volatility because maybe I don't need it." The same person with the $10 million and the $100,000 income, that person might not have any desire for the money, in which case minimizing the volatility might be a useful thing.

I don't think that a bond portfolio is by definition safer than a stock portfolio, at least a well-diversified stock portfolio, which is why I'm avoiding using the words risk and safe. I think it's just simply less volatile. And bonds have their own sets of safety risks, and so you have to be more precise and defined.

But the key is always going to be your goals. And if you're wondering what to do with your money, the answer is usually, in my experience, clarify your goals. And if you'll make your goals clear, say, "This is my goal," and then put those goals on a piece of paper in front of you, and then look at your balance sheet, then, or your income statement, or whatever it is that your financial document you're looking at, then if you compare your goals to your money, the answer to your money question will usually be obvious.

If somebody doesn't know what to do with their money, I don't spend a lot of time talking about what they could do. I try to focus on what their goals are. And if your goals are clear, then generally the next steps are fairly obvious. And that applies on the macro level, and it also applies on the specific account location level or type of particular assets that I want to invest in.

So if you're wondering about something, get clear on your goals, and then go back and tackle your financial question. Thank you for listening. If you'd like to join me on next week's Q&A call, go to Patreon, search Radical Personal Finance. I would love to have you with me next week.

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