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Visit yamava.com/palms to discover more. The holidays start here at Ralph's with a variety of options to celebrate traditions old and new. You could do a classic herb roasted turkey or spice it up and make turkey tacos. Serve up a go-to shrimp cocktail or use Simple Truth wild-caught shrimp for your first Cajun risotto.

Make creamy mac and cheese or a spinach artichoke fondue from our selection of Murray's cheese. No matter how you shop, Ralph's has all the freshest ingredients to embrace all your holiday traditions. Ralph's, fresh for everyone. 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. I'm your host. Today is Friday, August 4, 2023. And today on this Friday, as we do on any Friday in which I can properly arrange the relevant technology, we record a live Q&A show. We're just like call and talk radio. You call in, ask about anything you want, raise any topic of conversation, raise any argument that you want.

I always enjoy it when you call in and argue with me about something. I love doing that. If you'd like to join me on one of these Friday Q&A shows, you do that by becoming a patron of the show, go to patreon.com/radicalpersonalfinance, patreon.com/radicalpersonalfinance, sign up there to support the show, and that will give you access to one of these Friday Q&A shows.

Also, one more reminder as we begin today's episode. Consulting calls are open during the month of August. So if you like the way that I interact with people on a Friday Q&A show, but you'd like to speak with me personally, go over specific details of your situation, or perhaps just talk to me in a private way, consulting calls are open, radicalpersonalfinance.com/consult.

Make sure also to go and sign up for the live Panama event. Awesome event planned in January of 2024. Come and hang out with me and 39 other listeners of Radical Personal Finance. We're going to spend an entire week together. We'll get into all the details of your situation as much as you want.

We can talk, we can discuss, we can argue on anything that you want, expatmoney.com/radical, link in the show notes. We begin with Mark. Mark, welcome to the show. How can I serve you today? - Hi, Joshua, long time listener. Appreciate everything you do. One of the tricks I've used, I guess, or tools I've used in the last several years is an old rollover IRA.

So from a previous employment. And so even though now I'm in another 401k and contributing steadily to that, I've got this old IRA. And as my kids entered college, in the college years, I had three kids that I went through, that rollover IRA, as I learned, I could take money out of that for education expenses, penalty-free, was a pretty important resource for me going through those years.

And although I know we generally, nobody talks much about early withdrawals from those types of accounts, as my thoughts about retirement and retirement savings have changed much because of your thoughts and teaching, that's been a very good tool for me to dip into, and yet I don't hear much said about that exception for taking penalty-free withdrawals.

And so wanted to just get you to react to that a little bit and get your thoughts on the appropriateness of that. - Right, well, I think the reason you don't hear much said about it is simply that in general, nobody wants, I don't know of a financial planner in the world who would advise somebody to take money from an IRA and use it for educational expenses.

And there's one simple reason. You can easily borrow money for college. You can't easily borrow money for retirement. So it's not that it can't be done. Obviously, it is a relevant exception. You can take the money out penalty-free. You can use it. But in the priority of different goals and the ease of reaching those goals, retirement, the vast majority of people are significantly underfunded for retirement.

Retirement is a very large goal that's impossible to borrow from. And so financial planners don't want people taking money from retirement, where it's productive and active, and using it to pay for college expenses. I myself would, I mean, I guess in theory, I would come up, I mean, there are certainly situations in which I would say, "Okay." But those situations would be simply, "I've got millions and millions of dollars in my 401(k).

I'm well squared away for an IRA. I'm well squared away for retirement. And I just need some extra money for this kid's college. And for whatever reason, I'm going through a temporary period of hardship." But taking money from an IRA to pay for education would be the very last thing that I myself would encourage someone to do simply because of the ease of borrowing, the ease of paying for college, either through cash flow, either on the behalf of the student or the student's parent, or the ease of borrowing for college in a worst-case scenario.

And all of that is preferable to taking money out of a retirement account. - Yep. Yep, that's pretty consistent with what I, I know is kind of the standard financial plan answer I just, I've found it useful not being as worried about retirement funding, but it's been useful for covering certain hardships, I guess, or expenses during those years where I am also, they're also in college and we're also spending on tuition.

- Right, right. And I think that those, your exception may be one of those things. As long as your other finances are well squared away and you're looking at it and saying, I have a temporary hardship, I'd rather use my own assets instead of borrowing for this, then I think it can, it's not a bad thing, but because, I don't want to repeat myself unnecessarily, so I just say it very simply, because so many people are so woefully behind on retirement, that's the fundamental reason that generally speaking, we don't use retirement accounts for college, that there are so many other alternatives that are superior, that though it is possible to take money penalty free from a retirement account in limited circumstances for higher education, it's generally not advised.

Anything else? - Well, one different question too is about how the savings picture has changed in these last couple of years. A few months ago, I encouraged my dad to get with his financial plan and he had a good bit of money just kind of parked in cash and he did that and lo and behold, the money market fund is just under 5% that he's moved his cash into, the financial planner didn't bring it up or this didn't happen automatically and so he's getting another $1,000 a month income off of this and so just as these things have kind of crept up over the last couple of years, interest rates, and it's easy to get 5% now on a CD or just almost that on a money market and so I haven't heard you talk much about that change in picture and I know generally, we don't talk a whole lot about cash management and stuff, but I wanted to get your thoughts on what that changes for people and how to use, when to make the most of these kinds of higher interest rates now.

I was talking about it on Twitter a couple of weeks ago and the comment I made then was I never thought in my lifetime that I would see the original portfolio recommendations from the book by Joe Robbins and Vicky Dominguez or vice versa, I can't remember the names exactly, called Your Money or Your Life.

I never thought I would see their portfolio recommendation come back into vogue, but we're living in a world in which their portfolio recommendation is actually doable once again and for the uninitiated, they wrote this book back in the, I mean, what was it, late 70s, early 80s, something like that and basically they encouraged people that as an early retirement plan, you should just simply take all your money and put it into government treasuries and that if the government treasuries interest rate was high enough, then that was good to go and I have been watching this and looking at it and trying to challenge my own thinking and say, do I believe that people should do this?

Because if you have enough money, you can put money in treasuries right now, sit back with zero risk and collect a pretty decent income right now just on your treasuries. Is it still, do I, so I've been challenging myself. I don't have a lot to say other than that I think for someone with enough money, that's certainly a reasonable scenario and in the meantime, all of us should be looking for as much return as we can get and so CD rates are going up, various savings account rates have been going up and we should take advantage of them.

There's no downside to doing that, so I just don't have much to add beyond that. - Right, thank you very much. - Love it, Mark, we move on to the great state of Utah. Welcome to the show, how can I serve you today? - Hi Joshua, can you hear me okay?

- Sounds good, go ahead. - So I have a question for you revolving around my wife's grandparent's house. So a little back story, they own a house in North Dakota that my mother-in-law grew up in and then my wife's grandparents live in now and they're getting to the age that it's a little bit too much work for them to take care of, it's gotten a little bit more expensive and they've been talking about moving just because age and cost of living there.

So it kind of came up, my wife brought it up that we might consider buying the house from her grandparents so we could keep it in the family because they're not selling it because they want to, they're selling it because it's just got to be too much work for them.

And so we have just kind of been rolling that around and I was curious if you had any suggestions on how to go about like analyzing that opportunity, anything you would look for, we've kind of talked about keeping a bank out of it and maybe owner financing it for grandparents, I don't know if you have any advice on that or any pitfalls we should avoid.

- Right, right. Let me make sure that I got the chain of facts straight. You are considering buying it from your family members and would you live in the house yourself or would it be a rental property? What would you do with the house if you did buy it?

- So the house is in a small town in North Dakota and my wife is in the Air Force so we don't really have the opportunity to live in it for probably eight more years. The thought crossed our minds that grandparents could continue to live in the house and we would provide the lawn care, the snow removal, which would take the burden of maintaining the house away from them and then they wouldn't have to move and find a new place, buy a new house and deal with that.

They could continue to live in the house they built and my in-laws grew up in. But we probably wouldn't be living in the house for a while. - Okay, got it. How much is the house worth just in terms of the open market? - So none of the houses around it have sold for quite a few years so it's not a great estimate.

The bill listed right now, the two lots that they own at about $750,000. So we had thrown around the idea of other smaller single family houses in the area about $200,000, $250,000. So we had thrown around the idea that for grandparents were gonna buy, sell this house and use part of the profit to buy a smaller house.

We could maybe offset the cost of what they would pay for another house on what we pay for their house and then they live in the current house rent free and we take care of utilities and everything else. Yeah. - And repeat the number you said $750,000 but you're talking about $200,000 to $250,000.

- So their house is pretty big, sits on a lake. It's a pretty desirable area and they were considering moving more into town into a smaller house that would be more manageable and would be closer to the grocery store, things like that. And those houses generally retail for $200,000 to $250,000 instead of the market of this house on the lake, $750,000.

- Okay, so let's talk two basic things. So the first question is basically the advisability of should you do this? That's gonna depend primarily on your personal finances. So you should look at it and say, what do we have the money? How much money do we have to help out?

Can we afford to help out? Can we afford to make payments, et cetera? That's kind of a separate first primary conversation is how much money do we have? If we need to talk about that in detail we'll come back to that in just a moment. There are two big considerations for you to consider.

The first one is what's going to be best for your family members. And number two is simply going to be what's the best way to arrange the finances of this particular transaction. And that's gonna be fairly straightforward if you do wind up doing this. So first, in terms of what's best for the family members you need to begin with a clear financial slate and just simply ask yourselves what is going to provide the best lifestyle for grandma and grandpa?

Where will they both best be happy? Where will they best be taken care of, et cetera? If this is the house that they live in and if the house is suitable for them to live in for the long term with regard to handicap access, it not being multi-levels, et cetera then probably the best thing is for them to stay in the house.

And how you get to that is up to you. There are various creative ways that you can get to that. But the most important thing is to be very clear on what is best for grandma and grandpa. So if the house is ideal then start with a plan that this house is ideal for them.

We're going to stay with it for as long as possible and then we're just going to make the money work. If the house is not ideal for them that it really would be better for them to move into town where they can have more neighbors, et cetera then understand that clearly and then make the money work for it.

But don't underestimate the difficulty of moving for somebody who is older. I've seen this again and again and again that people think that they're putting their parents into a better situation but in reality they often don't because if the parents lose friendships, neighbors, relationships, et cetera all the things that they love.

And so moving an older person who doesn't want to move can be the start of the end. And a lot of times this is very well intentioned. I've watched this where somebody has a house and they look at it and say "Hey, this house isn't particularly suitable but if we just moved it if we moved them into this other house where they would have lots of neighborhoods, neighbors, et cetera everyone's very close then it would be better." But in reality it's often not.

So just... and sometimes it is. So I'm not saying one way or the other. But what I'm saying is disconnect the financial consideration from what's right for mom and dad or for grandma and grandpa in this case. So whatever is right for grandma and grandpa get that very clear and throw away the money question first and foremost.

Now, once you know what's right for grandma and grandpa then come back to the money and say "Can grandma and grandpa afford what's right for them?" So for example if this house is their asset they have no other savings, no investments maybe a little tiny bit of social security and then this house well clearly they're going to need money from the house in order to pay for their living expenses.

So they can't move to another situation that's better without selling this house. Or maybe they're just going broke living in the house. So get clear on the assets and what money is needed. If grandma and grandpa don't need the money from the house then the best thing all around is just going to be to own the house and then leave it behind as an inheritance asset.

Possibly rent it to someone if they're not living in it themselves. And the primary reason there is going to be from a tax perspective. So you said that this is a house that the wife in this case grandma grew up in. So that means that this has been owned for a very long time.

If the house is now worth $750,000 in the open market and if the house was purchased for basically nothing or built and added on to over the years then there's likely to be a very large amount of capital gain. And so if grandma and grandpa sell the house today in any way, shape or form, they sell it to you regardless of if they do owner financing, sell it to an independent person, etc.

they're going to have some kind of capital gain. Now they will have the Section 121 exclusion on capital gain for the sale of a personal residence. A $500,000 between the two of them. So that gives some wiggle room where they could have some tax-free gain. And that's the first thing that you focus on.

So let's say they have a basis in the house of say $250,000 which would surprise me based upon the fact pattern that you described. Then if it sold for $750,000 they would get the first $500,000 tax-free. The remaining $250,000 would be received and be taxed as a capital gain.

If they hold it until death then they can leave it behind as an asset for you, for your wife, for anybody in the family. And then it will receive a step up in tax basis to whatever the fair market value is at the date of death. And so their tax basis would go from $0 to $750,000 and then you would inherit the house completely tax-free.

And so that would be a reasonable solution as well. So in terms of your financial planning you can come back to the financial planning and look at it after you decide what's the best lifestyle for mom and dad and then think about the tax considerations, think about how to generate income from the property, etc.

Also you would need to take into account how this house... So let me just pause for a second. Other than this house, how are their overall finances? Do they have money saved? Do they have other assets? Yeah, they have a little bit. Grandpa works for a telephone company so he has a pension from them but part of the consideration of possibly selling the house is that the utility bill and the cost of upkeep has put a little bit of a financial strain on them so he's had to get...

He works a part-time job right now to help support that. So there's a little bit of a financial strain added to this conversation. Okay. Is the house the center of family life? Is this the place that everyone goes in the summer and goes out on the lake, etc., on Fourth of July?

Yeah, and that's really the reason we're considering it. Fourth of July is a big family gathering there that for the last two decades, three decades, has been the focal point of the family scattered across the country. Yeah. So I think I've said what I want to say in terms of the big picture.

From what you're describing, I would look first at just simply having the family pitch in in some way or shape or form to pay for the services to be done for the upkeep. I think that if at all possible, if the house is large and this is the center of family life, I think if at all possible, it should be kept and it should be kept in the family and that that is worth investing in.

I observed this in my own family, that my parents had a large house that they had built when we were children that we grew up in, and for many, many years, it was the center of family life. The problem is that as the years went by, my siblings and I, we didn't really want to be involved much in keeping up the house.

We didn't want to go and fix things, etc. And so that all fell on my dad's shoulders. So he did it and he did it as he had done for many, many years, but he reached a point in time in which he didn't want to do that. He didn't want my mom to have to clean this giant house, etc.

And so they sold the house and moved to a small condo. For them, that move was a fantastic move. They were much happier because now less work, less upkeep, more freedom, etc. I underestimated prior to the sale, and even immediately after, I underestimated the harm that that would bring to our own family culture.

It made it very hard for us to know where do we go to get together for Thanksgiving. How do we do that? It made it very hard for me to take my family and visit because there's just not enough space for us to have room. Now we've found solutions, and there are solutions to it, but it's never the same as the house that everybody knows.

Now in your case, that's even more important because this is a house on the lake. You've got the boat. You've got the years of family memories, probably 75 years of family memories, and those things can continue. And if you sell the house, your family's never going to put together another $750,000 to buy an equivalent house.

But the cost of paying for professional services for upkeep and handyman services and snow removal, etc., to me is a very small cost of a potential investment into the family culture. So unless everyone in the family is broke or you're all at each other's throats, my ideal plan would just be to say, "Could we work out and pay for the services needed for the house and allow Grandma and Grandpa to be in the house, have this continue to be the center of family activity.

We'll pick it up so that it's not necessary that Grandpa has a part-time job to pay for the house and find some equitable way to do that among the family members, and then figure out what would happen with the house in terms of an inheritance that it could stay in the family.

The older I get, the older my children get, etc., the less I ever want to give up those investments into the family culture, and I see that as much more important than any money that can be made from the property. Yeah, absolutely, and that's the reason that we even considered doing this.

My wife's family has had some hard financial times, and so my wife and myself are definitely set up the best financially to be able to take this on. Do you have any suggestions on how -- if it would be my mother-in-law and her three sisters, it's basically their inheritance.

Do you have any advice on how we approach the idea of us fronting the cost for upkeep and maintenance of this house without causing any -- I think it will be too strong. I just don't want to push myself into this situation and say, "Hey, we're going to be paying for the house," and then it could cause any strife in the family because we have some equity in this house.

That is going to be hard. No question. So in terms of approaching it, I would just say begin with conversations. Lay out the vision and begin with conversations. But if your mother-in-law and her sisters are in financially a difficult situation, then inheriting this property will be seen as important to them.

Poor people don't have the luxury of looking for the long term and thinking about all that stuff that I just went over of family culture, etc. They like it. But if you offer a poor person a chance for $200,000, they're thinking about my own house being paid off and what I can do with $200,000, etc.

So what I would say is you're going to have to find out what people want, what they can afford, and that's just going to start with casual conversations. If you had buy-in from the family that this is something that's important, then you could move into it. And legally speaking, your grandparents have the ability to structure everything that they need to do, and everything could be set up legally if you have buy-in, so that you could provide this cash flow.

It could be a great investment into the family culture. But if you start getting into it and there's no buy-in that this is something that's important to the family, then I don't know of a way that you'll be able to accomplish that. At the end of the day, what we're talking about here is for those who have financial abundance.

So if you could come in and you could buy the property and give a fair market value for it, and you own it, and then the money just goes ahead and gets given as an inheritance to the others, that could be... At the end of the day, you have to look at your wife's family culture and find out, is this a family culture where the money is going to divide us?

If so, then there's probably not a solution here other than let grandma and grandpa do what's best for them, let them leave the money as an inheritance. Or is there some thing where there's a culture here that we could go past the money and work together on this in some way?

So for me to know more, we would have to get into more details. I would just say start with conversations and then call me back in six months after you've had some conversations with everybody and see what the level of buy-in is. And then maybe there's some way that you can arrange the finances that'll work.

But it's hard. It's a very difficult estate planning situation to be in when you have one large asset and you have multiple family members. Unless there's some other compensating asset, then the asset usually gets carved up to get passed along. And that happens whether it's a lake house that is the family lake house.

It happens whether it's an $80 million family business. And one person wants to run the business, but you have three other people, there's just not the money. And so it gets carved up because people want the money and want the cash. And so I would say start by conversation.

Start by trying to lay out the vision of how this property could continue to serve the family. But at the end of the day, be prepared for failure. And just be prepared for the fact that you yourself have to make enough money to recreate this and have your own lake house that you buy.

And that may be where you go back to the first thing that you said and go ahead and buy it from them yourself. Awesome. That's great. I guess that's a conversation and just a vision. My wife and I can maybe lay out a vision between the two of us and get that established first and then have the conversation.

Yeah. I would beg and plead with everyone to see the value of the family togetherness. But at the end of the day, if their financial situation is dire, they won't be able to see past their own short needs. Sure. Okay. California's top casino and entertainment destination is now your California to Vegas connection.

Play at Yamava Resort and Casino at San Manuel to earn points, rewards, and complimentary experiences for the iconic Palms Casino Resort in Las Vegas. Two destinations, one loyalty card. Visit yamava.com/palms to discover more. All right. Great. We move on to... We'll stay in that area of the country, Montana.

Welcome to the show. How can I serve you today? Hey there, Joshua. Thanks for taking the call. Long time listener, first time caller. I had a question regarding how you view or value benefits through an employer when you're considering leaving a job. Because I've been at my company for a little over eight years, I get six weeks of vacation per year, my 401(k) is vested.

I got paid paternity leave when my daughter was born earlier this year, 6% 401(k) match, long-term incentive bonuses, and just a lot of stuff that's important and valuable. And I know it was coined for a much higher tier of employment, but it just kind of feels like golden handcuffs keeping me at a job that I otherwise might not like.

And while I'm looking for other stuff within the company, just curious how to keep those types of benefits in line and not just be stuck with looking only internally. How much are you earning right now? I make a little over 100k. And do you have an alternative opportunity in your hands right now, a job offer or a job you're interested in, etc.?

No, nothing currently. So, number one, there's no point in thinking about it until you have a better job offer or a better opportunity or something else. It's just all theory, which is fine to talk about. I'm going to answer the theory question in a moment. But in your situation, don't worry about theory until or unless you have something better in hand.

Because then there's actually a decision to be made. If you come in, let's just make it obvious, okay? If you came to me, right now you have a job where you're earning $100,000 per year. You have all these benefits, six weeks of vacation, great 401k matching and you're vested, etc.

And then somebody came to you and offered you a job with a million dollars a year where you had 10 weeks of vacation plus 401k plus an executive deferred compensation arrangement. Plus it's working in an area that you're super passionate about and you're really interested in, etc. Would you leave your current job with lots of benefits to go and take the new job?

Yeah. Instantly, right? So don't fall under the idea or the impression that somehow you can't find something better. Now, obviously it would be very unusual for that million dollar a year job with all those benefits to emerge and offer itself to you. But the point is that when you have a good job, that doesn't mean that you can't have something that's better out there.

And that's the false dichotomy that a lot of people think of and they labor under. They say, "Well, I've got a good job and it's the best that's out there and there's nothing else out there." But they haven't gone and looked. Or they haven't set their standards high. They haven't prepared themselves for something that's genuinely going to be better.

And what I'll tell you is there are opportunities out there that you could go and prepare yourself for that will simultaneously pay you more money as well as provide you with better benefits. You just haven't gotten an offer yet. So don't think that it's one or the other. Benefit's just part of the package.

The higher you go up the pay scale, the more important those benefits are. And so the reason I asked you how much money you make in the first place is to understand the level of earnings where you are so we understand the importance of cash versus benefits. So for example, let's say that you were earning $35,000 a year.

Well, you've got to have more cash. Benefits are pointless in that situation because you can't live on $35,000 a year. When you get to $100,000 a year, you don't always have to have more cash because you have enough income that you can do most of the things that you want to do.

So the difference between, say, $100,000 a year income with a lot of benefits and $129,000 a year income with fewer benefits, I would... What's the difference? I mean, yeah, okay, so you make $29,000 more, but you're going to lose $8,000 to $10,000 to taxes, so now you're at $19,000, so there's an extra $1,000 a month.

But an extra $1,000 a month doesn't move the needle all that much as compared to the six weeks of vacation or the cushy job arrangement where you're a senior in the company and you don't have to necessarily prove yourself like you did when you were 21 years old, etc.

And so the point in general is that benefits should be understood to be a part of the collective package. They are important, and you shouldn't just jump out of a place where you have a good salary and good benefits to another place that has a higher salary but no benefits because once you reach a point in which you have enough money to cover a comfortable lifestyle, you have enough money to give you the flexibility to buy the things that are important to you, then those benefits and that lifestyle actually do become more important than the upfront salary cost because, and especially if you-- things like vacation are a huge deal.

I wouldn't walk away from the $100,000 a year job with six weeks vacation for a $130,000 a year job with two weeks of vacation because the six weeks of vacation will be a much bigger impact in your quality of life than will the extra after-tax of $15,000 to $20,000 of income make a difference.

But that has to do with the pay scale you're at and the alternative opportunity. Recognize that when you are well-employed and you have a good job, your job is to keep on going out and looking for things that are substantially better. So if you are consistently interviewing for $150,000 a year jobs, you're going to find yourself frustrated with, "Well, do I really want to go back and take the junior position where I have to work on the holidays and I get two weeks of vacation, etc.?" Not going to work for you.

So move your sights up higher. Look at doubling your income, tripling your income because now that financial difference might make a big enough difference where you're willing to give up with certain benefits. Now that's a longer, slower process because you probably have to qualify yourself for that higher job.

The reason you're being paid $100,000 today is because you're worth $100,000 and it's probably going to take years of work and investing into your knowledge, your skills, your network, etc. for you to be worth $300,000 a year. But the other thing is that as you go up the pay scale, as you go up the scale of responsibility in a company, things don't get worse, generally speaking.

So you have six weeks of vacation right now. Does the CEO of your company or the owner of your company, does he have more than six weeks of vacation or fewer than six weeks of vacation? I am not sure how much vacation he gets, but I'm assuming even if he had as much as me, he would probably still be working on those vacations.

So that may be true, right? And that's a very fair point because a lot of people do, when your responsibility is very high, it can be the case that you don't have as much flexibility and as much freedom. If you're the CEO of a Fortune 500 company, frequently there's a lot of pressure on you to perform.

But there's also the flip side, and that's the point I was driving at. So I guess I think both of these can be true, that as you go up, there may be more demands placed on you. My experience has often been that as you go up, you can have fewer demands placed on you because the demands that are placed on you are a higher intensity.

You have more responsibility for good decisions, etc. It's not that you have to work more hours. The people who work the largest number of hours, who have the least number of days of vacation, etc., are often those in the lowest of ranks within a company. Those who go up in the ranks often work fewer hours and have more freedom and flexibility, but the responsibility that they wear for their decisions, for the outcomes, etc., is much, much greater.

And so as long as you're willing to embrace more responsibility, there probably exists within your opportunities, job positions or capabilities that you would have to go out and take on a job that provides you with more money and more benefits because you're willing to embrace that responsibility. But you shouldn't go away from a place where things are good until you get to a situation where they're obviously much better.

Great. Thanks for taking the time to answer that. I really appreciate it. My pleasure. A lot of callers on the line. Let's go to the great state of Virginia. Welcome to the show. How can I serve you today? Hi, Joshua. Thanks for taking the call. I'm here to argue with you a little bit or at least interrogate something you said, I guess, about a month or two ago.

You were talking about choosing associates for your children and you said that you chose them on the basis of, I think you put it, social class. And I wonder if you could clarify what you mean by that and why that is your rationale. That's a good question. So, let me get my thoughts straight here and make sure that I can do a fair job with this.

One of the things that I observe, especially in the US American society, is that we live in an increasing separation, an increasing distance between social classes and the expectations and the norms that are appropriate within those social classes. The book that first, that most demonstrated this to me, that I read probably a decade ago now, was Charles Murray's book called Coming Apart, The State of White America from 1960 to 2010, something like that.

And what he did in that book, what Murray did, was he took the data and used white Americans so there wouldn't be racial data and dealing with all of the fallout from racism within the United States and the effects, long-term effects of racism, etc. And he just focused on white Americans and the data of the cultural data over the 50-year period from 1960 to 2010.

And the biggest takeaway that I had from that is that in 1960, white Americans in the United States were a very homogenous group where the classes were very close to each other. He used an example of, I think it was Whirlpool Corporation in Ohio, where the CEO of the Whirlpool Corporation lived in a very similar neighborhood, not very far away from front-line workers, factory workers of the same corporation.

And he used cultural examples. So, for example, if you went to Harvard Square in 1960 and you ordered a cup of coffee, it was perfectly recognizable to you whether or not you yourself came from Fargo, North Dakota, because the cup of coffee was a brown ceramic cup of coffee and it had poured out brew in it and it was given to you.

And if you went out to eat in 1960, the ethnic variety of your food was very minimal. You would go out and you would have steak and potatoes or fried chicken or something. There was just a few menu ingredients that were fairly normal and ordinary. Now, if you fast forward to 2010 and you take those same exact two Americans, then the American, the president of a corporation, does not live anywhere close to his factory workers because the neighborhoods are now very, very segregated.

There's a huge distinction in the very expensive neighborhoods where the CEO lives versus the inexpensive neighborhoods where the front-line workers live. The guy who goes to a diner in Fargo, North Dakota, he'll drive past a Starbucks on his way into the diner and he'll still get a cup of coffee that's served in a brown ceramic coffee cup or a white ceramic coffee cup with poured over coffee.

But if you go to Harvard Square and you try to order a cup of coffee, it practically doesn't exist. And if it does exist, you pay four and a half dollars for this poured over coffee. It's much more likely that you're going to order some form of latte or espresso or some fancy coffee drink with all kinds of words behind it.

And so this is just an illustration that even within the same ethnic group, right, white Americans, etc., the class distinctions have become very, very separate. Now, that's an example, kind of a practical example, but what I found that was even more impactful on me of that book is his conversation on the way that classes live.

And so, for example, there is an impression that I think some people have, I certainly had it in the past, that people of a higher social class tended to be libertine in some expression. They tended to be accepting of all kinds of lifestyles and all kinds of decisions, etc.

And people in lower social classes, lower socioeconomic classes, tend to be religious zealots and fundamentalists and you have to live this way, you have to do this certain thing, etc. And so one of the things that Murray demonstrates is that that is radically not true. It's actually the opposite, that in higher socio—and here I'm specifically talking about socioeconomic now in terms of social class— higher socioeconomic social classes, they tend to speak in a very liberal manner, what we'd often call today progressive or liberal manner, right?

Live as you want to live, do what you want to do, we're accepting of all people, etc. But if you look at the way they order their lives and their families, it is not that way at all. That when they marry, they stay married, they don't have children out of wedlock, they go through all of the institutions in a very disciplined way.

You don't have a rich playboy who's just sent off to do whatever he wants. If he does that, he often gets banished from the family. No, you're going to go to school, you're going to go through this, you're going to get a job, you're going to be responsible, etc.

If you go to lower socioeconomic classes, the rates of religiosity, for example, are much, much lower among lower socioeconomic classes. And so not only is the idea of religious fundamentalists, that's not borne out by the data, but more importantly, the lower socioeconomic classes impose very few expectations upon their children, upon their families.

Divorce rates, through the roof. Single motherhood, through the roof. College finishing, etc. Just absolutely through the roof. And so one of the things that I observe as I go through life and through society, is that the class that you're raised in, the cultural milieu in which you exist, is something that will define most of your expectations.

And if you see your peers as reaching and meeting certain accepted expectations that lead to a thriving life, then you're much more likely to model those behaviors yourself. So I never drank when I was underage. And I never engaged, when I did consume alcohol, I never engaged in wild partying, because that's not me.

That would require me to have a fundamental, distinct, that would require me to sacrifice all of my identity of who I am. This is the people that we are. Like, for example, my wife, she doesn't like alcohol. She never drinks alcohol. But to this day, she has never in her life drunk beer, because she sees that as so classless, like that's fundamentally below her.

And you can argue about whether it's classy or classless for a woman to consume beer, but I've never found it to be something attractive. It just seems to me to violate all the social norms of what I expect for femininity, etc. But there are many situations in which that's perfectly accepted behavior.

I don't see that that kind of class behavior leads to any kind of success in life. That I want to be myself, a high-class person. I want to treat people in an appropriate way. And I want to model and have modeled in front of my children, for the vast majority of their life and in their time, those positive behaviors, because that positive social peer pressure makes a huge difference in outcomes.

Everything from college attendance, premarital sex, marriage, whether you expect a marriage to last, etc. These things need to be the standard culture that I want my children to be surrounded by, both in terms of the things that we consume, and more importantly, the lived experience that they have. I want it to be very high-class behaviors.

So what would be the objection to this? Which is clearly, I think, where you are going. The objection to this would be, "Well, what if you just live in a bubble? What if you live in a cocoon and your children don't have any exposure to the real world?" First, I'm not convinced that that's a bad thing.

I myself live in a very, very happy cocoon. And I recommend it greatly. I read about the lifestyles that other people live, and I'm filled with compassion and empathy, but I often have a very hard time recognizing the world that they live in. And so let me just give some simple practical examples of the cocoon that I live in.

I live in a predominantly Christian cocoon. And so within the Christian bubble that I live in, no kind of weird – I'm not in any kind of weird cult or anything like that. I just live in a homeschooling Christian bubble. Almost no divorce happens. It's normal in our culture.

We have children. So my children have lots of playmates. Financial stability is very, very important. And so if somebody demonstrates financial attitudes and behaviors that would lead to instability, that wouldn't fit in our cultural norm. High levels of education are very normal. The majority of people that I spend time with have a minimum of a college degree.

We don't – things like – I think the context that I mentioned this in was something possibly like device usage. I don't know anybody in my family who just sticks a screen in front of their kids' face. And most of us have screens, and we use them, but they're in a very controlled manner.

They're in a public area of the house. It's a computer. It's something where it's planned ahead, et cetera. And so that makes my job as a parent easy if that reflects 80% of the exposure. So I don't think that the idea that you live in a bubble is actually a bad thing.

I think that in general it's a good part of happiness as long as that bubble is a healthy bubble where it leads to overall success. And I try to manipulate – in the areas that I'm weak, I want to change my bubble that I live in. So a simple thing is that if you hang out with – like health indicators.

Low-class people generally tend to be fat and unhealthy. High-class people tend to be fit and healthy. And so that class distinction – low-class people think it's perfectly normal to go out on Friday evening and eat pizza and drink beer. High-class people don't do that. They go to expensive restaurants where you pay more money and get less food, and they're more likely to do it around and engaged in some kind of physical activity.

And so if I recognize that and I manipulate my environment, I stop hanging out with low-class people who, if I'm not eating pizza and drinking beer, that they make fun of me because that's what those kinds of people do. If you're on a diet, they make fun of you.

But I hang out with people who would impose modest amounts of social pressure on me if I engage in those kind of behaviors like, "Joshua, what on earth? What is this? Why did you order this?" Then that over time will have an improving effect on my life and on my lifestyle.

So now I think we come to – again, I'm assuming your objection is, well, does that make you out of touch? Or is that unnecessarily causing you to see yourself as different than other people? And again, I'm not sure that seeing yourself as different than other people is a bad thing.

In fact, I see myself as very different than most people. I'm not normal. I'm not normal. I don't want normal. I don't want normal children. I want excellence. I want excellence in every area of my life, and I'm going to be intentional about that. But what I don't want is an attitude of superiority.

I don't want an attitude of cultural arrogance, and I don't want an inability to relate to people. And so I would need to make sure that my children are not so isolated from others that they develop those negative character qualities. And I'm not sure. I think that that can be achieved.

I always prided myself when I was younger on my ability to stand around the back of a pickup truck with my redneck friends and fit in, and then fit in a fancy dinner and fit in there. And so I think I achieved that. I'm pretty comfortable in most places, and I hope that I can do the same thing with my children.

And I hope that I can have good strategies for making sure that they don't develop an attitude of arrogance, superiority, disdain, et cetera. And I hope that that can be accomplished through service, through empathy, and through spending significant amounts of time with people who are not nearly as advantaged as we are.

And so I don't know, but that's my overall perspective on it, is I do not want to make 80% of our time and our lifestyle to be spending time with low-class people, because I'm not low-class, and I don't want any of their lifestyle for my children. But I also want to guard against excessive egalitarianism – or sorry, excessive arrogance and an attitude of superiority, which I find very unpleasant.

What do you think? What say you? Yeah, fair enough. Here would be my rebuttal. We agree that it matters who you spend time with, that positive influences are important. Where I would inject another caution is to conflate that with economic status. And I'll use as an example where I grew up.

I grew up in a suburb of Washington, D.C., probably one of the highest-income neighborhoods there is. And I had a particular friend at one time when I was not as judicious as I should have been about friends that I kept. And he also had wealthy parents, and he had impeccable manners.

In fact, he was my mother's favorite friend, because every time he would visit, he would compliment her cooking. He would say, "Hello. Thank you. Please. Thank you for bringing me that glass of iced tea. You must have worked so hard to bring me that glass of iced tea," that kind of mannerism.

And my mother said, "He is so polite." In reality, he was a sociopath. He constantly lied. He constantly cheated. He was a bully at school. His father was a successful insurance agent, but he was, I think, fairly unethical in his business practices. But I'll continue on to the next sort of related point.

I have a friend that grew up in this neighborhood with me, and we went our separate ways. He had been economically successful, but it was very important for him to continue to live in the neighborhood he grew up in, which is a very high-income area. He had a moderately high income, but it stressed him financially to stay in that neighborhood.

And he plowed all the money he possibly had into affording a home there so that he could maintain the status and be around the people he'd always been in. And it has harmed his marriage because he's constantly under financial stress. Whereas I live in what I guess you would call a working-class neighborhood.

That's why I think it's so important to be fine-grained in how we define these income areas, because these people are not poor, but they probably have sort of blue-collar jobs. They may have small plumbing businesses. They may have – they may work in restaurants or own small restaurants. It's about 50 percent nonwhite.

It's got a very working-class vibe. There are townhouses, a lot of Muslims, a lot of Hispanics. And so you might look at that and say, oh, that's a lower-class neighborhood. It certainly doesn't have any visual markers of social status, but the kids are extremely responsible, and it's an incredibly safe neighborhood.

All the kids have summer jobs, or they don't even have summer jobs. They contribute to the family income with full-time jobs that they have themselves. I know a kid whose dad loves to go out on the front step in sort of a tank top so-called wife-beater shirt and smoke a cigarette, and he looks unkempt.

But he raised that kid, and he's going to college, and their grandmother lived with them until she died. We used to see her outside gardening. And so my take-home point is there are a huge number of great virtues exhibited in my working-class neighborhood. And I see a lot of social pathologies in my friend's neighborhood where everyone's in therapy, and it's just a very dysfunctional social environment.

So if I had to pick the neighborhood he should select to have a healthier life for his family and for his financial well-being, I would recommend he live in my working-class neighborhood, not in the extremely wealthy, hard-to-live-in, economically stressful neighborhood he does live in. So I would wholeheartedly agree with you, and I guess I should have – so I don't like the idea of combining the concept of class or social class with income levels.

Skip the weird-sounding socioeconomic status, like income levels or wealth, because both of those are – like those things are not the same. And I wholeheartedly agree with you. The problem is simply – and when I was referring to class, I'm referring to something that – all those values that you mentioned.

I mean, if I had the choice, I would much rather live next to a Pakistani immigrant who is building a business and his children are under discipline and control, et cetera, even though he doesn't have a dime to put together because he just arrived. Like, I don't – that's not – I don't think of social class as income, because for all the reasons that you stated.

So the problem is how do we – what word do we use? What word do we use to describe people that represent the values that we hold dear? What word do we use to represent the kind of culture that we want to encourage our children to be surrounded by?

That's what you're describing. You're not describing – you're not saying that isolating – you're not saying that exposing a child to – what word are you – you're not saying that we should go and expose our children to bad influences. What you're saying is that there are wonderful cultural values reflected in my "working class neighborhood" implying lower levels of income, lower levels of wealth, et cetera, that are – that create a lifestyle worth emulating.

And so that's what – I'm agreeing with you. I just use class to say that because I don't know what other word to use. It's not an ethnicity thing. It's not the color of the skin. It's not a religion thing. It's a – to me, the only word I know is class unless you've got something better.

Yeah. Well, yeah. I don't have a – I would use character level because it's hard to get away when you use the word class from thinking, well, people that go to the country club or people that are lawyers or doctors, high income professionals. That's what is – I think in a lot of people's minds anyway connoted by class.

So I'll accept character but that it's not perfect. Life habits? I don't know. It's hard to – I guess one of the things that just bugs me is probably culture. Like culture. Is this a – maybe that's a word that I should use because I'm trying to reflect a certain cultural attitude of the things that I value, that I want around myself and that I want around my children.

And there are certain cultures that I absolutely do not want them exposed to. And there are other cultures that I absolutely do want them exposed to. And it's not based upon the income level of a household. I mean as a Christian, I honor people who are poor based upon good decisions but not prioritizing money.

And so I in no way associate this exclusively with income. But I don't know a word, especially in today's very charged racial environment, I don't know a word to use to describe the kind of class that I appreciate and want to see more of. Yeah, it's a challenge. I think we just have to be very precise with the language we use so that people know exactly what we mean and what we don't mean.

Yeah. So let me try then. I want to be surrounded by people of competence, people of high moral character, people whose lives are authentic, who are not hypocrites, and who live in their external actions the types of values that I believe lead to a happy life personally, a happy family life, and a happily and well-integrated community.

And in order to do that, I need to not be scared of isolating myself or children from people who do not express those values that I believe are so important. Yeah. Well said. We have to curate our social circles carefully. Right, right. And if I'm with you, I would probably be in the working class neighborhood.

I have also a great seeming paradox that I do not believe – I'll just say it in the modern way that it's said – that diversity is a strength. I do not myself believe that diversity is a strength in the way that many times the people who would say that lead it to be.

I think that diversity is actually in many cases a weakness. However, I really enjoy having diversity in my life as long as that diversity is based upon shared values, a shared commitment to universal human ideals, universal human values, etc. And then within that, I love diversity, but that diversity has to be built upon a platform of uniformity that is in the concept of good humanist values in order for it to flourish.

And so if I had my choice, I'd be in the working class neighborhood next to you rather than your friend who's in the other one. Yeah, yeah. I recall you speaking fondly of some dinner you had – I don't know, this must have been seven years ago now – with some woman who was politically diametrically opposite of you.

I think she was pro-choice and all sorts of other things, but you had a grand time speaking because you must have had some kind of value in common, maybe just the value of, I don't know, inquisitiveness or earnestness. I don't know. Intellectual honesty. That woman was a classical liberal, right?

And we run into danger running into specific issues, of course, but the thing that has caused me so much great frustration in the modern dynamic in which politics is overriding is that the honesty of position and debate, etc., I find it hard to find. And so I think of the ACLU, right?

When I was younger, I always respected organizations like the ACLU because I may or may not have agreed with them on a specific issue, but I understood them to be principled persons who believed in the rightness of their cause. And if you're talking to somebody who is a principled person, especially someone who shares the values that I hold, such as open debate, logical inquiry, philosophical consistency, honesty in communication and representation, etc., to me, one of the greatest joys is to talk with somebody that you disagree with and on that shared cultural foundation of, again, honesty, clarity, consistency, open conversation.

But that's very different than somebody who doesn't hold that foundation of honesty, inquiry, debate, logical analysis, etc., who simply engages in name-calling or something like that. I can't enjoy interactions with those people. So again, we find our language limited, that I don't think that uniformity is the key to success.

There has to be a shared foundation, and then within that, diversity of opinion works. Iron sharpens iron, that our ideas get better because of those that we disagree with, as long as that disagreement is held in an appropriate way that leads to safety for the people involved and the interchange of ideas rather than personal attacks.

Yeah. That's what we all want. I know it's what you and I want, so may we do a good job of modeling it. Anything else today? Oh no, that's all. I'll let you get to your other callers. Thank you so much. I love the question, and I guess I will try to, I think in days to come, I'll try to bring together, if I make comments on that subject again, instead of just saying social class.

I distinguish social class from socioeconomic status. So in my mind, I use the term socioeconomic status when I'm talking about money, and then social class when I'm talking about class or culture. But I should probably update my language and incorporate the use of words like culture and class rather than just class because of the connection that many people would have to the concept of socioeconomic status.

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Don't lose out on your chance to get a Maverick X3. Visit Del Amo Motorsports in Redondo Beach and get yours. Offer in soon. See dealer for details. All right, we go to the great state of Kansas. Welcome to the show. How can I serve you today? Hey, Joshua, thanks for taking my call.

I've got a question for you. I was listening to an earlier episode maybe a couple years ago that you had talked about home ownership and some of the thoughts you had had that had changed about how much to put down and all that kind of stuff. So I was wondering if you could maybe just give some thoughts to me on how you would think about when, what test or rule you would use to see if you're ready to jump into home buying.

Because as it stands right now, I'm a leaser, I lease a place and it's not great and the rent's going up and I know that there are options out there to buy, but I'm just not really sure what things I might not be aware of that I need to consider before I just make that decision to jump into that.

Thank you for the question. It's an important one for me because my views have changed on this and it'll be important for me to update my own advice specifically to you because it's different than what it once was. I have a list of things that I've changed on over the last 10 years of doing radical personal finance and this is one of those.

In the early years of radical personal finance, I defended this basic idea. Home ownership should not be viewed through a financial lens because a home is a consumption item. So you shouldn't be trying to focus on a great investment with your home. It's a consumption item. And this of course is a channeling of a concept that I think is Robert Kiyosaki made popular in his not technically correct but inspirationally correct view of assets and liabilities.

An asset being something that puts money in your pocket and a liability being something that takes money out of your pocket. And so the extension of that is that a home is something that takes money out of your pocket and so you shouldn't think of it as a wealth building asset.

You should think of it as a liability. I've never believed that that's true in the fullest sense of the word. I believe that's a mindset or a model that's useful but not something that is true. It's just a useful way of thinking about it. However, the related thing is that I think that when somebody is at a certain stage of life, owning a home can actually be more of a liability to their opportunities than the alternative.

And so the best example of this is things like geographic freedom. If you buy a home when you're 22 years old, even if you are perfectly within all of the suggested metrics of what I can afford and the way that I can live, frequently that decision alone can be something that hinders your opportunities because now you're less likely to be willing to move for a great job opportunity.

You're less likely to be willing to go and explore something new while it's easy for you to just go across the country. You're locked into long-term thinking at a phase in your life in which long-term thinking is not always a positive scenario. And so there may be a guy who says, "I bought this home and I could afford it but now he's got to work a job and he can't afford to go and quit his job and take a risk on something or go across the ocean," etc.

And so for those reasons, I've often, even though you can make money on a house and it can be a good financial decision, when people are young, when people are single, when people are not settled in a long-term vision for their life, I think that buying a home should be viewed as a liability.

And I actually still believe that. Another expression of a home that you want to be careful of that is a component of why I used to significantly discourage jumping into home ownership is that when you purchase a home, in and of itself, it often results in you upgrading your lifestyle.

So let's say again, use our mythical 22-year-old guy, graduated from college, used to living like a college student in a dorm. That guy could go and purchase a – sorry, that guy could go and live in a $500 a month bedroom somewhere but instead, he goes and buys a home.

And even if he can afford the home, because he now buys a home, he's very likely to start increasing his personal lifestyle. He's very likely now to purchase a set of furniture, purchase a set of decorations, purchase all these things that express the place that he is in life, et cetera.

And if he would just wait two or three years, he may save so much money by not doing that so quickly that it is on the flip side something that he would have been better off if he just rented $500 a month, kept on living out of a suitcase, and set aside 80% of his income for a few years while also simultaneously pursuing the opportunities around the world that he had.

Now, what has changed? I now think that you should indeed view a home as something that is a fundamental component of your wealth plan. And what convinced me of this is John Reed's book that he wrote a few years ago on the value – the advantaged nature of a personal residence.

And Reed, here's this guy who started off after the Navy as a real estate agent and a real estate investor. He bought all these houses, then he moved up to multifamily apartment buildings, bought a bunch of apartment buildings, was living the dream from a real estate perspective. Then after a while, he started selling his properties and he started a business being a real estate guru, writing a newsletter, writing books, et cetera, and that was his primary business for years.

He was a real estate guru for many, many years. A few years ago, he shut down the newsletter and basically – although he still updates his books and writes here and there a little bit. His kind of capstone book was this book called Something Very Awkward Like An American Principal Residence Is the Most Advantaged Investment in History, Maximize Yours, something like that.

Very awkward title. But in that book, he reflects upon his story as home ownership and all of his work as a commercial real estate investor. And he uses this example of a friend of his who never did all that stuff. This friend of his just bought a house, moved into it, lived in it, and then some years later, sold it for more money, bought another house, a nicer house in a nicer neighborhood.

And over time, he's like, "I often wonder if I would have been better off just simply buying a nicer house." And I found his argument so persuasive that it became then a staple of the advice that I give to people who say, "I want to get involved in real estate," but they don't want to go out and try to buy properties under market.

They don't want to go out and deal with toilets and stuff like that. And my comment to them is if you have a good income or a good business, just buy increasingly a nicer house because you have the best tenant, you got all kinds of tax optimization opportunities, you got all kinds of personal ways in which this can improve your life and all kinds of benefits.

You don't need to go out and purchase a bunch of houses in order to have a great investment in real estate. So that's what has changed about my advice over the years is just simply a reflection that, no, it's not appropriate to just discount the financial value of your house.

It's not appropriate to discount the financial value of a house. Rather, it's more appropriate to incorporate this as an overall part of our wealth-building plan. Now, for you personally, what then should you do? Number one, if you're thinking about buying a house, you should be certain that buying the house is going to be good for your economic prospects beyond just the value of the house.

There's a tendency to just look at the cost of the house and the value of the house and think of that because those numbers are in front of you. But if you do that, you are foregoing the true analysis that is in front of you. So remember what I said.

If you own a house, you're less likely to move across the country for a great job, or you're less likely to just up and move to China because you can and expose yourself to something new. And the only people that get rich on their house are those who have a lifestyle that they feel content in, that they live in, where they got a job, etc.

Then they buy a house and they live there for a really long time. That's great. But if you're young, you should be very skeptical of that and you should be very thoughtful to make sure that you have looked for and pushed all the opportunities that you have. So do you – and let me just pause for a moment.

Are you single and how old are you? No, I'm married and I'm 36. Okay. So married and 36 is very different than single and 22. So single and 22, you want to be in a place where you can meet a potential wife and that might mean it's better for you to go to college, live in the dorms, go to a master's degree, live in a dorm where there's a high population of potential candidates for a wife.

You should be trying different career options. You should be living in different places, getting a sense of what you like and what you don't like, etc. 36 and married, you're in a different phase of life. And so you want to still be sure that you're willing to go and if there's a job opportunity or a business opportunity or something that you want to go and pursue, that the house is not going to get in the way but you're in a different phase of life.

The next thing that you want to think about is in buying a house, am I unnecessarily upgrading my lifestyle? So again, back to 23 and single, live cheap. There's no downside to living cheap except potentially attracting a high-quality wife. But when you're 36 and married and having children, etc., now all of those aspects of a house become much more valuable to you.

Having a house that is your wife's where she can do exactly what she wants and she doesn't have to worry about having to move in 12 months is an important component of life satisfaction and happiness. The number of children that you can have because you have a house and you have stable life, you're not worried about your rent going up and you have a place that is suitable for them, etc., this is important.

And so you're at a phase in life in which buying a house is almost very likely the right move. So then you get to get to the money. Well, can you afford it? And so the way that I would answer the question would be number one, can I afford it based upon perceived life goals?

So for example, if you and your wife both have an income, if you're planning to have children, I would encourage you do all of your calculations based upon your income. So that if you have babies and she's a mother, then you don't have to all of a sudden change your lifestyle and move out of a house.

The house payment should be something that is modest as compared to your income. In the range of 30 to 40 percent is probably affordable, but a modest amount of money is going to feel more comfortable. And so if your income allows you to buy a suitable house where it's even a smaller percentage of your income with a mortgage payment, then that's fine.

As far as a down payment, you want to put down as much money as is necessary in order for you to get great financing terms. If you could put down 100 percent on a house, I think that would be wonderful. And the reason to do that would be to set this as a goal.

My wife and I were working. We're going to save and save and save and we're going to pay cash for a house. And if you have a house that works in your local area where you're living, where you can do that, that's a great goal because that goal is affecting your behavior and allowing your behavior to change so that you can achieve the goal in short order.

On the flip side, however, if you don't have the money, but yet there's a house that's appropriate and you can get good financing terms by putting down 20 percent or even if you have an FHA, a VA loan or FHA loan or something like that, then use those opportunities and go ahead and purchase a house.

As long as you can get decent financing terms, as long as the house is affordable, as long as it's a blessing to your lifestyle because you're living a stable, settled lifestyle, as long as you have a few years to go in terms of your anticipation that we're going to be here for a few years, it's virtually always the better move financially for you to be house owners rather than house renters.

Okay, great. That's super helpful. The other thing I would just want to ask about is in terms of the finances, is there a rule that you would use to say, okay, well, how much in cash reserves? Obviously, getting the best financing, I do remember you saying that in one of the previous episodes, so that you're not house rich in cash for, I guess is kind of what you were talking about.

But when it comes to all the maintenance and upkeep and all those different things, is there some magic number of percentage or something that you would say, you need to have this in reserves before it's a good idea? Well, there are a few ratios that you can consider. So the first ratio is what I said, what percentage of your income is going to be used for the mortgage payment?

And in the range of about 30% of income is ideal. In terms of how much cash you should have in a perfect world, in an ideal world, your formula is this. Number one, I'm going to be out of debt. Number two, I'm going to have three to six months of expenses in an emergency fund.

And number three, I'm going to have my down payment saved up so that when I make the down payment and purchase the house, the mortgage is around 25 to 30% of my income and I still have an emergency fund. So in a perfect world, that's how things are going to be.

In a real world, people just buy the house when they find a house that works and they can make the numbers work and they figure it out and it usually works out okay. People like you who are clearly thoughtful, clearly in control of your money, it usually works out.

And so the ideal formula is what I've described. If you came to me and said, "I've got to spend down my emergency fund to get this house that here is affordable right now for us," I wouldn't say wait on it. We live in such a funny world with real estate that this is all very market dependent.

You're calling me with a Kansas number, right? Kansas is a very different place whether you're in Kansas City or whether you're three hours outside of Kansas City. And so in some places, we have historically normal markets. In some places, we have crazy markets. So I think that those kinds of decisions are going to be much more having to do with what your local market is and what is likely to change in that local market versus you being able to follow the formula exactly the right way.

In general, if you're settled, you got good overall structure, et cetera, and you think you're going to be in a place for at least a few years, buying the house as long as you can afford it under those terms that I've said, buying a house is almost always going to be the right move as compared to not buying a house.

Okay. Okay. Thank you, Joshua. I appreciate it. My pleasure. Two callers left. We go now to – we'll stay in that – sort of kind of that part of the country, Sioux Falls, South Dakota. McKenna, welcome. How can I serve you today? Yes. Hi. Thank you so much for taking my call.

My pleasure. So I think my question actually is related to the previous caller. I'm in a similar boat as your first example, 28 and single and getting tired of renting. My goal is to eventually own a home because I don't want to put all my eggs into the finding someone basket because if that doesn't happen, then I'm just still renting the rest of my life.

However, buying a house is a little bit daunting for me because I'm wondering how do I afford the mortgage and the utilities and emergencies on my own income. And then one of the solutions is roommates but there is not many people as a single woman that I would trust to live in a house with.

Of course. Of course. So I'll give some personalized advice on the house thing. And you definitely – it's hard. You face an unenviable situation as a 28-year-old single woman because you're simultaneously expected to make your long-term plans and live your life and exactly if it's just you. And yet you also say, "I'd like to meet Mr.

Right. I'd like to get married. I'd like to have these things." And the question is, "Well, what decisions that I make are going to push me in that direction?" So first, let me give you one modestly timed speech that I always give to all young men and all young women.

First, if you want to get married, that is a good desire. And if you want to get married, that should be an actual goal, something that you pursue with diligence and it should be your primary goal. Because the younger you marry and the more that you – the younger you marry and the younger you start working on that actively as a goal, the better it is because the easier it is to find a good potential spouse and the better your long-term results are.

More time in life you get to have together, more time you get to have with your children, et cetera. And so as long as you're not in a dangerous situation, you're not 15 years old, dropped out of high school, like none of that weird, none of that obviously don't get married situations, then this should be a goal.

And so I'm not going to – in this context, I won't – unless you want me to – I won't ask you all of the personal questions that I ordinarily ask people. But what I always press people on is what are you actually doing in order to make this happen?

And what I find is more common is that most people aren't actually doing all that much in order to have the possibility of getting married. They're living very isolated lives. They're usually – I'm on a few apps and doing my best to swipe around and they're going on some dates occasionally, et cetera.

But they don't have a plan, they don't have a strategy, and they don't have specific actions that are associated with that plan and strategy that might lead to their meeting a high-quality spouse. And I believe that at its core, that is the – that's the primary thing that you should be doing is actually measuring the number of encounters that I have with the kind of man that I might actually marry.

And how much time per week, how many opportunities per week am I actually spending in the places? Let me amplify this just a moment because I'm planning to go back over the coming weeks and re-up this series that I started a long time ago and then I walked away from on how to marry an excellent wife.

My advice on this is a simple formula that works – that is directionally appropriate for both men and women. And I want to take just a moment to put it here in case I don't actually get to recreating that series in some time. The most – if you want to get married, there is no way to guarantee that.

But there are some things that you can do that make it more likely to happen. I'm going to speak to this from – I'll speak to this from your perspective. But again, it's exactly the mirror image of what I say to men. Number one, the first step in potentially meeting a high-quality spouse is to sit down and make a list of every attribute, feature, and quality that that man would have.

Sit down and make a complete list of everything that you think that that man would have. What are all of the features, etc., that that man is likely to have? And make the list as complete as you want. There is a danger sometimes to having standards that are beyond your ability.

There always is this danger. But at this stage of the formula, go ahead and make all of the requirements that you have and put down in as much detail as possible the kind of man that you yourself would be willing and thrilled to say yes to and to marry.

That's step one. Step number two is looking at that list, start a new list, and write down all of the characteristics, qualities, attributes, features, etc., of the kind of woman that that man would be attracted to. So let's use some fairly non-controversial ones. You may want to have a kind husband.

I think you should. My daughter, you need to have a kind husband. And so you would ask yourself, well, what kind of woman would a kind husband be attracted to? A kind man is most likely to be attracted to a kind woman. And so let me write that down, a kind woman.

He would be attracted to a kind woman. Or if I want a man who takes care of himself physically, he's in decent shape, he's not in poor health, etc., well, am I the kind of woman who takes care of myself because these kinds of things go together, etc.? And so make a complete list.

Then you look at that list and you ask yourself the question, do I resemble this woman? Do I resemble this woman? Do I have these character qualities? And ordinarily, this is fairly easy for men. A lot of women struggle with this. It's my observation. A lot of women struggle with this in the modern basis because women often don't seem to want to change for men.

They often ignore what men say they want, and they often are unwilling to listen and unwilling to change because I'm a queen, he should accept me the way I am. I'm the prize, right? Like, obviously, I shouldn't have to do anything. And that's a good recipe for long-term singleness.

So look at the list of qualities that this man is likely to want in a woman and then compare yourself to that list and ask yourself, do I have these qualities? Do I express these attributes? And there's the whole basis of simple things. Guys are pretty simple. They'll tell you generally what they want, but they find themselves frustrated at the moment that women don't usually believe that they want the things that they want.

And this is especially difficult for you as a 28-year-old woman in the United States because most of the things that high-quality husbands want are things that, unless you were raised in a very isolated culture, are things that you have generally been taught not to want. So, for example, one thing that men want is a woman who is a good cook.

And yet women have often spent much more time being trained of how to be a good employee and how to make money than how to be a good cook. Women want a woman who respects them for who they are and who builds them up for who they are. And yet women in our day and age have frequently been led to believe that it's more important that you spend time tearing down men than building them up and respecting them, etc.

And I won't go on, but there's a long list that we could make. Men tell women what they want and women routinely refuse to believe them. And so be very careful in making your list. It's your list. It's whatever it is, but be careful in making your list that you have good, accurate information of what a man is likely to want.

Because then, if there's anything that is out of whack in terms of your abilities, your features, as compared to that woman that he's likely to want to marry, if there's any place that you're lacking, then get busy working diligently to change those things. Some things can be changed overnight.

Instead of wearing sweatpants all the time, I'm going to wear a sundress. I'm going to work on these other things, on treating men nicer and being kinder instead of being snappy all the time. Some things can be changed immediately. Some things can be changed only over the course of years.

But a lot of things can be changed. And if you are moving in the direction of the kind of woman that that man that you would like is likely to want, then you're making progress in a positive direction. It's improving your odds. Now, the next thing you have to do is you look at that list of the man.

You say, "Where does this man hang out? Where is he likely to be?" So, a simple and silly example. Let's say that you are—you say, "I want a man who is a God-fearing man, who's going to be a good husband, who's going to take our family to church on Sunday morning." You're very unlikely to find that man in the club on Friday night.

He's much more likely to be at church on Sunday morning than he is at the club on Friday night. He's much more likely to be out at the lake on Saturday morning than he is to be at the club on Friday night. So, make a list of all of the places that that man is likely to hang out.

And this list is not just physical places, although it is physical places. So, you make a list of where he spends time. If he's going to be in good shape, he's probably going to be in the gym. If he's intellectually curious and he's smart and he's going to be my intellectual match, he's probably going to be in a college class, etc.

And then take a look at your calendar and ask yourself, "How much time do I actually spend in a normal week in these places where this guy is likely to be located?" Or, "How many physical counts do I have?" And so, frequently, the number is an hour a week or less.

And so, this is why young men and women are sometimes desperately swiping at home because they're not spending time in those places. And so, then, looking at your list of where he's likely to be, try to think of a strategy of how I can spend more time in this place.

If I, myself, were unmarried and I were in this phase of life, I would go and I would take college classes. I would go and sign up for a master's degree, a PhD. I would go and take some kind of college classes. Why? Well, because the kinds of girls that I would be interested in are girls who are the kinds of girls who would normally be in college.

And so, I want to go and spend time in that environment in order for me to have the opportunity to meet somebody in class, meet somebody at the gym, meet somebody in the cafeteria, in the coffee shop, etc. And I don't want it to be weird that I'm hanging out there, so I'll just take some classes and then it's perfectly normal.

But I'm going to try to spend 15 hours a week on campus in various ways, not 15 minutes a week on campus. And so, start tracking the number of times. I, myself, would be going to – if I were unmarried, I would think about the kind of girl that I would be interested in as a girl who is very religious, a Christian girl.

And so, I'm going to be thinking, "Where is she likely to be? What conferences can I go to?" I'm going to be going to youth conferences. I'm going to be going to different organizations and charitable causes, etc. And I'm going to track that stuff and I'm going to be really diligent about it.

And it's not to say that that's in lieu of having an online dating account or whatever – I don't know – what website would be appropriate for me. I'm not saying I wouldn't go to a website, but I'm going to spend time with people. And at least then I know that I'm being diligent about doing things that are going to improve my odds.

And then the final thing is this. I'm going to intentionally activate my network. And this is the thing that I think most people don't do as well as they should. So, if you're doing these things and you're spending time in places, you're not going to be a socially isolated person.

And so many young men and women are living lives of social isolation. All they have is a phone screen to stare at and they're not spending time with people other than coworkers. Coworkers are fine as a start, but that should be the start. A good normal social life for a 28-year-old young woman should be that you're in the homes of different people, in organizations, you're involved in organizations that you volunteer with, that you serve with, etc.

There should be at least 5 to 10 social contacts per week with people who are outside of your – that are not your coworkers and that are not just your girlfriends that you hang out with, but that are of diverse backgrounds and diverse experiences in life. And so what I would do is in a very intentional way with those that I can trust who aren't going to betray my confidence or make fun of me, go and make clear to them and say, "Listen, I would like to be married.

This is the kind of guy that I would like to meet. I'm serious about this. I would like to be married. If you ever know of somebody that you think would be an appropriate spouse for me or you think I should be interested in, please don't hesitate to introduce me to this person.

Please don't hesitate to arrange it in some way. I'm open to anything, but I just want you to know I'm serious about this. I'd like to be married. Here's the kind of person that I would like to be married to." One of the great tragedies of the US American culture in 2023 is that young people labor under the illusion that it's a normal – that the normal way to find a spouse is for them to do all the work.

And this is absurd. And the marriage rates and the shocking collapse of marriage rates demonstrate that this is absurd. Cultures traditionally thrive on matchmakers. Those matchmakers are expressed differently in different cultures. In some cultures – I watched Milan with my children, the Disney Milan movie with my children some time back.

Here is the Chinese culture that Milan is in, and here is the matchmaker of the village who's coming to make the match. Maybe it's – I don't know if it's historically accurate or not. The point is that sometimes there's an actual matchmaker. This is a primary job for parents.

I am deeply convinced that one of my primary jobs as a father and one of my wife's primary jobs as a mother, our job as parents is to help our children to encounter suitable matches and to be very, very involved in encouraging them in that process and helping to facilitate the process of them meeting a suitable spouse, falling in love, and moving through the doorways of marriage.

So I'm not going to go as far as arranged marriages. I don't think that – I think that the person who is being married absolutely must have agency. But the older I get and the more time I spend watching and listening to the stories of success and failure all around the world, the more I become convinced that arranged marriages are a perfectly reasonable way for a culture to help in matchmaking.

And so you should appeal to your father if appropriate. You should appeal to a pastor. You should appeal to any older woman that you know, anybody that you know who you can respect and say, "I would like to get married. Please help me do that." And I think that most people, especially who are married, are thrilled about that.

But they want to know because there aren't – not all 28-year-old women want to get married. But if these things are true – again, you pick what resonates with you. But these are some things that you can actively do that are in addition to or in lieu of just swiping all the time that can help to make it more likely to lead to marriage.

Normally, this little lecture is said to men, and normally the number tracking is much more important for men. I think it's simpler for women because if you have some of these basic qualities and attributes that are attractive to men, then you do get more approaches than men do. Men are often invisible to women unless they actually go and do it.

But at the same rate, you can calculate and keep track of the number of hours a week you spend in places where your ideal husband is likely to be, the number of opportunities, even the number of men that you meet in an appropriate, safe, professional setting, etc. Nothing weird, nothing's going to put you in danger, nothing's going to lead to some creep getting involved in your life.

And a woman who is more active about it and who is clear and intentional is much more likely to be married at 32 than a woman who just kind of sits back and takes it as it is. So none of this, McKenna, is intended to reflect on what you do or do not do.

It's just something I really feel a deep desire to help people with if at all possible. Because in our current society, the data is really shocking. Many fewer people who want to be married are married than want to be married. And many people have way fewer children than they want to have.

And if we don't change this and we don't fix the completely corrupted and broken system that our young people, that you have grown up in, that I grew up in, that our young people are growing up in, where they labor under these illusions that are not borne out by any reality in life, and they think that someday I'm just going to meet the one, and it's just going to happen, then we can't move back in a healthy direction as a culture.

And we really need to do that. So we're going out of real estate, but I have a deep passion for that subject. And I believe that of any possible thing I could say to a 28-year-old woman who has a desire to get married, that anything you can do that makes that more likely than less likely will make your life much better when you're 68 than just dealing with the specifics of purchasing a house or not.

Before I go on, let me pause. Any comments, any feedback, any reaction to that? Oh, no, and I would totally agree with pretty much everything you said. And I would say that I have been doing a lot of those activities, but there's definitely room for improvement. I think my only comment would be that, you know, it sounds like a full-time job.

Yep. But basically trying not to put all my eggs in that basket, basically. I'm trying to have, I guess, two goals in mind, one of financial independence in case that doesn't happen, and the other being everything that you just said, because I would totally agree. I would prefer to have been married, you know, years ago, but here we are.

Yep. And I don't know – I can't resolve the distinction between this. I talk a lot about this with my wife when I think about how we help our daughter and what I need to do with her. And it very much feels like I believe that my daughter would probably have the happiest lifestyle if she could meet an incredible husband, just an incredible man who loves her through and through and word and deed.

She could be a full-time mother, a stay-at-home mom. She could have a bunch of children. I think that would be probably the most incredible lifestyle for her. I also look at the society in which we live, and I feel like it would be wrong for me to spend all my time saying to her somehow, "Well, this is the thing that you should do, and you don't need to be well-educated.

You don't need to have a career. You don't need to have money," et cetera. Like, that would be simultaneously wrong. And so the balance that I think I will have to hold as a father is I need to do two things. Number one is I need to prepare her not to be just a wilting flower who's just dependent on a guy to come along and take care of her.

I need to prepare her to be appropriate and be able to care for herself, see to her future, because she may never marry. And it would be wrong for me to put her in a situation where she's unable to marry. But the great problem is that many of the things that you could do that lead you in the best direction financially, et cetera, are the things that in and of themselves damage your prospects of marriage.

You can become a boss lady and have the highest of career success, flash it around, be the most successful executive, the biggest house, the flashiest car, et cetera, and those actions are very likely to repel the kind of man who is going to be attracted to you. And so this is what relates to the house.

If at all possible, things like buying a house, would it be a great financial move for you to buy a house? Most likely, if you're building on that previous speech, most likely, most likely it would be. And yet, is that the best move that is likely to result in a great marriage?

You need to be cautious about it and you need to be thoughtful about how you express this. And so I think buying a house is a great thing, but what you don't want to do is build an attitude of independence that is so strong that it will make it difficult for you to merge your life with a husband in the future.

And that's where some of the challenges are. And so, again, I don't think that this is an answer to buying a house, but it should be something you think about. And I don't know the right answer. It's the same way I struggle with this question. It's like if I were 22 years old, should I drive a minivan or a Corvette?

Should I drive a car that has sex appeal that is likely to say like, "Hey, this guy has a flashy car and he's great," or should I drive a car that shows me to kind of be a boring, mundane guy who doesn't care about that, knowing that that will repel the kind of woman who just wants to drive in my Corvette, but it might attract a woman who wants a good father?

I've never resolved that question. I have no idea. The only idea that I have actually is simply that to choose a third class, a vehicle that neither completely lacks sex appeal, but is also completely impractical. So a Toyota 4Runner or a Jeep or something like that that just doesn't fit either of those molds and doesn't result in judgment.

I feel like the same thing is true for you, is that you should be building your financial life very, very strongly, etc., but you shouldn't be pursuing things that are going to be repulsive to guys. And I don't think that buying a house is repulsive, but I don't think it's something that you should rush into at 28 if you're not completely filling up your retirement accounts, etc., things like that.

If you were my daughter, then I would say make sure before you buy a house that, number one, you're living in a situation that is going to lead to your having good social dynamics, because one of the best things that you can do to maintain a really strong personal character is to live in a social environment.

And so that ideal social environment involves living with family. If there are mother, father, grandparents, sisters, brothers, etc., people who are around, so that you can be surrounded by a good, strong, healthy social environment. If lacking that, being surrounded by roommates and girlfriends that are carefully chosen, that share your value, share your lifestyle, etc., can be ideal.

And you want to keep yourself in a social environment just for your own personal mental health versus living in a big house all by yourself. And if you do have the big house, then you do want to choose something that you can fill up with good quality people who are going to be with you in a social environment.

And I would say because of the risks of that, because of the possibility that you may need to change if you're living in an area of the country where you don't have enough good high-quality potential husbands or you may need to change to industries or change jobs, you may need to move where your future husband is, etc., things like that, then I would much rather you just completely fill up all of your retirement accounts, your mutual funds, and all of those things and do that for a few more years and then buy a house when it's just a steal of a deal and is obviously a great thing versus this being a primary goal that I really need to buy a house right now.

The great thing about mutual funds, retirement accounts, etc., is that most of that wealth is invisible and you can get really, really rich really, really efficiently without the external indications of wealth that can go one of two directions, either attract a guy who's a deadbeat who's just attracted to you because he's going to be the deadbeat guy who mooches off of you or vice versa.

And so I think that for a young woman, prudence in those areas and having most of your wealth be hidden and you choose to reveal it is probably something that I would lean towards, but it's not an absolute rejection of buying a house. Is that gray enough for you?

Actually, I had not thought of that, slowly building up the retirement accounts and have it be hidden. That makes a lot of sense and as far as I know, I could still access that if I needed to before retirement. So I hadn't thought of that, so I appreciate that.

Yeah, my pleasure. I said what I wanted to say, so I just think the social environment is really important. One of the great problems that young people tend to do is they tend to live on their own, especially in American culture where you're just pushed to be on your own and to be independent by the whole culture around you.

I honestly don't understand why most people would ever want to live alone. You do want to have your own space, you do want to have enough privacy, etc., but I would always much rather live with people that love me, people that care for me, people who can see how I'm doing every day.

Being alone is not good for any man or woman on an ongoing continual basis. So if there is a living environment where you can rent a room from some friends of yours, it's just much better. You don't need to buy a house to build wealth. The house is appropriate at a different stage of life.

I would say there's a lot you can do just in terms of, again, fill up your retirement accounts. If you filled up all your retirement accounts and you still can save more money, just save more money. Then in three years from now or five years from now or something like that, when you find a great house, a really killer deal, and you have real confidence about it, then you'll have plenty of money to buy the house at that point in time.

Those are my thoughts. I hope it helps. That does. Thank you very much. My pleasure. Thank you. Now for a limited time at Del Amo Motorsports. Get financing as low as 1.99% for 36 months on Select 2023 Can-Am Maverick X3. Considering the Mavericks taking home trophies everywhere from King of the Hammers to Uncle Ned's Backcountry Rally, you're not going to find a better deal on front row seats to a championship winner.

Don't lose out on your chance to get a Maverick X3. Visit Del Amo Motorsports in Redondo Beach and get yours. Offer in soon. See dealer for details. Thank you. And with that, Jose, you have been extremely patient. Thank you. How can I serve you today? Yes. Good afternoon. Thanks, Joshua.

I've enjoyed the call so far today. My pleasure. I've got a couple things, but maybe I will limit it to one. Try to keep this under two hours. So I have a general philosophy that insurance is a bad deal in most cases, unless it's ensuring a catastrophic loss. And so, for instance, you buy a cell phone and they say, oh, do you want the protection plan for an extra 10 bucks a month?

I assume that they're in business to make money and. Assuming that I can pay for it, if I drop it in the water and destroy it, it's going to cost more in the long run for me to pay for that insurance. And so same thing with like a car's extended warranty, that sort of thing.

And I wanted to hear your thoughts, obviously, something like health insurance when you have a lot of assets that could be spent up because you're in the hospital or something that that makes sense, because that could be a catastrophic loss. But one, I was curious about your thoughts on that general philosophy.

And then, too. Where do I draw the line? And part of that is I do have a property that I don't currently have insured. And if I lost it in a fire, it wouldn't be catastrophic, but it would be a bummer. On the other hand, the cost to insure that at the moment is relatively high because.

It's an unoccupied property and so I'm just trying to weigh like at what point do I say, no, this is worth it to insure it versus, no, it wouldn't be catastrophic if I lost it. So let's not waste the money. Right. Right. It's a good question. So the first thing I would say is, let me see if I can find it real quick.

In the very beginning of Radical Personal Finance, back in the first 30 episodes or so, I gave a show where I gave a complete outline of all of the structure for risk retention. And so the first answer to your question is to say that deciding whether thinking that you only buy insurance or you don't buy insurance and that's the only way that you cover risk is a false conception.

And so actually I found it. It's called Do I Need Insurance? A Mental Model to Analyze Methods of Dealing with Risk. It's episode 91, published on October 29, 2014. And so, you know, my introduction, many of us have had exposure to various forms of insurance throughout our lives, but how do you make the initial decision whether insurance is appropriate for you?

Today I share a framework with you for considering various risks you face and various ways to deal with those risks. So I'm not going to repeat that entire podcast. I have not changed my opinion since that date. And when you listen to that show, episode 91 of the show, you will recognize that insurance is perfectly appropriate in some situations and is perfectly inappropriate in other situations.

And so let's use an example like the cell phone. If I don't buy insurance on my cell phones, I can't remember that I used to, but I can't remember the last time that I did. And the reason is very simple. For me, the loss of a cell phone and needing to go and purchase another cell phone, even the kinds of premium thousand-dollar cell phones that I use, would not be a significant event in my financial life.

But if my, let's say my 16-year-old son comes to me and he's got no, he doesn't have a lot of money, but he's buying a premium cell phone. Now, let's assume it's a good idea. Maybe he's making money on it. He's doing video and all the premium stuff that you can do on a cell phone, et cetera.

And he's making money at it. Then I would absolutely recommend that he gets the insurance because of his different financial status. For him, the loss of that cell phone could be a very significant event in his financial accumulation. And so this never changes. The situation that you're living in with a house and saying, "I'm not insuring my house," can be appropriate or not appropriate depending on the financial stage.

So here are three simple comments to go in addition to that entire quadrant that I give in episode 91. The first thing to consider is the cost of the insurance. There are insurance policies that are a great deal, and there are insurance policies that are not a great deal.

And depending on the cost of the insurance, you may make a certain choice. And the example I would use here is simply that I own long-term care insurance. So I've owned this since I was probably 24 years old, 25 years old. It's not that I think I need long-term care insurance.

In fact, every time I talk about it, I'm very clear that I don't need it, nor would I ever recommend that someone has it. The reason I bought it in the situation, unless it has these exact fact patterns, the reason I bought the insurance was that I was buying an insurance policy that I knew would never be available in the market again.

And it was very inexpensive for me because of my age, and I had the extra money. And so it's a good deal for me, even though I don't need the insurance, and I wouldn't tell someone else unless they had those exact fact patterns where the product was going to disappear to have it.

But I've had it for years, and the cost of the insurance is fairly negligible. It's triple deductible from a tax perspective. It's a product that will probably never be on the market again during my lifetime. And so even though it's not technically necessary, it's something that I own because the cost of the insurance was negligent.

Negligible. The second thing is you can consider the concept of adverse selection. And so you, in your own circumstances, the benefit that you have as an individual who's purchasing insurance is you have more personalized information than the insurance company has. So if there's something that is you know you face a higher risk for something, then you may be more willing to have insurance for it because of your unique personalized risk that someone else doesn't have.

So let's say that you are a fisherman, and you're always around the water. You're always out on the boat. And you know that whatever cell phone you have is going to be rained on, and it's likely to fall in the water when a big fish bites, et cetera. It's just what happens.

Well, you might get the insurance where someone like me who's generally in my office and who's very careful with electronic devices, I'm not going to do it because I'm very rarely on the water. And so if there's some personalized thing like that, so floodplains, and your knowledge of the flooding nature of a specific your neighborhood or your house, or your house's unique exposure to wind forces or unique fire danger, et cetera, may cause you to have insurance.

Whereas on the flip side, let's say that you know that your house is protected from wildfires, and you know that all of the electrical wiring in your house has been up done, and it's very unlikely for it to catch fire. And you have good systems to protect your house from fire.

Well, then in your situation, you can feel really good about skipping it. And so your individualized knowledge is going to play a role as well in your ability to get stuff. And then number three is just simply going to be the importance of the outcome. So your instinct of what you said at the beginning, that insurance is a bad deal unless it's for catastrophic costs, is the right mindset because that's normally true.

And so if there's something that you just can't afford to do without this thing, then you insure it. But you don't necessarily always purchase insurance for it. There can be multiple ways of insuring it. So as the cell phone example, I myself have and basically live with and travel with two cell phones.

And the reason is that the catastrophic risk of not having a communications device ready to go is too significant for me because my entire life and the well-being of my family probably rests upon having a functional phone. So I've just upgraded phones more frequently than I otherwise would. I didn't buy insurance policies on them, but I have a mirror image phone ready to go that has everything loaded up so that if phone number one gets stolen out of my pocket, then phone number two is ready to go.

And so the catastrophic risk for me is not being able to run my business, not having the communication things that I need, et cetera, and being incommunicado for a couple of days. But the solution is just a different form of insurance than just an insurance policy. So if something is catastrophic to you and it's really important and it would be a big deal for you, then you should insure it or you should not have it.

And that's another way. So a car is an example. Generally speaking, I think that people should not have cars that they need to have big expensive insurance policies on. So somebody could have, let's say you're young, you don't have a ton of money, you go and you buy a brand new car and your insurance policy, because you're young, is going to be very, very expensive.

Well, looking at that situation, it is absolutely true that somebody in that situation who's young, doesn't have a lot of money and bought this big expensive car with a big expensive insurance policy, it's very true that that person should have full coverage, collision liability, everything on that car because of the risk of loss being really catastrophic.

But instead of doing that, I would rather see the person get rid of the big expensive car and buy a car that is so modest that they wouldn't need to have that big insurance policy on it. And so there's always multiple ways around the insurance policy. So those are just some thoughts off the top of my head to say that I generally agree with you.

And I just like to add a little more texture to say that insurance policies are not the only solution. There are other ways to look at it and approach it. Yeah, I appreciate that. And I think we probably see eye on that for sure. And this came up recently, and this also ties into a second question that's shorter, if you don't mind me asking that as well.

Go ahead. So I recently bought a new vehicle, and at the dealership, they were just amazed that I wouldn't want the extended warranty. And maybe that was false amazement because they just wanted to sell it. But I said, well, first of all, you have to make money on that extended warranty.

And based on how hard you're pushing, you must be making a lot. And my second thought was kind of what you just said, which is if I can't afford to repair this, then I should not be buying this vehicle in the first place. And so second question, recently you had talked about car loans.

And I got the impression that you were against it in maybe all cases, or in most cases at least. And I wanted to push back, at least in my situation, I'd actually never purchased a new vehicle until the past year. But the interest rate was so low, and based on my business, I do a lot of borrowing at higher rates than the car loan.

So to me, I thought it was a pretty clear decision to take it out on a loan instead of pay for it in cash. And I just wanted to hear your thoughts on that as well. Yeah, I'm 95% opposed to car loans because in most situations, they don't help improve the economic outcome that somebody experiences.

But let me back that up. I'm 85% opposed to car loans. But there is 15% of individualized circumstances where I think they're justifiable. And so your situation might be one of those. And I can list off, you know, off the top of my head, I could list off half a dozen situations, which I think a car loan would be perfectly fine and reasonable and smart.

At its core, I would say that finance is not always a mathematical optimization structure of life. And there's a very, very important to look at all finance through the lens of scale. So things like leasing cars, let's just stick with that. Virtually all financial planners or financial pundits will say that leasing a car is suboptimal.

Because it's just obvious that it's suboptimal. But we do suboptimal things all the time. And doing something that is suboptimal doesn't automatically mean that it's a mistake. That we may choose to do something that is suboptimal because it's just not an important component of our overall life. And so, you know, things like cars, I use variability to say, does the car matter for your career?

For the vast majority of people, nobody cares what kind of car you drive. And, you know, going out and buying an expensive car so that they'll think better of me is a fool's errand. It would be completely stupid. And yet, there are people that based upon the image that is presented by their car, I would give the opposite advice.

And so, I think that any good responsible advice is going to understand the basic truths that exist. Why do we not always buy new cars? Well, because if we're always just upgrading, buying new cars, we're operating a vehicle at the most expensive cycle of its life. And then that person would look for the counter truths.

Why does, you know, public supermarkets, where I'm from, public supermarkets is the thing. Public supermarkets drives, has an enormous fleet of basically brand new trucks that as best I can tell are all leased. Why? Why? Why wouldn't public supermarkets be frugal and drive their trucks until they're 20 years old?

Because for a supermarket, the most important thing is not having the absolute lowest per mile cost on delivery. The most important thing is having a fleet of trucks that work all the time so that every store always has everything that it needs. And so, the point is, I mean, I'm fine with ambiguity.

It's why I'll never be as successful as Dave Ramsey with his dogged commitment to his single message. But I do want to be honest with the ambiguity. So, you know, and like what you're saying, is the car a lower form of financing than other forms of financing that are available to you?

Sure, absolutely. But in buying a $50,000 car or whatever you bought, did you immediately go and pay down $50,000 of a higher interest rate debt? My guess would be probably not. And so a lot of these games are, okay, it's fine, but it's also not, you know, we don't usually follow through as much as we would like to think that we do on all of the details.

But we don't have to. You don't have to be perfect. You just got to get the big things right. And so in your situation, I would doubt very much that your car purchase is a problem for you based upon your overall financial situation. But if you were 22 years old and you're working a minimum wage job and you're coming off and showing your brand new Kia, I would yell and want to slap you across the face for your stupidity.

But it's not because buying a car or not buying a new car or not buying a new car is morally right. It has to do much more with the overall impact of your life and its relevance to your overall situation and your lifestyle and the decisions that it opens up or closes off for you.

Yep. Okay. I think that I think that makes sense. Yeah. And in my circumstance in the business that I work in, which is like real estate investment, flipping and such. My debt changes so much month to month depending on where I am in a project that it really, you know, the debt is fungible.

So I feel like, okay, well, $40,000 at 3% as opposed to an extra $40,000 on another deal at 9% depending on the month. Right. And you may follow through. So at its core, we don't have to be perfect. We're not in personal finance to just make everything mathematically optimized.

If it were mathematically optimized, we would all go around with all of our clothes bought from Goodwill for our entire lifetime. None of us are going to do that. This is personal finance. And so there are many, many points in life in which we don't do the optimal thing because we don't want to.

We want to live a different way. And that's perfectly fine. The only appropriate litmus test or the only appropriate standard to compare your actions to is your goals. It's the achievement of your goals. And if you are achieving your goals and you understand what you're giving up by achieving your goals, then that is fine.

And so the example I like to use, I have a family member who likes to drive nice cars. Doesn't buy them brand new but likes to drive nice cars. I make a different choice. And it's not that I don't understand the value of a nice car. Most of the brand new cars I drive are cars that I rent.

But I spend a lot more in international travel than he does on his nice cars. And he doesn't seem to be interested in international travel, which I totally get. I don't think you should be interested in international travel if you're not. It's a lot of work. It's a lot of hassle.

It's a lot more comfortable to stay at home. And so I have complete and full respect for a guy who says, "I'm happy to stay at home." And this is not my family member, but I'm happy to stay at home. I'm happy to do my international traveling with my big screen TV.

And I like having a nice car and I make the money for it and I can pay for it. And to me that's perfectly fine. The only reason that people – the only reason that would be a mistake is if he didn't understand what he was giving up. And so if we look at all personal finance advice, it basically comes through the lens of the unexplored alternative.

So why does Dave Ramsey say, "Don't ever buy a new car unless you're a millionaire," and his other rules? Well, because majority of people, their cars are causing them to be broke. Their cars are keeping them in a lifestyle of no peace. They don't have financial peace because they have a bunch of payments.

And they're stuck in a job they don't like driving down a road in a vehicle they'll never own to impress people that don't care about them. And so you look at that situation and you say to somebody, "Don't you understand that this one simple decision of not driving such a ridiculous expensive car and not having payments could lead you to a lifestyle of freedom?

You could get a job that you like. You could quit your work, et cetera. Don't you understand that?" And along comes someone even more hardcore, someone who says, "Don't you understand that your car in and of itself of any cost is causing you to give up on early retirement?

And you could be retired in five years, but you're driving this car instead?" And so the person who's super dogmatic is the one who wants to retire in five years. And they would much rather retire in five years than give up their car. That's perfectly fine. But someone else may look at and say, "I don't want to retire in five years." And that's fine as well.

We're not dealing with moral right and wrong where we have objective, clear moral values. We're dealing with your standard should be my goals, my vision, and my ability to achieve that. And then you should also make sure that your goals are fully informed by what are all the alternative choices that you could make.

And then within that, we're going to choose differently one person over another. I myself, I just assume live in a place where I don't need a car. I don't like them. I've driven, I don't want to say millions of miles, but I've driven a lot. And at this point in time, I just assume live where I don't have a car.

But, you know, someone else can make a completely different decision, and that's perfectly fine. As long as you know what you're giving up and as long as you know what your goals are, then that's fine. I don't think it's – it's not right or wrong. It's just shades of idealization towards your specific goals, this mythical standard of your ideal outcome and how quickly you want to get there and what style you want to arrive.

That's great. Yeah, and my outlook has definitely changed in the last 20 years. I think I was on the extreme idealistic side in my 20s. And honestly, at that time, I think that probably helped me so at this point I don't have to live in a cardboard box. Right, right.

Rules are helpful. They're clear. I mentioned Dave here a couple of times, Dave Ramsey, but it's what I tell people. It's like you will never go wrong following Dave's advice if by wrong you mean being in financial trouble, et cetera. Like you're always going to be right. You just may not get the most ideal outcome, right?

You may not be as rich as you would otherwise by using leverage in your real estate investing, obviously, but you're never going to make a mistake. And so that – those advice and those rules are, I think, really important. And all of us decide how much we want to pay heed to them because of our own goals.

So that's all I have to say. Anything else, Jose? No, we're good. Thank you so much. My pleasure. Thank you for calling in. And with that, we conclude today's Friday Q&A show. I want to thank all the many callers. What a great variety of questions. I love doing these shows, and I thank you so much for being here for it.

If you would like to join me on next week's show, go to patreon.com/radicalpersonalfinance, sign up to support the show on Patreon. That will gain access for you to these Q&A shows, and I'd love to speak to you next week. Thank you so much. And remember as we go that there are two things going on right now.

Number one is I have personal consulting calls open for the month of August. For information on that, go to radicalpersonalfinance.com/consult. Link in the show notes, radicalpersonalfinance.com/consult. Also remember registration open right now to come hang out with me in Panama in January. Go and sign up now. Go to expatmoney.com/radical, expatmoney.com/radical.

All the details there or in the previous podcast episode. Thank you so much. The holidays start here at Ralph's with a variety of options to celebrate traditions old and new. You could do a classic herb roasted turkey or spice it up and make turkey tacos. Serve up a go-to shrimp cocktail or use Simple Truth wild-caught shrimp for your first Cajun risotto.

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