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Welcome to Radical Personal Finance, a show dedicated to providing you with knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less. My name is Joshua Sheets. Today is Friday, July 19, 2024. And on this Friday, as we do on any Friday, when the computers are working and the internet is working and all of the microphones are hooked up and all of that, we do live Q&A.

You set the show for today. If you're new to here Radical Personal Finance, welcome. I'm glad that you are here. And I'm glad that you can join me on a live Q&A show. These are open line shows. You get to call in, talk about anything that you want. You set the agenda.

You ask any question. You raise any topic. We can talk about your personal situation, discuss some question or challenge that you're thinking. We can talk about some philosophical consideration. That's all up to you. If you'd like to join me for one of these Friday Q&A shows, you can do that by going to patreon.com/radicalpersonalfinance.

Patreon.com/radicalpersonalfinance. Sign up to support the show on Patreon, and that will gain access for you to one of these Friday Q&A shows. I do that to allow me to just simply meter the flow of callers a little bit, keep it to a manageable four, five, six, something like that, which really works out for a one to three hour show.

And so you can, again, go to patreon.com/radicalpersonalfinance if you would like to join me on a future show. Just in beginning, as I record this on Friday, July 19, I just want to point out, obviously, hopefully you are aware of the large IT outage all around the world. Quite interesting to see.

Huge disruptions in the travel industry, significant disruptions in all kinds of businesses. Many just normal businesses finding themselves unable to do work, unable to process admissions, credit card machines down, all kinds of issues around the world. The extent of the situation is not particularly yet clear. There seems to be some improvements going on, which is great.

And so hopefully it'll just turn out to be a minor blip, and we'll be able to get back to kind of life as normal. However, one of my core philosophies that I urge you to consider accepting for yourself is simply, when something bad goes wrong, assume that it happened to you.

And what would that look like? So if something bad happens to someone else, and you're not affected, then just ask yourself, all right, well, if that happened to me, how would I be affected? And by just systematically doing that over time and then putting in plans to mitigate whatever the long-term consequences of a bad situation would be, you'll build yourself into a much more prepared individual, much more resilient, and you'll be prepared to go through difficult times with less disruption to your life, to your business, and also to be able to help people who are not as fortunate.

So as you look at-- I'm sure that some of you are affected by the current events. As you look at computers not working, just ask yourself, if my computer didn't work, do I have backup plans? If everything was corrupted forever, if my computer shut off today and I couldn't get anything, is there a backup plan?

Do I have the ability to go and get my data? Do I have my data backed up? It's a good thing to ask. Think about how you would collect payment if you're running a business. Do we have an alternate form of payment? Think about what would happen if the electricity went out.

I saw one quote from some professed expert who said that this is much more like what we were expecting on-- what was it called? Y2K. Much more what we were expecting from Y2K than Y2K itself turned out to be. So what would you do if the power went off for two weeks?

There's been hurricanes recently where people are going through a week without power. What would you do if you just had no electricity for a couple of weeks? Do you have some plans in place for that? So just use these examples and try to learn from them in order to position yourself for future success.

With that, we go to the phones. Seth in Nebraska, welcome to the show. How can I serve you today, sir? Hey, Joshua. Can you hear me? Sounds good, yes. Great. So yeah, so I've been listening to you since 2016. That was my summer after my sophomore year of college.

I was 20 at the time. I'm 28 now. So my wife and I got married that summer with an unplanned daughter on the way. She had already had a two-year-old daughter at the time as well. So I kind of went from a carefree college guy to a father of two in about a nine-month span there.

So that's when I started listening to you. I knew my finances were pretty much cooked. And little did I know, they were more cooked than I even had thought at the time. So I started listening to you. I was making $11 an hour working on a golf course doing the grounds maintenance, living off of student loans, Pell Grants, WIC, food stamps, all that stuff, and then eventually credit card debt.

So graduated early, became a teacher. And with your encouragement, talking about increasing income, I ended up doing lawns on the side since I had learned how to take care of stuff like that with the golf courses. I just went out student teaching, and then I was teaching with my actual job.

I was able to grow the lawn company large enough that I was able to quit teaching after my second year. That was the COVID year. So it was actually kind of nice to get out of there because I had a lot of teacher friends saying the year after that with all the masking was pretty much awful.

So that was great. So the thing is, I'm making a pretty solid income right now. It's nothing great. Nebraska's cost of living is really low, but that helps a lot. So I'm making about-- so I'm able to pay myself a net salary of about $80,000. The business itself, we should gross minimum $400,000 this year, but it could be a lot larger than that.

But I'll discuss here in a second kind of the issues. I'm wondering what I need to do to grow my business in a way that eventually I can sell it. I'm not really interested in selling it right now. There's no rush. I do understand that this is essentially talking about building a bridge to wealth.

And I understand that this is my bridge, and I shouldn't tear it down or give up on it when I'm five feet away from the other shoreline trying to start a new one. But I'm also understanding that it is a narrow bridge that takes a lot of maintenance. I understand that-- well, I'm realizing more and more now that the low barrier of entry for lawn care that allowed me to get into it when I was on food stamps and things like that at the time are also the reasons why it's not really terribly profitable, as well as the employees in this line of work are oftentimes not great.

They are seasonal. They seem to just-- you get a good one here and there, and then they-- I've got a couple of good ones that I've gotten to stick around, but it's just really tough as far as consistency goes. And I just find myself basically working my butt off to keep the business going.

And I basically just come in and save the day. And I realize, wow, I'm doing 20 or 30 hours a week of $25 manual labor when I could be using my time in a lot better ways. And so because of all that, I've been transitioning a little bit more into fertilization pest control because it does have higher profit margins.

People are paying you because they don't know how to do the applications. They're afraid to mess up with the chemicals versus with lawn mowing. It's like, oh, I just don't want to do it, so I'm going to pay some guy to come out and cut the grass. So that is something that's positive.

We doubled our fertilization customers this year while keeping our mowing customers the same. So as far as just right now with the business, I plan on continuing that fertilization route so that the business is just a little bit easier on me. It's really hard to keep a strict schedule where you have your Monday yards, Tuesday yards, Wednesday yards, and they're the same every single week when you have seasonal employees that are not consistent.

Whereas fertilization, the schedule's a little bit easier. And again, the lower labor percent just makes it a lot easier to pay guys more. They have to do certification tests and things like that. So that's what I'm doing right now to keep the business going in a way that's making it a little bit easier on myself.

But I don't see myself necessarily continuing with this business in 10 years. So I want to be building other companies, investing in real estate, doing things like that. I love inventing things. I want to have several sources of income other than just this one company. That basically makes it where every day I'm worried about the weather.

All year long, I'm checking the weather app. I mean, I don't know. I probably have a record for how often I check the weather app. And then as well as, I can't plan a trip because the second I do, two days before the trip, somebody quits. Or during the trip, two guys don't show up, and I'm sitting there on this trip.

All I just wanted to do is just take a Thursday and Friday off. And then now all of a sudden, it's Saturday, and half the Friday yards aren't even done yet. And I only have one guy out there working. And it's like I'm sitting there stressed out about it.

So the questions I really have-- I know it's kind of a long intro-- but how do I structure the business from here on out so that when I want to sell it, I can? When do I know the right time to sell it in my life? Again, I'd like to have other businesses in play that are also bringing me income.

I'm not going to just throw this away before I'm set up with other things. And then other certain milestones that maybe I need in the business that make it more desirable for people to purchase it-- I don't know if that's the amount of income, the amount of time the owner, myself, am putting in on a weekly basis.

Should I be keeping track of that, my hours? And then also a solid place of residence. Right now, we are working out of a rented shop. It's actually basically a storage facility. There's a couple other businesses that work out of there. But would it be better for me to purchase a place?

Does that look better? Or is that even worse? Because when somebody buys it, are they going to move everything to their place anyway? Now they have this property that they deal with? Things like that. Got it. Congratulations on all your progress and for taking hold of your responsibility and making enormous progress.

Congratulations. Thank you. I appreciate it. Listening to you, really, that was a game changer, a life changer. I'm so glad. Thank you. If you sold the business today, what business would be your next business that you would go into? So that's part of it. That's why I'm not really afraid of holding onto this.

But it seems like this business just takes so much of my time and energy that because I have computer work I need to do as far as talking to customers and doing things like that, sending out invoices. But then that all gets pushed back to evenings after my wife and kids go to bed because I'm out mowing yards all day or helping out with the fertilizer or something like that.

But I have a couple of different products. Again, I love inventing. So I have a couple different products, some that are involved in the lawn care company space in general that I probably like to start. I'm interested more in product companies or knowledge companies rather than, again, the service companies.

You talked about the other-- I haven't honestly thought about this until two weeks ago when you brought it up, I think, on your podcast or three weeks ago about-- well, now I'm blanking. Searching for your next car? Don't settle, thrive. At CarMax, it's easy to shop online or in person.

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What do you call it when you buy a company that-- or you purchase into a-- franchise, franchise. Yeah, yeah, I don't know how I blanked on that. Franchise, you know, franchising maybe. And then again, just investing as well. If the company, I could get it to the point where I sell it for $1 or $1.5 million, I don't quite know the value of the business as a whole and where I will be in five years.

But at that point, I'd like to be reinvesting that stuff into real estate, which could take up a lot of time as well. Right, OK. All right, so let me answer your questions and give you a framework to kind of build some things on. First and foremost, I don't know what specifically you need to do to your business in Nebraska in order to make it attractive to a potential buyer.

But you can find that out by looking around in your area and asking yourself, who would buy my business in three years time? And try to figure out who that person would be, and then go and talk to that person. And I mean actually genuinely go talk to the person.

I'm glad that you identified the problem being the barrier to entry, because that is exactly the problem. The great thing about a lawn care business is simply that anybody with a little hustle can take a Toyota Corolla, put a weed eater and a lawn mower in the trunk, and go up and down the street and find a way to make a living.

And so a lawn care business is a business that's open to anyone with a little hustle. Now the problem is then that that competition is generally going to push down prices, because it's available to anyone. If there were some kind of trade cartel that could protect the business against other people coming in and make it hard for people to come in, like let's say a licensing mechanism for physicians.

They have a licensing mechanism that makes it really hard to come in. And so they have very low competition, and they can command much higher wages, obviously, of course, the value of the services. But things like having a licensing-- if you set up a licensing cartel for lawn maintenance, and you have to get some kind of government license or some other thing like cosmetology, then now you have fewer people coming into it, because there's a protectionist racket there that's keeping it out.

But in lawn business, you don't have that. So this is your fundamental problem. Now the question is, who's going to buy the business? You build a business with, say, 500 accounts or 100 accounts. We'll just use 100 accounts. And so now you've got 100 accounts that you're working on.

The guy who would put his lawnmower and weed eater into the trunk of his Toyota Corolla is not going to buy that business. Who is going to buy the business? Well, it's going to be somebody with money, and it's going to be somebody who wants to own it. So the person with money, generally speaking, the only people with money who are going to want to buy a business like the one that you've built is going to be somebody who already has a preexisting connection to the industry.

I'm not going to come and buy your business, because I would just say, well, I could build my own if I wanted to. And I'm not going to spend a lot of money on buying a business unless I'm already in that industry, because there's a relatively low barrier to entry.

Anyone can get into it. But there's going to be companies or other business owners who are in your area who are in an aggressive growth mode and have money and are looking to expand. Those are the ones who are likely to buy your business. So you need to think about who that person would be.

There's probably only a couple dozen of them in your area. And go figure out how to make some contacts with whosoever is involved in those businesses. And make it clear that I've got this business. I'm looking around to see who might want to buy the business. And I figure you guys might be people who kind of do that.

Have you ever bought a business before? There are people out there who will buy businesses. Now, I worked in lawn maintenance. And what happened is the guy that I worked for when I was young, he just eventually sold his business to one of his competitors. And that's probably how things work, because you need to find some guy who's kind of at the stage of a business where he's got enough money.

He's got the crews. He's got things. And he wants to quickly acquire accounts so that he can increase his scale. Now, you may also look around and say, well, is there a corporate entity that's doing this? And this is where you'll start to think about differentiation. You mentioned things like fertilizer and pest control.

That's a distinct-- that's a significant difference from the guy with his pickup truck and lawnmower in the back of the truck. That now you can appeal to a larger company. You may have more commercial accounts. You may have higher end accounts. And that may be the kind of thing that you can do with your business that makes it more attractive to a large company.

If you're in that space, look around and see, is there a business broker that's doing business in this space? And go talk to the business broker. Introduce yourself. Tell them about your business. And get some advice on what you can be doing to make your business the most attractive to people in your area.

Because a lot of this stuff is very much area-based. And that's your first thing, is get the real, on-the-ground information from those people. With regard to questions one and three, as far as the structure of the business and then the milestones to make it more desirable, I don't know without knowing the people in that space.

So it may be that the only thing you're basically going to be paid for is the number of accounts. It may be that all that matters is size. And if you find that out from a business broker, then you now know that this differentiation that I'm trying to do of doing additional services is not serving the end goal of creating the business that's saleable.

If I'm just going to be paid based upon the bare number of accounts, and that's going to be the key metric, then your goal is just to go out and get as many accounts as possible. On the other hand, if it is going to be based upon the specialty services and the fact that you have these higher-profit businesses in place, then now you would focus on maximizing those.

So the long-term structure of the business and the question regarding the milestones to make it more desirable could only be answered when you can identify the specific company that is likely to purchase the company and then think about what would be attractive to them. Now, there are a number of things that any business can do that make it more saleable.

So you should always do these things, and they are the necessary things to do along the way. Number one, have good, organized financial records that are up-to-date, that are accurate, and that are clear. And the earlier you can get good financial controls in place and keep them in place, the better, so that you can inspire higher levels of confidence in your prospective buyers.

Having a business that's run efficiently, so that there's a higher profit margin, is likely going to inspire confidence in a prospective buyer. I don't know about things like equipment, how that actually works out in the long run. But at the very least, you should make certain that whatever equipment and business things are that you have in place are maintained in the best possible condition, so you get the highest long-term resale value and valuation in the sale.

You should also think about your documentation and think about your staffing. Because if somebody comes in and buys this kind of business, having employees who have been with you for a long time, who are relatively well-run, having a good training program, just having a business that is properly documented with good employee training programs, good recruitment programs, things like that, is going to be a big deal.

And then when we get to things of diversity of services, I don't know how that stuff shakes out in the long term. But think about those factors as you're talking with people. When is the right time to sell your business? I would say the right time to sell your business is when you have an idea of the next thing that you can move to.

And you can see that you can't do both at the same time. So if the next thing that you want to move to is investing in real estate, and what that means is I'm going to buy a house, one house per year, and shop around for it, finance it, fix it up little by little, well, you can obviously keep this business and buy a house per year or a house every two years.

And you can become a real estate investor using that pathway. On the other hand, if you have a clear plan for a new business that is markedly different, and you can't do that new business without capital or without time, then that would be a good indication that it's time to go ahead and sell the business.

And what you should do is you should get some form of valuation for your current business, ideally by a real prospective customer or a real business broker who sold a business like yours before. Figure out what the multiple, if it's going to be a revenue or earnings multiple, figure out what the multiple would be for your kind of business, and then look and see what this business could grow to over the next three or four or five years.

So if you find out that the multiple is very small, as I'm guessing it is compared to many other kinds of businesses, if you find out that the multiple is very small, and you figure I could grow this thing by 20% in the next three years, which would be a good growth rate, but it's a 20% increase on a small number, but you have an alternative business that could go to double the multiple, because it's a different industry, and it has potential for a 50% growth rate, then now you would clearly want to move faster away from this business, because you've discovered the weaknesses of this business, and you've discovered the strengths of another business.

So I would say that you want to get an idea of what this business could be worth if you really poured it on five years from now, and what an alternative business would be. And when you come up with an alternative that you feel confident has a good chance of success, that you yourself can execute on, and that is superior to what you're doing, then you go ahead and start making plans to actually sell the business.

Now the good news is, I think almost any asset and any business is always for sale. So you probably don't need to do much anything differently in terms of timing, except wait for a buyer to come along. If you actually were going to market this with a broker, sign a contract, that would be different.

But if you were just kind of casually networking within your industry, and especially focusing on meeting the kinds of people who might like to buy the business, and you drop a hint here and there that you'd like to sell the business and move on, you can be operating the business effectively now, while also moving on to the next thing.

What I would say is, don't neglect the lessons that you're learning. The most valuable thing about this business is because it's straightforward, you've been able to learn these lessons step by step along the way. And if you can't fix the problems of the business, you have to ask yourself, are the problems that I'm facing due to the basic inherent nature of the business itself, or are they due to a personal area of incompetence?

So if I'm having trouble finding, attracting, and retaining good quality employees who are gonna come to work and show up on time, is that something that is fundamentally due to the actual business or the industry? Or is that due to my incompetence at creating an attractive job, recruiting high quality candidates, and training them so that they want to stay with me?

I'm not saying which it is, but if it's the latter, then you wanna focus on saying, what could I do to improve this, and learn the lessons from it? 'Cause whatever the next business that you go to, good chance all these same problems that you have right now are still gonna be with you.

Let me pause for a moment before I go on to your other questions. Does that make sense conceptually? - Yes, 100%. And I actually already have a guy, now that you've said all that, I don't know why I didn't ask him in the first place, I've got a guy in my church that has a really big landscape company, and he's actually purchased a fertilizer company in the past, so that'd be perfect to talk to him.

- Perfect. - Yep, 100%. - And if you've got that guy, ask him for other people like him who have also done that. So remember that the secret to breaking into a network is usually just finding that initial toehold. You may only know one person, but he probably knows another person or two that does it.

And so if you're genuinely asking for advice from him, it's not a difficult thing for him to say, oh, here, call my other friend here, he's done it too, and he can also help you out. With regard to the building of solid place to work from, that's gonna depend on the timeline of the business.

Generally speaking, it's always smart to buy real estate that your business is in. That's a good thing, because you've got a good tenant, you can keep an eye on things, and if you can make the finances work, then you can get the best of both worlds, because you have the income and the growth in asset value, and then it's a good way that allows you to later just sell the business, but keep the real estate.

The only distinction would be if you might need that capital for a new business. So what would be a mistake would be, I'm gonna go and buy a real estate for this business, but 12 months from now, I sell the business, but I sank my life savings into buying that building, and now I need those life savings to start the new business.

Better to start the new business in a rented facility so that you can get the business going, rather than to make the mistake of purchasing real estate too soon. But if you've got a five-year timeline, or whatever the timeline is to the sale of the business, and you see a property that would be appropriate, then I would say, sure, move in the direction of selling the business.

And then the other question you said, as far as what is the right time in my life, the answer goes back to what I said, what's the next opportunity? If you know that this is not the business that I want to have 10 years from now, then it's a limited time business.

And so the right time in your life to go for it is as quickly as you can find the next business, and as quickly as you can develop the personal ability to deal with that next business. So you may need to do this one for three more years so you can stockpile capital, 'cause the next business requires more capital.

But it'll all just be based upon, can you find the next thing, and what do you need to make the next business go? - Sure, yeah, that makes sense. So if I were to purchase, say, a shop for this business, is there a way that I should purchase it so that I can keep it in my personal possession and rent it out to, say, the company that buys the actual business itself?

Or can I just purchase that as my business, and when I sell it, I say, "Hey, this is excluded," or how does that work? - You can do any of the above. It really doesn't matter. So the name that's on the title doesn't matter all that much. It's basically the same almost any way you do it.

Ordinarily, if you have a business that's operating, ordinarily you would want to separate the operating business from the asset ownership entity. So it would be ordinarily smarter not to put the ownership of the building into the same company that has liability because you have significant liability to your employees, you're operating dangerous equipment, you're doing things that could create lifelong hearing damage and lifelong injuries and things like that.

So if this building is owned by the company and you are negligent as a company owner, one of your employees sues you, well then because the building is an asset of the company, all of the assets of the company are exposed to the claims of the creditor. So ordinarily you would want to separate that ownership and you would put it into either your personal name or you would put it into a separate entity.

If we're talking about a significant purchase, I would always just put it into a separate entity. However, if it turns out that you do, for whatever reason for right now, have it in the business and you go to sell the business, you can cut it out at that point in time and just adjust and say, well the business is for sale but not the property and then move the property.

Changing title is not that difficult to do. - Okay, perfect. Thank you so much, I appreciate it. - My pleasure. We go on to Tim in Indiana. Tim, welcome to the show. How can I serve you today? - Hi, this is sort of a thinking like a wealthy person or thinking like you plan to be wealthy question.

Your last Q&A, you answered the question about affording a car. And the big lesson was like, don't get into the weeds and like not let little things take big energy. So like the question, what investment can I make to pay for a car indefinitely versus like, how do I save up for a car?

I really love that question 'cause it reframed reality and sort of broadened the scope of what I'm focusing on and what I'm comparing to. So personally, I grew up in like a humble, middle class household. I had one pair of shoes upbringing and it's been hard to shake this scarcity mindset and I've always kind of struggled with thinking bigger and just been scratching and clawing my way out of that ingrained mindset.

And knowing that you didn't grow up particularly wealthy and we have similar proclivities and personalities I've seen. Do you have any other ways to reframe your thinking or mind hacks that kind of get you to think about things in a radical way that really shift the mindset from like middle class mindset to wealthy mindset or even books that do that?

- Great question. I would say a lot of it is just due to exposure and this is where we're so, I'm so grateful to be able to live in the modern world because we can change the kinds of people we're exposed to very easily. If you and I went back a century, we would be living in our local town and the people that we would know would be those who were in our area.

We would know our neighbors, we would know our friends from school, we would know the parents of our friends from school, we might know some people from church, maybe a local community organization of some kind and then the people from work. And so at that time we had in daily life, we had a very closed connection that was usually based upon social class, ethnicity, neighborhood, whatever it happened to be.

If we wanted to get out of that, then we would have to go to books. And so we would need to go to the library, go to a bookstore, find a book written by somebody with a different experience, a different perspective and then buy the book and gain from that person's knowledge and experience.

Thankfully, that's something that's always been available to people to do and those who have done it have gained exposure to a different way of thinking, different ideas, different philosophies. Challenge back then though, was simply that publishing at that time was very expensive and there were lots and lots of gatekeepers.

So the gatekeepers were a positive thing, generally speaking, because if you're gonna have your book published, then it's gotta pass through an editorial review process, it's probably not gonna be all lies, it's just some lies or mostly lies, but not all lies, because there's gonna be an editorial review process.

And the publishing company is taking some responsibility for the book, so there's gonna be some vetting, some fact checking, some due diligence done on the book. But because writing was so time consuming, it was hard, it was a big undertaking that required somebody with significant motivation to follow through, write the book, get it published, to get it into your hands.

Fast forward to today. Today, we're all publishers. Every person in the world can publish something in some format extremely easily. The downside of that is that there aren't so many qualified gatekeepers. And so without an editorial review process and without fact checkers, we wind up having a hard time discerning high quality information from low quality information.

And this is why there's so many frauds and hucksters and just all kinds, it's very challenging to figure it out. So we have to develop some skills to be able to sift good advice from bad advice and honest people from dishonest people, all of that is important. On the flip side, we can gain access and insight into all kinds of people's stories.

And this is to me, one of the most valuable things in the world, that you can go and you can find somebody who is similar to you, but slightly ahead, and you can hear from that person directly, you can learn from the lessons that person is sharing, and you can allow that person to shape and adjust your thinking.

And that's an amazing opportunity. I think that it's best to look for somebody who is somewhat near you, but just a little bit ahead, or a good bit ahead, but not unreachably ahead. If you go, for example, and you say, I'm gonna go and read all of the essays written by the King of England, if there are any, that's gonna be very hard for you to relate to.

But if you go and you find somebody who makes 50% more money than you do, or who lives in your area, but has a different mindset around wealth, then you'll find that to be more relatable. So that's what I would counsel, is look for people who are similar in experience to you, but ahead of where you want to be, and start to follow their advice.

There's just been such a profusion, an absolute flourishing publishing industry, that all kinds of people now, with genuine, real, valuable advice in a niche, are now able to publish that easily to the internet. And we're surrounded by just an embarrassment of riches in almost any area. So I would just say, go look for someone who's in that.

Now, where we could go from here, and I don't know that I could do this extemporaneously, but what we could do is start to compose a list of goals, of the kinds of things that we would want to look for. So the person who might be well-suited to give good career advice, may be someone who is very poorly suited to give good family advice.

And the person who gives good religious advice, may be somebody who is very bad at giving good travel advice. And so we would want to think about the different areas that we want to make progress in, and then choose, in essence, a mentor or two, in that area that we can look up to, and learn from along the way.

And then just don't be scared to swap them out. I think the normal pathway of progression, at least the way that I consume advice, is I find somebody who has something that I want, I listen to that person, and I work to integrate everything that I can. But usually after a few years, unless that person himself or herself is continuing to grow aggressively, usually that becomes a little stale, and I reach a different point in life.

And so then I need to go out and find some new mentors who have some new life experience. And that doesn't mean that the previous mentors were wrong, or that there was some kind of error about them. They were fine for what I needed at the time. So it's perfectly fine to consume what's helpful from one person, and then swap that person out for someone different when you reach a different point in life.

- Okay, okay, that makes sense. Well, I won't be swapping you out anytime soon, Joshua. - Well, thank you. I try to keep growing, and so hopefully that comes through. But I appreciate that. But I actually, I think many people will swap me out, and that's totally fine. But I do try to stay ahead of the curve, and that's one of the reasons I try to share as pointedly as possible when and how my experiences have changed, when and how my positions have changed.

Because I think that growth is the natural course of a man's life. He should be growing. I should be different at 40 than I was at 20. And as long as we recognize that and are honest with it, then it will work. One more comment on the concept of scarcity mindset.

I'm very uncomfortable with this term, though I quickly acknowledge that it is useful. The reason I'm comfortable with the term is I've very rarely done well with psychological commitments to try to screw up a belief in something that is not backed by reality. And so I can recognize and identify the fact that, hey, I've got a scarcity mindset.

But I've always had a tough time with the way that people often apply the concept of the strangest secret or the idea of just believing in something that will happen in the future. I find that that, at least for me, sets a foundation of dishonesty, that I'm lying to myself.

I'm lying to myself of the fundamental, who is the one person in the world that I don't want to lie to. So I'm not about to sit around and say, I'm rich, I'm rich, I'm rich, I'm rich, when in reality I'm poor. I think the way that you overcome a scarcity mindset is by eliminating the scarcity through good, solid actions.

And then as time goes by, you talk with people and you identify one particular change in thinking that can be a helpful way to improve something. And the only way to eliminate, or a way to eliminate the scarcity mindset is to identify one or two things that are illogical and focus on something else to replace them with.

And so I've worked with a number of private clients on this topic over many years, and I've seen it in my own space as well. And that's one of the reasons I try to bring out basically the frame of scale to all conversations. If you, for example, by scarcity mindset, you're referring to something like frugality.

There is a truth about frugality that is applied at every level. So what I reject, for example, is somebody who says, you know, I grew up poor, I'm poor right now, I don't earn very much money, I don't have very much money, but I just read "The Secret", so I'm gonna sit here and just imagine the future.

And by the way, I may be unfairly pillorying "The Secret", I haven't read it actually. So if I'm mischaracterizing it, please forgive me. I make fun of it because it's become a meme in our culture, and when I hear people talk about it, they see it as just basically trying to instill a belief system.

Obviously, psychocybernetics is obviously an important component of life, and so instilling a belief system can be necessary, but it's not a sufficient condition for significant change. It may be a necessary first condition, but it's not a sufficient condition. So anyway, back to the point. So let's say that I'm poor, and I don't have any money, I don't know anybody with money, and I realize I have a scarcity mindset.

Well, the first thing to do is to be honest and say, I'm broke, I don't have any money, I gotta change this. And I start having money. And so the first thing to do is to start saving money. - Searching for your next car? Don't settle, thrive. At CarMax, it's easy to shop online or in person.

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- In order to save money, I need to be frugal. So I go, and if I have a low income, the expression of frugality is that I'm gonna go get my clothes from a thrift store, I'm gonna shop for my food on the discount sale price, and I'm gonna do all of the things that are kind of coupon cutting and all of the expressions of that that are low-hanging fruit for frugality.

And that's important because if I do that, then I can drive a wedge into my income and I can start saving money. And now as I save money, I'll actually have a little bit of money. Fast forward a few years. If I've been able to take that money, invest the money, increase my income by applying things I learned about increasing my income, I still have to be frugal.

I just may not have to be frugal specifically with the area of clothes, whether I buy them at the thrift store or I buy them new. I'll still be frugal though with the kind of vehicle that I purchase. I'll still be frugal with the kind of house that I live in.

But fast forward a decade, and all of a sudden now, the car, the kind of car that I drive now doesn't matter 'cause I can drive anything, but I still have to be frugal. It's just that I have to be frugal with other consumption items or other kinds of business decisions.

So frugality is a necessary virtue at all levels of wealth. But what frugality means changes based upon the scale of where someone is. And this is why I say what I said about trying to find someone who is just a little bit ahead of you. Because what is necessary when you're very broke is not necessary when your income has doubled, but you're gonna be in a totally different place when the income is four times from now.

And since you can't know what those things are, it's safest to consume some advice from someone who's a little bit ahead of you for say 80% of the time, and then make sure that you consume the advice of someone who's way, way ahead for the other 20%. Because it could be that there's some big jumps to be able to be made.

And so I wanna emphasize honesty and honesty to myself and recognize that if I've got a scarcity mindset, it may be because resources are scarce. And that's a very different conversation than somebody who has abundant resources but still has the mindset. We can fix that in a few weeks or a couple months.

But if the scarcity mindset is from genuine scarcity, the key is get rid of the scarcity. - Yeah, maybe I can narrow the scope a little bit. You just hit on it. I grew up having to fix everything because you certainly couldn't buy anything new. And like the other day, I spent four hours fixing our vacuum, where I look back, I'm like, wow, looking at my hourly rate, I should have just gone and bought a vacuum.

Or like, do I mow the lawn every week or do I pay someone else? It's like that level of, it's almost like breaking the habit. - So let's explore that for just a moment. When, what day of the week did you fix the vacuum? - It was on the weekend, like a Saturday.

- If you hadn't been fixing the vacuum, what would you have been doing with your time? - Probably thinking of ways to improve my small business or ways to optimize what I have already. - Okay, so the key for making one of these decisions is the opportunity cost. If you had instead spent four hours working on improving your small business, but instead of doing that, you went and fixed the vacuum, then at least financially, you should have not fixed the vacuum.

You should have just gone and bought a new one. Now, we could talk about enjoyment 'cause a lot of times, some guy may enjoy fixing the vacuum. Puts on the baseball game in the background and sits down and works on the vacuum and it's something that's genuinely enjoyable. And so if something is enjoyable, then we don't just cut it out just because we can make more money doing something else.

But if your business could gain from additional time spent on the business, on planning, on preparing, on whatever the associated business activities are, if it could gain from that and you're choosing not to do that by doing a low-value activity, then that is an error. And so you should engage in some methodology to identify where those time leaks are and where those low-value activities are because in the fullness of time, for you to reach your financial goals, you have to commit the resource you have, which is time, to high-value activities.

And if you have ambitious financial goals, you're not going to reach those ambitious financial goals by doing low-value activities. So you have to embrace the specialization of labor and embrace the fact that I have the capacity now to do high-returning labor and I want to do as much of that as I can.

So that one's a little tricky. It probably deserves a podcast in and of itself with lots of episodes, excuse me, with lots of expansions and examples. But it's not as simple as just to say, well, I could do more of that because sometimes you can't. Sometimes you're just worn out and you need a break, in which case there's no reason to spend money if instead you can fix it yourself.

But if you genuinely would have gone and worked on your business and if that would have been a higher-returning investment, then yes, it was a mistake for you to focus on fixing the vacuum instead of going and doing that. - Okay, okay. - All right. - That makes sense.

And it probably makes it more difficult to pay somebody to mow the lawn when all the neighbors mow their own lawns. So I guess it makes sense when you're like, find somebody who is making 50% more 'cause they're likely not in the same neighborhood. - Right, right. And remember, there's always a good way to do it, right?

Find a kid who needs a summer job and pay him handsomely so that he can get the start on it. There's always a way to justify the stuff in a way that's gonna make it feel good for you. Let me just give you two quick exercises that will help.

Number one, take your annual income goal and break it down to an hourly rate. So let's say your annual income goal is $200,000 per hour. Excuse me. (laughs) Excuse me. - Okay. - We'll take, yeah, that would be great. - Done. - So $200,000 per year, right? Divide that into 52 weeks and then divide that by 40.

So $200,000 a year is an hourly rate of $96. Now, what we can do basically is just round this up. $100 an hour is $200,000 a year. $500 an hour is a million dollars a year. So I don't know how to explain that math, but you probably got it by now.

You basically just double it and add some zeros and you're there. So $40 an hour work gives you 80,000 a year, basically speaking. So figure out what your annual income goal is. And if your annual income goal is $200,000, then you need to be doing $100 an hour work.

And so every hour that you don't do $100 an hour work is keeping you from reaching your annual income goal. So if you can go and you can pay someone else $50 to do the things that you would be doing, and instead you can go and do $100 an hour work, then you're on the right track because you're focusing on the high value work.

If the opportunity cost is, oh, I'm gonna pay these guys $50 an hour, but what I'll do instead is just sit around and do nothing and not active rest or whatever, then you're better off doing the $50 an hour work because it's additive rather than replacing the other work that you would do.

But figure out what your hourly rate needs to be for your own personal financial goal. Then come back to the actual activity and ask yourself, is this $100 an hour work? And if you discipline yourself to always be focusing on, I need to do $100 an hour work, then you'll be in a situation where systematically as you do more $100 an hour work, you will in the fullness of time reach the $200,000 goal.

So it will work in the fullness of time. Hope that helps and keep in touch. Let's talk about it in the coming months. Daniel in Texas, welcome to the show. How can I serve you today, sir? - Thanks, Josh. How are you doing today? - Very well, sir. Thank you.

- Good. So my root question is, what is the value of just learning a skill for having the skill? Even if you're not sure that the skill directly points you in the direction you want to go. The details with that is I was, for my day job, I had the chance to start doing some amount of sales kind of on the side.

I'm in project management, for everyone listening, and I had the chance to kind of take on basically a little extra work on top of my job to do some sales, which would obviously make some extra money would be the plan, and then learn that skill to some degree. That worked great for me.

I was happy with it. It worked for the family, everything. Due to, you know, there's always less money in the giant corporate bank account than they would like there to be, they are asking me to move full-time into sales, forego the old job, and just take that on full-time.

So I know sales is obviously a useful skill. I don't look at sales other than as kind of a general thing as being something I would ever want to go into, or really have much to do with. On the other hand, you have to sell things all the time, so, including yourself.

So I guess I'm trying to figure out, it doesn't really, it's like, it also, the hard thing, I've worked from home almost all the time now. I'm now going to basically be gone five days a week, driving all over creation, which I love that aspect. But, yeah. - Got it.

So my first answer is that for the young, learning a skill that you're not necessarily going to use, the value of that is very high. For the older, the value of that is lower. And this has to do, basically, with what we have in abundance. Generally, learning a skill involves time.

Now, it can involve money, but it generally involves time. And for the young, time is more abundant, and money is short. As you get older, time becomes shorter, and money usually becomes more abundant. And so since we can take money, and we can buy other people's time, the value of learning a particular skill goes down significantly.

It also goes down because we're more focused, and we know ourselves a little bit more to be able to give better direction of what specifically we want to do. Now, I'm speaking a little bit generally, but this is kind of a good general outline, I think, to say. So let's say that, let's put teeth on this.

Let's say that I'm running a business as a teenager, and I need to create a website. Well, I could go and buy a website. I could just go to any website providers, and that would be perfectly reasonable. But if I sit down, and I create the website myself, and I use it as a chance to develop a skill, I'll probably, I will have that skill now for the rest of my life.

And since time is abundant, and there's probably not a lot more useful than doing that skill, let me go ahead and do that. And I may discover all kinds of things that I can use later in life, because now I understand the website at a better level. But now if I'm a lawyer, and I'm 45 years old, and I need a new website, it's very difficult for me to imagine ever advising someone like that to sit down and create your own website.

It would be a very, very high cost of doing that. So think about time versus money. In addition, we have to recognize that not all skill acquisition falls into an economic framework. And so there are many good reasons to accumulate skills outside of economics, and we just judge those by a different metric.

You're asking a basically economic question, but let's acknowledge that I may really enjoy calligraphy, because it's an art form, and I'll never make money on it, but if I like doing calligraphy, then sure, it's valuable to go build the skill. I use that example, because it's the famous example, though, to show that sometimes skills that we develop that are not related to our current business can wind up being useful down the road.

The calligraphy example is famous, because Steve Jobs took a calligraphy class in college, and then used the idea of being keyed in or clued into design as something that ultimately impacted the whole design culture related to Apple computer. And that high design culture became a core component of the company's identity and the success of the products.

Jobs never did that strategically, but it's a good example of the serendipitous nature of life that we can learn something and move on. Now, to scale, to sales. I would say sales is one of those core skills that everybody who has it has something that's enormously valuable. And I think it's one of those core skills that probably everyone should have to some degree.

And because of the high return on investment, it's worth learning, even if it's not a long-term endeavor. When I went into the insurance business and started selling life insurance, I did it because I wanted to learn how to sell. And I didn't, in fact, end up sticking with that business, even though I'm in a related business currently.

But I'm very grateful for the experiences that I gained from that business, because learning how to sell effectively is something that has given me enormous confidence in life. And when I talk about developing skills, at least when I do coaching on my career planning, I talk about economically valuable skills.

And selling is one of those core things. I built this model years ago when I read Joshua Kaufman's book, "The Personal MBA." And in that book, he defines a business very carefully. He's gonna talk about business. He defines a business. And according to his definition, he says, "A business is a repeatable process "that one, creates and delivers something of value, "two, that other people want or need, "three, at a price they're willing to pay, "four, in a way that satisfies "the customer's needs and expectations, "and five, so that the business brings in sufficient profit "to make it worthwhile for the owners to continue operation." Let me repeat that.

I know it's wordy, but just listen. "A business is a repeatable process "that creates and delivers something of value "that other people want or need, "at a price they're willing to pay, "and in a way that satisfies "the customer's needs and expectations, "so that the business brings in sufficient profit "to make it worthwhile for the owners to continue operation." It doesn't matter whether you're running a solo venture or a billion-dollar brand.

If you take any of those five things away, you don't have a business. You've got something completely different. So a thing, a venture that doesn't create value for others is a hobby, which is fine. It's just not a business. A venture that doesn't attract attention is a flop. A venture that doesn't sell the value it creates is a non-profit.

A venture that doesn't deliver what it promises is a scam. And a venture that doesn't bring in enough money to keep operating will inevitably close. So that's the core point. So since business, every business, is fundamentally a collection of these five processes, then these are the five areas to focus when we're thinking about building economically valuable skills.

So we can put names on them. The first one, where a business creates and delivers something of value, we can call that value creation, which is discovering what people need, want, or could be encouraged to want, and then creating it. When we think about a business being a process, creates and delivers something of value that other people want or need, that's called marketing.

Marketing is attracting attention and building demand for what you've created. At a price they're willing to pay, we can call that sales. Turning prospective customers into paying customers by actually consummating a transaction. In a way that satisfies the customer's needs and expectations, we call that value delivery. Giving your customers what you've promised and ensuring they're satisfied with the transaction so that the business brings in sufficient profit to make it worthwhile for the owners to continue operation, that's finance, bringing in enough money to keep going and make your effort worthwhile.

So all five of those skillsets are core to all businesses everywhere in the world. And somebody who is skilled or knowledgeable to at least some degree in all five of them is very well suited to do well in business. So they are value creation, marketing, sales, value delivery, and finance.

Now, of those, sales itself is really unique because sales has provable value. And that's what's so powerful about it. A good salesman can go into any market and find a job because a salesman by definition can prove that he brings in more money to the company than he costs the company.

So it's a uniquely valuable skill to have, and it's a core skill to all business. And so for that reason, it should be very highly prized when there's opportunity to learn it, even though it not be something that you want to do forever. - Okay, that's helpful. That was kind of what I was thinking.

Was it worth it for the sake of learning the thing? Sorry to them also, I'm still trying to figure out like there's parts of it where I'm looking at and saying I don't love being taken away from my family and want to figure that out long-term. So I have to figure that aspect out.

- Those are all important questions and considerations that I couldn't comment on right now. Just pointing out that sales itself is uniquely valuable. It's a skill that's fundamental to all business. And it's one of those things that at least some experience in sales is something that seems like it'll pay off for a lifetime.

How that specifically applies to you, you be the judge. - Yeah, what is the, I mean, I guess if you were to say, hey, this is a useful thing, let's assume it goes fine, but I don't love it, whatever. Where's the point at which you say, okay, I've learned this decently.

I feel confident in myself, but not maybe overconfident. I'm going to try and now go do the other thing. Like I've learned it enough. I'm familiar with it enough. When do you move on to the next thing? - I think that one is just what I repeat so frequently is when you know what the better thing is.

As a man, it's different than the advice that you would have to implement in your life as a man is different than the advice that you would implement in your life as a teen. If you're coaching a 14-year-old who has a chance to just go learn sales for three years or two years, you would say, yeah, go learn sales for two or three years.

You're going to be so glad for the experience, go for it. And this is a great thing for teens to do. Most people who I've known who've been very successful financially, or at least many, let me be careful with my words, they have some background, right? They sold Cutco knives in college, or they did some kind of network marketing gig, or they did something.

I had a list of ones that I did, and I'm grateful for those experiences. You learn something from all of those experiences. But for you, time is not so cheap as it is for a teen. So if you're going to go into sales, that should be because this is the best opportunity that I have now that moves me down the path towards my vision, whatever it is.

It's perfectly fine if that vision is just, I can make more money, because I need more money at this point in time. But if you have a vision of something that you want to do on the next step from sales, then you move on to that as quickly as you can see it.

So we can acknowledge broadly that this is a useful skill that we want to develop, but your time is not cheap. And so you should be thoughtful about it. It may be that you go into sales here at an opportunity that you have. It involves a little travel, but your family can handle it for a time.

But a year from now, with a year of good sales experience under your belt, now there's a different sales job that takes away the travel or whatever it is that's negative about this, and has a much bigger and better bonus structure and commission structure, where now you can do much better.

In that case, you would quickly jump to that, and you would get there because you have the opportunity. So only move in the direction of sales if it kind of obviously makes sense in terms of your overall career plans. - Okay, but, and that's, you know, like I'm, yeah, I'm trying not to, time is less than I'm trying to use that well, 'cause I'm also in my mid-30s and trying to figure out how to use that time well, and not lose time in the place that I'm at, because things have, I guess, trying to make sure that I'm moving in the right direction and not just learning a bunch of random things, and then I'm 50 and I have a bunch of different skills, but never enough time in any one thing to move forward in one industry.

- Yeah. It's frustrating if you don't have a clear strategy. So just know that it happens to a lot of people. I just finished a biography this week, and it was a biography of this really amazing guy, very smart, but it wasn't until he was almost 50 years old that he had finally put together all of these pieces of his life and realized his unique calling in life.

And his biography was outstanding, and his contribution to the world was enormous, absolutely enormous, and yet it was obvious from just reading his biography that it took him a long time to build confidence in himself and to have such a diversity of experience that it ultimately came together and where he really left his imprint on the world.

So I don't know if it, I don't think it can be forced or hastened. Go as far as you see, and then when you get there, there'll be more light. If you think that sales is going to destroy your family, don't do it, right? Because that's largely irreversible. But if you think that your family could handle it, and it's strong and it's not too onerous, and it may move you in the direction, then pursue it.

And it's not wrong. There are a couple of, I think, basic metrics that should be adopted. Number one, if you get the chance to earn more money, then generally speaking, you should pursue it unless it comes with some unacceptable cost. Again, unacceptable risk, loss of life, loss of marriage, loss of children, things like that.

So if you get the chance to make more money, earn more money. If you get the chance to take on more responsibility, generally speaking, unless it comes with some unacceptable cost, don't do it. But every time you go up the ladder of money and responsibility, you gain and you grow, and that's what transforms you into a more powerful man in the fullness of time.

And then you look back later and see. But if sales can be a part of your vision, go for it. If it's not, then don't go down that path if you can't see how at least some way it fits into your vision. Samuel in Colorado, welcome to the show.

How can I serve you today, sir? - Hello, thank you so much. We've spoken recently on career and income topics. - I was gonna call this a regular segment, I love it. - Yeah, today's shifting slightly from that onto inflation. But before I get into that, I was really inspired by the conversation on scarcity mindset.

And I get my idea of the scarcity mindset from Stephen Covey, Seven Habits of Highly Effective People. And he talks about it very briefly, just one or two pages. And he concludes you should not have the scarcity mindset, but he only seems to really address it in a financial context.

And that's how I think I heard it addressed on the last call. So just really quick, I wanted to say, I have a very strong scarcity mindset, but it's mainly in terms of time. And you've mentioned the time is scarce as well, but even more so you can see in things like as a skier, I may only get one day and one weekend in a whole season where there is incredible powder in Colorado, like 20 inches of powder.

You may not even get that in a season. So there's absolutely a scarcity mindset in my mind. Same thing with rock climbing. You know, a willing partner who's not flaky and doesn't bail on you, that aligns with the day with good weather, that's extremely rare. So just wanted to hear your thoughts on scarcity mindset outside of finance.

- Fair question. I don't know that I have anything profound to say other than to affirm what you're saying. At the end of the day, time is the thing that seems to be, at least in our current experience of time, time is the thing that is profoundly limited. Now, I believe that someday God will end the system that we have of time, and we will then have an eternal life in which we'll have an entirely different model and a different way of making decisions, and I can't wait to see what those conversations are gonna be.

Whenever we try to wrap our mind around time and even long-livedness, we can't really think without the concept of time. It's so fundamental to who we are. So as long as we are on this mortal coil, then we need to think continually about time, and to me, that seems to be the ultimate resource because it continues forward at a steady pace.

It does not change, and there's always less of it. And so the actual embrace of time is core. It's fundamental to what it means to be a productive person. Virtually all of my regrets, and I try to avoid too much the feeling of regret, but I try to learn from them, all of my regrets relate in some way to poorly used time.

Other than that, like money, I've wasted plenty of money. I don't worry about that because money is ultimately renewable. There are other things. I don't have many relationship regrets. I've generally not experienced, I've not done anything really terrible there. So there are other regrets, things that can't be changed, but most of my regrets relate to poorly used time.

And the older I get, the time gets shorter, both actually and perceptively. So I feel increasingly this intense pressure to be useful with time. And then in my worldview, and I think our shared worldview, I know that ultimately I will be responsible to God himself for how I use the time that he's entrusted to me, and that I have a responsibility to use it in a productive and effective way.

So I feel that pressure, that kind of consistent need to be good with time. Now, what I think you're relating to is something I talk about, and just in terms of things that are time-bound goals versus money-bound goals or something else. And so if there's something that can only be done at certain times, then that should be prioritized.

And so where you put in amazing powder days or ideal circumstances for rock climbing, someone else might put in a day of great surf, then these are predictably unpredictable things. Like you can know sort of when they're gonna come, but when they come, you gotta drop everything and go.

I would put that into my context of how I think about things like experiences with my children, particular events in their life, and those kinds of things. So I'm not going to let something that can be done at any time fall in the way of something that can only be done at certain times.

And so it would be very important, it is in the same way that I structure my life in such a way that I am present for every single moment that I wish to be present for, you would structure your life as you're doing in such a way that when there is good powder, you're there.

But it doesn't mean then that you can't use the other time effectively, you're just identifying that at this particular weekend, I'm not gonna do this other thing that's important, rather, I'm gonna be on the rock face or on the slope. - Yeah, thank you so much. So yeah, circling over to inflation, and I did do a quick search.

I see you have almost 20 episodes on inflation, including one in 2022 on my current economic times. I think I've listened to it, but let me know if you've already covered these topics. But inflation in regards to a retirement plan, so it's vaguely related to my earlier calls, but I think years ago, I tried to make a retirement plan, but I never finished it because I cannot come up with a rate of return and inflation rate that I'm comfortable with, specifically the inflation rate, because I agree with a lot of what you say about the federal debt and our economy and no other country is any better.

So I think it's realistic to expect, and I mean, this is just directionally, it's probably not even close, but if anything, it'd be worse, like 10 to 20% inflation per year, if not more going forward. We had that somewhere around that this last year, even though people generally don't say we're in recession, we're not doing that bad.

So just imagine if we actually ever did enter into a recession. And so I think it would be irresponsible for me to make a retirement plan that had any assumption of rate of return beyond just breaking even, just keeping the purchasing power you have. And in fact, I think that's even too optimistic.

I think more than likely, like I took a quick look at my balance sheet and I've been getting around eight to 10% returns per year, just in the stock market, but that doesn't account for inflation. So I think any returns you could get other than, like you say, being an entrepreneur and having a business, they would be more than eaten up by inflation, even if we don't go into survivalism times.

So just wanted to hear how you can come up with a realistic rate of inflation for a retirement plan. - Great question, and an important one. First, inflation is, for most retirees, the single biggest risk that they face. Loss of purchasing power is an enormous and catastrophic risk to the retirement plans of many retirees.

And it's one of the reasons I work very hard whenever I have the chance to try to get prospective retirees to orient themselves around being concerned more about the loss of purchasing power than about the loss of current value. Because some people are so fixated on current value and fluctuations of the current stock price, and so therefore they say, "I've got to go all to fixed income.

"I've got to go to CDs," things like that. But over a long-term retirement, that's not the case. Now notice those last three words I said, long-term retirement. If I'm counseling an 89-year-old, I'm not spending a lot of time jumping up and down about loss of purchasing power. On the contrary, I'm willing to accept loss of principal is a bigger focus because the time is shortened.

But for a 60-year-old or 65-year-old, I am jumping up and down about loss of purchasing power, and it has to do with long-time perspective. Now, in your situation, it's catastrophically worse because you're planning for a very long early retirement. So how on earth do we plan for inflation over potentially a 60- or 70-year period?

It's just flat-out impossible to predict. And I think we need to acknowledge that it's impossible to predict and then build a model that doesn't necessitate us making accurate forecasts or predictions of the future. You said, "I think there may be 10% to 20% inflation in the future." I find that to be a reasonable expectation.

In my own thing, what I've said in past shows is that I think that mass inflation is a reasonable expectation, mass inflation being double-digit but maybe less than 30%. So 10% to 20% of inflation rates I think are perfectly reasonable scenarios to be concerned about. The reason, the logical argument that makes sense for me is that without inflation, the government is basically stuck with unaffordable, unimpossible finances.

But hyperinflation doesn't solve the problem, and no inflation doesn't solve the problem. So that argument has been that in the fullness of time, mass inflation is probably something that policymakers will look towards. Now, does the Federal Reserve Board have the necessary level of independence to keep inflation down when policymakers and monetary fiscal policy deciders are trying to get it up?

I don't know. I find that whole world so opaque and so impossible to actually know, I just simply don't know. But I think that mass inflation is a reasonable thing to be concerned about. It's not a reasonable thing to be concerned about for 60 years. It's also not a reasonable thing to be concerned about for 30 years.

It's more of the reasonable thing to be concerned about for some years, five to 10 maybe. I don't have any idea. I'm just making this up on terms of number. Trying to point out though that it's not conceivable for the long-term, for the very long-term. Something catastrophic would happen.

There would be a reset of the financial system, a new system started, and we would move on to whatever that happened to be. When it comes to planning though, the problem is if you're forecasting 15% inflation, which is not unreasonable, but you're experiencing 8% asset growth, which is also not unreasonable, there is no possible scenario in which your financial forecasts work.

The entire premise of financial independence is based upon investments performing and relatively normal financial markets. So I don't even try to forecast mass inflation when it comes to a conversation like yours. So if we're gonna talk about your personal finances, I'm gonna say, hey, listen, why don't you plan on eight to 10% investment returns?

That's fine. Let's go with 8%, right? 'Cause there are good reasons to believe that the future may be a little bit more difficult. So let's go with 8% instead of 10%. And then with regard to inflation, let's shoot for three or four, right? Let's go for three and then see what happens.

But then what I want you to do is build a plan that allows you to adjust and adapt for a changing market condition. And for early retirees, this to me is the core thing is to have multiple plans. So if we did get to mass inflation, what would you do?

And here we need either significant flexibility in expenses or flexibility in income, the ability to increase your income when you need to. And I won't go too deep into it, but when I teach in my retirement course, I go over this in detail and show how the way that you plan for retirement is by building in flexibility and insurance.

And so let me just use an analogy of going across the country. Do you remember MapQuest? You're old enough to remember MapQuest, right? - Yes. - Right. I was thinking about this yesterday. I was driving around and I was wondering what happened to them. I haven't gone and pulled up their website, but MapQuest was revolutionary when I was in high school because for the first time in life, we didn't have to just look at a map or get directions from someone.

We could make our own directions. And so I could go to MapQuest.com, I could put in my home address, I could put in the address of my friend's birthday party, and I could get these turn-by-turn directions across town. But I had to print them out and carry them with me.

And if I made a mistake on the way, I had to go back, I had to retrace my steps and find myself until I could follow step-by-step the turn-by-turn directions. So imagine that you're trying to go from Miami to Seattle. So you have this enormous trip. Well, when you're working, basically you know that Seattle is northwest of me.

And so I need to continually be going a little bit north, a little bit west. And so you just start driving and you go north, and then you go west, and you go north and you go west, and you go northwest, and you look at the map. The map is your annual financial plan, and you sit down and you know I'm heading for Seattle.

And that's what it's like when you're working. And if you go a few miles outside of your way, meaning overspend a little bit, or projections aren't quite right, no big deal, you're still just going northwest. Now, when you get to retirement planning and you start to plan for a life of not working, you're basically doing MapQuest directions.

And you're sitting down and you're saying, how do I navigate from Miami to Seattle? And you're imagining with early retirement, you've got this huge idea, 60 years to deal with, where I've gotta figure out a 60-year plan, and I've gotta print it out today and have it perfect. So in the same way that it's, not inconceivable, it's highly unlikely that you could print out the old-fashioned MapQuest turn-by-turn directions in Miami and follow that route perfectly until you wind up in Seattle.

That's just not really likely. There's gonna be all kinds of changes. There's gonna be a raccoon in the road. Something's gonna happen that's gonna cause you to go off track. So your planning needs to be more flexible. So what do you do? Well, you go to MapQuest, or today we would go to, of course, Google Maps, and we would say, all right, here's an estimate of how long it'll go if I drive, and you would maybe plot out some stops, and you would get a good idea of your plan.

But then you go with the GPS, and the GPS is that live feedback, that live turn-by-turn feedback. So if you make a different turn, or there's an obstacle in the road, you navigate your way around it. So a good retirement plan needs to have the MapQuest maps printed out so that you say, this is reasonable, I'm okay with this, but it also needs to have that live, real-time GPS.

And so you put in place a set of triggers for yourself, knowing that if I reach this roadblock of 15% inflation, and stock market has gone down by 30%, then instantly I'm going back to work. And by the way, that's why I kept my CPA license current, and that's why I kept some industry connections.

So instantly I'm going back to work, and I'm going back to work for five years, and then after five years, I'll reassess, and we'll get back on track. So you can't do planning for a mass inflation scenario that's predictable, it's inconceivable that it's possible. But what you can do is you can imagine how you would respond to different market conditions, and then put that in place.

And then finally, insurance. Then you look at your overall situation, and you say, do I have some assets that would be protected from inflation? So this is where the value of owning a home, and having a little cabin that you live in that has solar panels on the roof, and is own debt free, and has very low property taxes, and having a garden in the back, well, this makes you largely less subject to the vagaries of inflation.

And then looking at your assets and making sure, okay, I've got some assets that I can adjust with inflation, things like that. So that's my metaphor, and that's how I approach it. - Thanks so much. I guess my main struggle with that is, I was describing 10 to 20% more as not something that might happen five to 10 years in a 60-year period, but that maybe it'll get better, it'll get worse, but on average, it would be at least that bad.

So even to make it easier for the example, can you see a scenario where, on average, over the next 60 years, you would have inflation that's better than, or even significantly better than 8%? Like, I know we've had that historically, but just seeing all the trends you're pointing out, I don't see any reasonable way to think that in the future that's gonna be the case.

- I can't myself see that, but I can't argue against it. Meaning, can I see that happening? No, I think that the impact of experiencing mass inflation for a very long period of time would be so significant that we would basically have to reinvent our entire financial system, and I don't have any idea what that would look like.

But I also can't argue against it and tell you, here's how I think we get out of this thing. So I'm not an economist, that's a good question to go and ask some brilliant economist, but I don't know how we get out of this thing. Now, I don't know how we get out of the current thing.

We're just along for the ride, kind of waiting to see what happens. So I try to see what are those principles that will work out in most scenarios, but the answer is no, I can't see how we could have those high levels of inflation for that long period of time.

Now, a couple of quick things to point out. Our modern economic system has been reset three or four times in the last century. Most of our data from something resembling our current economic system really only goes back a little more than a hundred years, a little over a century now.

And even that, the economy back then is so wildly different than it is today, it's hard to even know. The latest big reset was, of course, the going off the gold standard under Nixon. That was an enormous reset of monetary policy. So we're very new into this current scenario.

And the U.S. dollar has experienced huge hyperinflation, but the U.S. dollar has been reset, revalued, is it three times or four times, going back all the way to right after the Revolutionary War. So it's perfectly reasonable to say, hey, this can't continue and there's gonna be some kind of enormous reset.

That's perfectly reasonable to me. I just don't know what that would be or what it would look like. So we're just along for the ride. And so I try to focus on those things that would have to not, that can't change. So assets that are good assets are always gonna have some kind of value.

Could their value be destroyed and diminished? Yes, but if you've got a house and you can live in that house and someone else can live in the house, the house has some value in any economy, whether you're paid in U.S. dollars or whether you're paid in green bucks or whatever, Bitcoin or whatever it happens to be, that house has a basic utility.

It's an encapsulation of labor and material and it provides a utility. A business, if you own a business and the business is making money, that's gonna have value. So regardless of the currency it's set in, regardless of that stuff, it's gonna have value. So all that say is that no, I can't predict, I don't see how we could have 60 years of 15% inflation in any of our current paradigms, but I can't argue against it.

So I wanna focus on those principles that probably are gonna work no matter what it looks like and then just wait and see what happens. - Thanks, I'll merge it on to related topics in future weeks. Thanks for your help. - Thank you, Samuel. I'm enjoying our serial conversation.

Nathan in Texas, welcome to the show. How can I serve you today? - Hey, thanks Joshua. Calling today, one of my summer goals has been to help my elementary age kids just kind of progress on their financial literacy, just general level. And I have a very kind of like some loose ideas, but just calling to compare notes and be kind of refined by your thoughts and then also use it as a good jumpstart to get me going on that goal 'cause the summer is ticking away.

So yeah, I'd just love to hear my oldest is 12, my youngest is five, I've got four. So yeah, I can tell you more or you can take it from there. - Yeah, so you said 12 to five, right? So those are gonna be wildly different experiences for all of them.

Do you, what are some of the influences other than my podcast or whatever, like what are some of the influences that have been the most formative for you yourself with regard to how you think about money? - I would say probably first and foremost, my family of origin, what I observed there and probably just worldview and kind of the Christian teaching on stewardship and things like that.

Yeah, I would say probably it's like, you double clicked on my family of origin. Certainly, if I look at my maternal grandfather, he lived through the depression. So my folks always really appreciated frugality. So going back to somebody that was talking about scarcity, I think that frugality can lean towards scarcity sometimes.

But definitely kind of like the Dave Ramsey principles of earning more than you spend and being prepared for emergencies, those sorts of things. Yeah, but then definitely I'm animated personally by the idea of stewardship and that we really need to give a good account for how we use our time, talent and treasure.

So I wanna get the kids used to, I think you've talked about this, money flowing through their hands. And so while I never grew up with an allowance, that's one thing that I have considered just to kind of get them used to more coming in and going out and then build on that.

- Right, I've given some thought to this and probably many of my thoughts are encapsulated in the series that I'm currently doing on financial goals everyone should set. I've wanted to build a high school finance curriculum and I may do it in the fullness of time, we'll see. But that would ultimately be the answer because there are some really foundational lessons that all teenagers should be taught.

Those lessons are usually things that are mentioned and then skipped past in most books because most books are written for adults. So for example, cornerstone foundational lesson is understanding the time value of money. And so students should be made to memorize charts showing if I earn money and invest it at a young age, what the difference is if I do that at a young age versus in the long run.

That's something that you'll see in a lot of introductory finance discussions, but it's just kind of skipped past. But really them getting their heads around that is something that is, I think, really important. I think what's even more motivational than that would be the charts related to the math of early retirement, understanding how savings rates compared to spending rates.

For me, that was enormously transformative and I wish I'd understood that when I was 14 or 12 or whatever. Beyond that, a lot of the knowledge has to do more with things that are best learned in doing rather than in learning about. So there are some books that I would recommend.

My favorite book on the subject is "Richest Man in Babylon." That, I think, is the core fundamental text that needs to be done. "Richest Man in Babylon" is one of the very few living books on money that I know of. And I've recorded the entire thing, so you can just have them listen to the audio recordings that I've released here in the podcast feed or have them read it and talk about it.

But "Richest Man in Babylon" is, I think, the starting point. A lot of the other books that I recommend to adults aren't necessarily applicable to children. So I have, of course, Radical Booklist. Radicalbooklist.com if you wanna get Joshua's "Financial Freedom" book list, and I send you the list of recommended books to work on.

But I would say probably two or three of those are appropriate for children and the others are not so appropriate. So I don't know of a lot of books. I think there are many books that could be offered, and I would see it as, with many things, more important to focus on making a habit of choosing books and reading books rather than any one particular text.

After "Richest Man in Babylon," because the ideas are so sticky based upon the way that it's presented, then I would say basically choosing books that stimulate the thinker. So if you're gonna focus on this from a book perspective, I would be more inclined to say, I would assign "The Richest Man in Babylon," and then I would say, when we go to the library, I want you to pick out at least two or three books on money and look through them or read them and make that the ongoing practice.

Because a book on money can be adapted enormously, and you suggest titles that you have found useful or that you think would be useful to a particular child, but they're often pretty customized. So I don't have this list right off the bat, but anything that is story-based and principle-based rather than technical-based, I think is what you're looking for.

So "Richest Man in Babylon," "Wealthy Barber." Is there a Morgan House book, I think, that was like a narrative-based? I don't have a list of titles current, but anything that's narrative-based and that's story-based would be good. Anything that provides discussion of goals that is appropriate. So Steve Maxwell's book "On Teaching Your Sons to Buy Debt-Free Houses," I think is such a powerful book because it relates and he shares and shows, look, here's how all of my sons bought houses debt-free before they were married in their earlier mid-20s, which is just powerful to give children a goal.

So that's kind of the book discussion. More than the book discussion, I think what you're looking for is to focus on the principles that will get money passing through their hands. So what I would love for you to, what I would say is take the series that I'm doing right now, listen to it with your children, or just listen to it yourself and then talk about the concepts with children.

And I'm trying to break that series into discrete concepts that are just enough to say, here's what it is and then here's why it's important. And then just start walking your children down that list. So you're a 12-year-old, you can start the task of getting a job, getting a summer job or getting a Christmas break job.

Doesn't need to be a lot, but a couple of weeks of him working with something, that puts a little money in his pocket will dramatically transform his questions. And then when he gets the job, then the first thing you're gonna talk about is how much does he save? How much does he spend?

How much does he give? That's a good platform for your stewardship discussion. Once that happens, you can talk about what to invest in. And we'll talk about that or talk about who to give it to. So I think it's more important that these ages, that there's just money flowing through their hands, either in the form of an allowance or in terms of a job, and then that you're giving the instruction.

As they go into teenage years, then to go through the Crown course. If stewardship is a big thing, the Crown financial course is fantastic. So go ahead and take your children through it as a family exercise and use some of those structured courses. But there's not just any one thing.

It's more a matter of cultivating the belief that it's possible, it's doable, it's expected, and then cultivating the specific habit of, if I say that I care about money and I actually care about money, then I ought to be reading at least two or three books a year on money and processing the ideas.

So that I'm continually being taught and educated and getting better and better at managing my money. - Okay, yeah, I think all that makes sense. Certainly some of those ideas, like I don't know if it's just thinking too low of like what my kids are ready to work on.

Certainly I can see all of that with my oldest, the 12-year-old. The others that are like nine, six, and five, I'm trying to like imagine these conversations in a good way. Like I can kind of tell from the way you're sharing about it you guys just have regular family conversation or conversation with your kids about all of these ideas and principles.

So I certainly try to share as much openly as I can with my kids. But it's also like if I pull up the spreadsheet with the budget or show them a time value of money investment chart, like my six-year-old's gonna wanna play soccer, which is great. So yeah, go ahead.

- Let me interrupt you to disagree with you, is that no, I don't have constant conversations about this with my children. I don't see how this is developmentally appropriate for an eight-year-old to talk about. I answer the questions, like it's not a secret, but I don't think that this is a core component of what eight-year-olds should be focused on.

I think eight-year-olds should be focused on stories and they should be slaying dragons and they should be building tree forts and they should be winning princesses' hearts and thinking about, and there's no, I reject the hustle culture idea that our eight-year-old should have a cell phone to their ears, focusing on doing the next deal so that they can make more money and yelling at all their friends about why are you guys wasting time?

We do want to instill character, but I don't think that this is appropriate for younger people. And I was answering basically with your 12-year-old. So with the 12-year-old, that's where most of this comes in. With the other ones, I think it's more important things that are caught and just discussed in the natural context of your life.

So with regard to stewardship, if you're gonna put money in the box at church, let's say that you have an option, okay, I could give online or I could put money in the box at church, then put money in the box at church and have one of your children take it and put the money in every week, put in, drop the envelope in the box every week so that they know that this is something that we do every week.

If you're gonna go out to eat, hand whatever it is, put money in your children's hands and let them make the decisions. That's where, as you've heard me talk about previously, the concept of an allowance, I think it's important 'cause it allows them to spend things, save for things, look for jobs, look for all that stuff.

But in terms of technical education, I don't think that any of this is particularly relevant at a young age. I think that it's most important to cultivate imagination and ideas and academic ability and unique skills and strong things at that basis. 'Cause money is not that hard to master.

Like, it's really not. It's a basic set of steps and it can be learned perfectly well in the teenage years. Now, I do have more to say on it, which I'm not gonna do in this context, but I think your goal is, hey, by 15, 16, you're bringing your child into the family finances, discussing things.

I think your ambition should be that your children, basically, by the time they're, I don't know, 14, 15, 16, something like that, is that you're treating them as adults. And one of the things of treating them as adults will just be just bringing them into the family finances in some way.

So I don't think having opacity with regard to finances is appropriate. Sharing is important, and especially as they start to head towards college, opening up about here's what we have, here's what I earn, here's what our budget looks like. Having them take responsibility for things. So putting and saying, okay, I want you to do the grocery shopping, and I'm gonna take you three times to do the grocery shopping and show you, but now, this summer, your responsibility is to buy the groceries.

Here's the list, here's the money. Anything you can do that's doing and related to money is really valuable. But in terms of education or reading, it's not that relevant until there's significant money flowing through. So it's gonna be much more impactful if you read "Richest Man in Babylon" and then focus on getting a job, doing well in school, getting scholarships, getting to college, and then providing appropriate training with summer jobs and then, and here's how you handle it versus giving a student a giant stack of books.

- Yeah, okay, that's perfect. And I think that aligns with my expectations. Give me a brief thought on what you would think some good allowance uses. I'm looking to spark a little creativity in my own mind here. Beyond just like, you know, the younger elementary kids, like, of course, you're like, maybe you just do the simple, like, give, save, spend, you know, like, just three.

And so, of course, you're like, you know, you're saving for the Lego set or whatever, you know, whatever they come up with. I had not thought of the idea of like, okay, like, when they got to eat as a family, you know, like, your kid's meal is gonna be nine bucks.

Here you go, here's nine bucks for everybody. Pick what you want. What are some other ways that you have thought about encouraging kids to use allowance and then kind of deciding how much money to funnel through there? - Sure, the key, I think, is just to be verbal with children and train every time you can.

So, when you go out to eat, talk about the cost and explain how it works, that here's what you see, then it's gonna be increased by taxes, then we have to leave a tip, here's what the cost is, here's what the budget is, just discussing things. When you go to the grocery store with your children, talk about unit pricing, here's what we need to buy, value per calorie, dollar per calorie, whatever it is that you are focused on, just talking about those things and recognizing that every time I make a decision, it's my job to instruct my children in what I'm thinking so that they will reflect my values and attitudes and that my instruction will form a background, knowledge base for them in the fullness of time.

To your question, as far as allowances, I have a system. I have implemented it imperfectly. I'm not satisfied with how I'm actually implementing it, but I still think it makes a lot of sense and it's what I'm seeking to implement. The lack of implementation is primarily due to, I don't even know what currency to give my children an allowance in because we travel so much.

So that's been, I don't expect most people to share that frustration, but it is a real frustration. So put simply, I don't call it good, so here's my names for it, is I teach my children to have three bags. I give them literally bags of money and bag number one is a giving bag, bag number two is an investing bag and bag number three is a spending bag.

I give them a certain amount of money and then I encourage, I tell them to divide it into three. And so you should choose an amount of money that will make a lot of sense to divide it into three. So it might be $6 a week so that it can be two in each bag or it may be $60, whatever it is.

But what you're looking for is to have a relevant amount of money that they can accumulate enough to buy the kinds of things that you think they should be doing. So I just split it into thirds because I think it makes for simpler math versus some other random percentage.

So the giving bag is money to give away to other people. So if I'm gonna give you $12 a week, then we're gonna put $4 in the giving bag and then the giving bag is going to accumulate. So who and what do you want to give it to? And so you have a family conversation.

Are you gonna give it to the plate at church? Are you gonna give it to the missionary offering? Are you gonna give it to your friend's birthday present? Are you gonna give it to your brother's birthday party outing? Are you gonna give it to the person in need on the side of the street?

Doesn't matter, just encourage them to be looking for opportunities to give it. The investing bag, I don't call it saving 'cause this is not a savings bag. The investing bag is the wealth fund. So money only goes into the investing bag and it only comes out to invest and then it goes back in.

The idea is I think that children especially should be taught that we only get richer. So the way you do that is by making sure you don't ever consume all your money. And so you always have a financial freedom fund. You always have an amount that goes in and this is what it's gonna be used for.

So you put $4 into the investing bag and then it accumulates and then you say, okay, well, dad, what can I invest in? And you look around and say, well, maybe you can sell candy at school. If we go to Costco and you buy a bunch of bags of M&Ms, you can take those to school and you can sell them at school or any other version of kind of buying and selling.

In general, buying and selling is gonna be the key thing. You may modernize that, right? You really love to go on eBay and look for Legos. So go and buy the Legos and then flip them or let's go to Walmart. Let's see what we can buy there and what we can flip to eBay.

Let's go and see if you can buy a bicycle and fix it up and sell it. Can you go and buy, maybe with a 14 year old, can we go and buy broken washing machines and flip them and fix them and sell them on Craigslist? Always looking for things that you can buy or sell as a way of investing.

And then as you grow there, then building little businesses. So let's get bread materials and let's bake bread and sell it. Let's go and buy something wholesale and sell it for retail. There's so many things that can be done and all of those kinds of things need to be done from the investing bag.

And then the third one is spending. And so spending just means you're gonna spend it on whatever you want. Now, here is where saving comes in. So here's where I'm happy to say, yeah, just accumulate money in your spending bag until you have a lot of money. And then when you have a lot of money, you can buy something bigger.

But if you wanna go out and buy something for $2 every time, then of course that's your prerogative. So that's what I'm doing. And I think it's the right thing to do because it covers all of the important components of it and yet does it in a good and straightforward way that needs to be continued.

So start there and then go continue on. - Save on Cox Internet when you add Cox Mobile and get fiber-powered internet at home and unbeatable 5G reliability on the go. So whether you're playing a game at home. - Yes, go. - Or attending one live. - Go. - You can do more without spending more.

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Welcome to the show, how can I serve you today? - Yes, Josh, thanks. I've enjoyed your recent series on financial goals. My kids are a little bit older than yours and every summer I require them to do a report on work or a job field that they could possibly go into after school with the potential for them to convince our family that we're gonna fund that education.

I want them to live a rich life. Of course, that doesn't require a huge income but it's easy to be restrained at the medium income and things you'd like to do and ways you'd like to invest in your children or your family. I see being an entrepreneur is very fashionable.

It's very fashionable to advise young people to do that but I read a lot and personally see a lot of people who have their own paycheck and they invest enormous blood, sweat and tears into it and then they have maybe just a paycheck but not anything really substantial with regards to income.

So my question to you is, with your experience working maybe with lower net worth individuals at the beginning of your career and then moving on to, I know you've said many times, you've learned that your job is to help people with money, that's what gets a lot of income coming in.

If you were to advise a young person on broad paths to take going into the future, looking at trying to earn in the 80 to 90th percentile, could you categorize into somewhere between, let's say two and seven buckets, people who are making more than $150,000 a year? I think there's obviously a large number of people who are doing that but if you were to go look online, it'd be difficult to find jobs that are listed at $150,000 a year or more.

Are all these people doctors and lawyers or what are some broad categories that these people tend to be in? - Good question, interesting. We could answer that by just pulling up the BLS, the Bureau of Labor Statistics data and look at what they have to do or you could answer it by going and finding your Asian or your Asian friends and seeing what they encourage their children to do.

There's a joke that if your parents are Indian, you've got a lawyer in the house, you've got a doctor in the house and if you've got a third child, you've got an engineer. It's not too far wrong in terms of that approach. First, I think the way to do that is really to hammer, hammer, hammer on education.

So the next series in, the next podcast in the series that I'm gonna talk about is going to be getting all of the education that you can get. And if you look at the kinds of people who have high needs for education, that's your most correlated feature to what you're saying, to a top 20% income is gonna be significant amounts of education.

Any kind of advanced degree or qualification is going to be the pathway to that. And the big ones that you mentioned are, number one, medicine. Medicine pays very well in the United States. Medicine pays well for doctors, but it also pays well for nurses. It pays well for all of the specializations within nursing or within medicine.

And that's a very reliable way working in healthcare for high levels of income. The second one relates to law. Law is a relatively high paying career and it's reliably associated with good incomes and a lot of work and advanced education. Engineering is also consistent, is a consistent category. Engineering has the problem of being more limited than the other ones.

One of the frustrations, I've consulted with a number of engineers who are kind of at the top of their field, and one of the consistent frustrations for engineers is they kind of max out much sooner than some other careers do. So a lawyer can become more specialized or go into a certain area and have a much higher ceiling than an engineer can.

And so an engineer who's working for other people, for whatever reason, they just often aren't paid huge amounts of money, but they are certainly paid top 20% income when they're at the top of their career. The biggest category that doesn't fit necessarily that pathway of formalized schooling is information technology.

So anyone related to information technology because of the newness of that industry, while certainly getting a degree in computer science can be an important asset, it's not the automatic pathway. And so there's a lot more people who are making quite a lot of money in the tech industry who didn't get there with the formalized schooling process.

I wonder if that will change in the future, but so far, since that industry is still so relatively new, it hasn't happened. Finance is a huge category that would have to be represented in what you're saying. Finance is kind of a hodgepodge of different things. There's some aspects of corporate finance that certainly will pay well.

Then there's banking and Wall Street stuff, but if you're in your local town, financial jobs of a guy who sells insurance, the guy, property and casualty or life insurance, local financial advisors, generally speaking, if somebody has been in that business for at least five years, it's hard to believe that they're not in the top 20%.

So that's certainly gonna be a component of it. We talked about, I guess I didn't mention pharmacy when I was talking to healthcare. Pharmacy would be another category. High-skilled technical jobs like aviation could certainly fit. Aviation definitely can pay top 20%. And by the way, there's a huge shortage of pilots right now.

So that's a very promising one. Then you get to the less predictable, but certainly impactful one. You get the whole world of business or just corporate work. So corporate executives and middle and upper-level managers certainly generally all fall into that category. And so there's a huge number of those and there are always education requirements, but it's not as specialized with regard to education as other things.

And then certainly we would have a category on there for structured entrepreneurship. Here I think of real estate brokers or mortgage offices, things like that where it's entrepreneurship, but it's entrepreneurship within a kind of a structured industry, not just from the skies. So it is entrepreneurship, but it's a different style.

You don't have to come up with a unique business. Those would be some that occur to me and all of them are fruitful in high-income wages. - All right, thank you very much. - My pleasure. We go on to Lucas in New Jersey. Welcome to the show. How are you doing today, Lucas?

- Hey, Joshua. One comment to your last caller. As an engineer who is making his way up the career ladder, if you wanna be technical and make money in engineering, you gotta go the management track. That's been my observation. And to this scarcity mindset that seems to be the focal point of today's show, I would highly recommend, I know it's hard for men, it was hard for me, find a good therapist.

It's the best way to address some of these things and you just can't quite get past. - Here's where I would put in, what is it? Better health is advertising everywhere these days. So find your podcaster that has a better health referral link and try with something like that.

- Yeah, yeah, definitely. Well, onto my question. So my wife and I are operating a small business and we're getting ready to hire an accountant for our business. We use QuickBooks and we wanna create an accountant profile, but we haven't signed anything with this accountant and wanna make sure that we're not putting ourselves at any risk.

Now, I've vetted them, I've spoken to them, they have great reviews. I've done that, but I wanna get your input on what we should look for as we hire this person to make sure that we're getting the real deal, we're protecting ourselves, and just kind of what is standard when you're hiring an accountant?

What should we be looking for? What should we be signing? - By any risk, are you mainly thinking about data or just the whole thing in general? - Mostly data. Anytime we're letting someone open their eyes to our books, I think this'll probably come up and this is just the first time that it's happened.

And my wife and I are both sitting here like, oh, we haven't officially hired them, but we want to know that they are competent, so we want them to kind of see what we're doing. And I wanna make sure I'm thinking about this right and what should we be putting in place so that we can hire them and feel good about that process?

- Yeah, there's a technical answer and then there's a realistic answer and they're pretty much opposite one another. So let me give both of them. So the technical answer that I have warned in the past is basically something akin to, you should really never give anyone access to your private financial information.

Anytime you give someone access to your private financial information, you're creating risk for yourself. And so if you go to your accountant and you take your accountant to your books, you're creating risk. An element of that risk is always going to be data leakage from just simply a cybersecurity component, but you have that now, right?

If you're using QuickBooks Online and your data is being stored in the cloud, you have a risk that your personal data can be targeted, you can be hacked and it can be stolen, even though it is encrypted, even though QuickBooks is a big company, blah, blah, blah, blah, blah.

Any data that's stored in the cloud is always prone to attack. You should assume at all times that all data that you store in the cloud, including your most important financial data, is going to be hacked and is going to be sold on the internet. That's a standard assumption with anything related to the internet.

When you're talking about interacting with another individual, you have more risks. So you have risks of people in that individual's office being able to see the data. So when I was a financial advisor, I had data, all kinds of financial data of all of my clients. I had an assistant who had access to my files.

And if my assistant had wanted to review client data, the assistant could. And then there's a whole management structure in the financial industry of all kinds of people who have access to the files. My managing director, of course, had access to all my files. My compliance officer obviously did.

Managing partners, all up and down. And the accountant is the same basic way. You usually have a smaller office if you have an independent accountant, but the accountant has access to your files. Anybody working for the accountant is probably gonna have access to the files. If you're in a small office that isn't gonna have multiple layers of management, then usually there's gonna be less sophisticated data management systems.

So probably everyone in the office has access to all the client files, unless they're a more sophisticated, larger firm with better security protocols. So what that means is that anybody in the office can see your accounts because that's what happens. That's just how it works. In addition to that, you create legal risk for yourself.

So let's say that you and your wife are in business today, but then, you know, three months from now or six months from now, you hire this accountant. Six months from now, you turn over your records. Six months from now, she divorces you, and you're trying to defend yourself against her.

And so you try to delete all your data for your business, and you're trying to get rid of all those records. Well, now, because you've given that data to someone else, then that someone else can be subpoenaed, and the data can be gotten from that someone else. And so if you were working with me as a financial advisor, and if I had client files on you, and you went and were declaring bankruptcy, and you told me about the million dollars of gold in your backyard, and I had that written down, million dollars of gold in the backyard underneath the oak tree, then all my client notes can be subpoenaed by the judge, by the lawyer, and all of that is public record to the court.

So anytime you're dealing with data, there's always risks, both practical risks for stealing data, as well as genuine legal risks. And there's, you know, can you protect yourself? Yes. So the legal risks, the advice there, is that if you want maximum legal protection with regard to an accountant, you need to hire an accountant who is both an accountant, i.e.

CPA, and a lawyer. There is an association, I can't state it off the top of my head, but there is an association of practitioners who are lawyer accountants. That's what they are. You will spend more money to work with one of them, but the big benefit that you get is that now your personal, confidential, financial information can be part of your client files.

So as long as you specifically follow all of the best practices to initiate a relationship where you're requesting legal advice, then now your files with your lawyer can now be privileged information, privileged for attorney-client communication. And that is a good step that protects you from legal risk, and that is wise.

So if you have a reason to believe that that's necessary or a good idea for you, that would be the case. Now, from a practical perspective also then, what you should do is quiz your lawyer accountant on what his or her standards are for information security. And so there are increasingly superior protocols here for security.

And so you should quiz your lawyer accountant and find out, what do you do for data security? How do you protect your systems? How do you protect your computers? How do you protect your client's valuable information? And there should be something in place, what you're looking for is at least something.

I don't think that in general, it's gonna ever be bulletproof or like airtight. No, there's always significant risks. All of us have big cybersecurity risks that are undealt with, even though we should and could deal with them. There are solutions out there, but we don't do them. But what you're looking for is at least somebody who's given some thought to it, at least somebody who has full disk encryption on a device.

So if the device is stolen from his office, it doesn't immediately do that. Someone who's using good protocols and good secure storage mechanisms and has some way of holding keys and passphrases. And then you can also engage in good data hygiene yourself, and that would be important. So using the proper QuickBooks Online login rather than emailing stuff back and forth would be important.

And so you're looking, I think, not for perfection, but you're looking for somebody who basically makes you feel good by the fact that he's thought about it, that he's got a plan in place, at least some kind. In reality, though, that was all the technical answer. The practical answer is it probably just doesn't matter that much, especially with what I think you were hinting at.

If you print out a profit and loss statement of your business and a balance sheet, and you go trotting around accountant's offices and you start plunking that down, an hour after you leave, the accountant is not gonna remember any of the data just because it doesn't matter. And so I would say it's kind of like seeing people naked.

If you walked into the office next door to you and there's a woman standing there naked, you're probably gonna remember that. But if you're a doctor and you see naked people standing in front of you all day long, it's just kind of, it's all the same. It's another naked person.

And so having been a financial advisor, the same thing basically happens with money, is that when I first started and like, oh, wow, now I know how much money someone earns. After a time, you just entirely stop caring. You're completely immune to it. And unless there's something that's radically different, you just, it's just another person.

And it's not like it's impressive or memorable. So I don't think there's much risk of you walking around town and taking out your balance sheet and your profit and loss statement and talking about it and sharing what you're looking for. But if you want the protection, the technical answer is lawyer accountant.

- Okay, yeah, I think the, I appreciate both of the technical and the real answer. I think the concern is we haven't entered into a formal business relationship with this person. And I was wondering if, in your opinion, that is necessary before we share anything. - No, I don't even know what that would mean.

- Yeah, I'm not sure either. I guess that's where the question's coming from, is what is normal here since it's my first bet, first go around with this as an entrepreneur. - I would say what you should try to do is to get as clear as possible on what you're looking for.

So are you looking for tax preparation? That's very different than I'm looking for proactive business advice or proactive tax advice. So get an idea of what you're looking for and then go and start interviewing people. And then I would just share kind of big picture numbers. We have a business that does X amount of dollars in revenue.

We have profit margins of about this much. We have this number of employees. Here's what we're trying to accomplish. We're trying to get this, this, this. What could you offer? How could we work together? And I don't see why there would be any kind of formal agreement before you would have those conversations.

- We've had some of that conversation already. It is gonna be a lot of tax related stuff since this is still a sole proprietorship. So that's definitely the starting point. - Good, so I don't think you're disclosing huge amounts of information there. And I don't think there's a big risk.

If you want to have it iron tight, then do all of this consultation with a lawyer. So for example, if you're a sole proprietor and you're thinking about, should I establish a corporation? That's a legal question. Now, obviously your accountant will comment on it, just like I used to comment on it, just like I comment on it when people call me and ask me.

But technically speaking, that's a legal question. You should have an understanding of the tax considerations, but that's a legal question. And so you would engage the services of a business lawyer to give you specific advice. And then in that context, when you engage the lawyer, then you will have attorney client privilege for your privileged business information.

- Okay, got time for one more? - Sure, go ahead real quick. - So we are eligible for a grant for our business. And the terms of that grant allow us to pay ourselves back for costs that we've incurred in the past for the business. Would it make sense to keep the funding from the grant for future business expenses, or to pay ourselves back for things that we've paid out of pocket?

- Do you see a reason to pursue one path or another? - Refilling our coffers a little bit, since we've paid it, everything personally so far, due to the nature of the business, which operates out of our house. But I could see value in just kind of holding that for improvements to the business, growing the business in the future, and we don't have an immediate need for the money if we were to reimburse ourselves.

Maybe that's my answer. - Yeah, I think if you don't see a way to actively use it in the immediate future, then filling the personal coffers, including things like making sure that you're making retirement account contributions, things like that, I think are important. Every calendar year that passes, you lose the ability to make a retirement account contribution.

And as a business owner, you really don't wanna miss those, if at all possible, because that's what keeps you going if your business goes into bankruptcy. That's what allows you to start again, is having money in your retirement accounts. So even if the terms of the grant didn't allow you to actually make a retirement account contribution, but if it does allow you to pay yourself back, then pay yourself back, lower your current income so that you can defer into retirement accounts, things like that.

Now, if we're talking about significantly more money beyond that, I would again go back to, I think, the good framework here is to think about bankruptcy planning. If I went through bankruptcy, what would be available? So if you live in a state that allows you to have a high homestead exemption on your personal residence, well, pay down your mortgage.

And then if you need the money to expand the business, you could always choose to go out and refinance the mortgage in the future. And again, speaking conceptually here about the value of bankruptcy-proof assets for a business owner as being a really valuable thing to think about, not giving specific advice about you paying down your 2.7% mortgage to refinance it at 9% in the future when you need the money out.

But beyond that, I mean, taking profits and actually having made money if it's in the terms of the grant is always a good idea, but you're gonna wanna expand. And so having the money available to you for expansion is good. So I could argue both ways. I would focus on what I said of retirement accounts or other exempt assets as a way of just kind of leveraging yourself up a little bit and making sure you're building on a solid foundation and then look for ways to invest it to grow the business.

- Okay, perfect, I appreciate it. - My pleasure. Fun questions. That concludes our Friday Q&A show for today. Really interesting set of questions. I thank you for the interesting discussion. As always, I had two or three other callers that came on, but I guess I didn't get to them.

So just know that generally I get to you. I work through everyone who's on the line, even if it takes a while. And remember, if you'd like to join me on next week's show, go to patreon.com/radicalpersonalfinance, patreon.com/radicalpersonalfinance. That will gain access for you to next week's Q&A show. Have a great weekend.

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