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Choose from a great selection of digital coupons and use them up to five times in one transaction. Check our app for details. Ralph's, fresh for everyone. Radical Personal Finance, episode 46. Welcome to the Radical Personal Finance podcast for today, Friday, August 22, 2014. It's Friday. I thank you for being here with me today.

I am excited about today's show. We're going to be doing a Q&A show, but I'm going to be answering one question in depth. And it's going to take us through the entire world of financial planning. But I think it'll be useful. I hope you like it. Stay with me.

It feels really good to be back in the seat after being out of town last Friday, traveling. So I'm back now, back to my own home office, back to my normal microphone, able to get some stuff done. And I'm excited about today's show. It's going to be fun. I'm going to answer a listener question.

This is a detailed question. And as I got this question, there were so many good things that came out of this question. That I said, "This is going to be a great way to kind of, in some ways, aggregate everything that there is to know about financial planning and show how it's incredibly simple, but incredibly complex." Now, that may sound like a bit of a confusing introduction, but stay with me.

Listen to today's show, and I think you'll understand. So today we're going to be answering an email that I received from Jason in California. And Jason was very kind. He sent me an email. And I'm going to read that email to you. And then we're going to go through it step by step.

And you'll see it's going to provide us some really great opportunities to talk about a lot of valuable financial planning topics. Jason's email goes like this. "Joshua, I don't consider myself a financial expert by any means. But I have it figured out, figured, that I would like to have a decent retirement with an annual income of around $80,000 a year minimum.

About two years ago, I started investing heavily into my 401(k) account. In 2012, I contributed $10,000. Last year, I maxed it out. And I plan on doing the same this year with already around $11,000 contributed. My account balance is currently $50,000 as I write this email. My employer uses One America, and I am very unsatisfied with the program, as nearly all of their investment options have expense ratios over 1%.

I've talked to my boss and HR, and they aren't going to change a thing. There is also no fiduciary. So I doubt these expensive funds and such are in my best interest. Starting this year, however, they have started giving everyone an automatic 4% contribution no matter what. I also enjoy getting taxed less as I contribute roughly $680 a check biweekly.

Something makes me think I'm just wasting my money by contributing so much into the 401(k) though. About 10 months ago, I joined Sigfig.com. If you've never heard of it, they invest your money for you based on your tolerance level. In those 10 months, I have contributed $4,600 to it.

They use Ameritrade to purchase funds and such, and use mainly Vanguard mutual funds with exceptionally low expense ratios. They charge nothing for their service unless you have an account of about $10,000, and then it's just a flat charge of $10 a month. Anyway, I've made roughly $250 in those 10 months.

While this isn't a lot of money, I feel that it can grow quicker than in my 401(k). My next goal is to be able to buy a house, flip it, and repeat. My ultimate goal is to be able to purchase land and build a state-of-the-art mini storage business, as they are a gold mine with very little effort to run once established.

I guess I'd like to know where should I keep my focus. Should I contribute so heavily to my 401(k)? Should I spread what little assets I have? If so, where? Should I take a risky step and pull out the $50,000 in my 401(k) account, take the 10% hit, and then try to buy that first fixer-upper?

I'm very interested in what you have to say. I forgot to mention that 4% is off of my base pay of $30 an hour, so that's a company contribution of $2,496 annually. I am "maxed out," as they say, so that won't be increasing. I haven't even gotten a raise in three years, but I can't complain.

I know I make more than the average working adult. Thank you. Jason in California. Jason, thanks so much for writing the email. And I want to start just with a quick comment to you specifically. Don't be offended at anything I say in my answer. I'm going to be very direct in my responses, and I may be completely wrong on something simply because I don't know you.

I don't know anything about you other than what you've written to me here in this email. And probably, if you're anything like me, I often will sit down and kind of quickly dash out an email. So I'm going to use some of the words that you've written, some of the sentences, but maybe you just quickly wrote it out, and maybe I'm reading too much into it, or maybe I'm not taking something seriously enough.

But I'm going to use this as a teaching tool for the audience. And I'm going to comment on some things, and so just don't be offended at anything I say. I'm going to give you straight answers. You might like some of them. You might not like some of them.

But I'm not going to give a specific answer to any of your questions. But I'm going to be very specific. But I'm not going to give a specific answer to any of your questions, and there are a few reasons for that. Number one, I really don't have enough information.

So I have an email, and so I could have emailed you back and said, "What about this? What about that?" But that's not going to be helpful. I don't have enough information, and obviously we can't do an individualized financial plan for you here on the radio, or I guess the podcast or the Internet, whatever this is.

And it would even be problematic for me to give you a specific answer because of all the restrictions on what is and what isn't financial advice. So I have to be very careful not to give financial advice. And there's a difference between my teaching and my talking about financial topics and me giving a specific answer to you and saying, "Here's specifically what you should do." So I'm very careful about that.

What I'm going to do is I'm going to tell you how I would think through your problem. And frankly, I think that will be the most useful thing for you because the key is for you to develop a plan that's customized for you, and the key is for you to think through your problem.

And also I think it will be the most helpful thing for the audience to hear how I would think through the problem because then instead of my giving you an answer and saying, "Jason, you should do this, you should do that," which would be arrogant and ridiculous because I don't know what you should do with your life or with your money, all I can do is help you think through the options.

And even if you had hired me as a financial advisor, I still can't tell you what you should do with your money. I can only lay out for you, here are the options, and then at the end of the day, it's your money. You could hire me for specific services, but I could never tell somebody what they should do with their money because all of us are different.

So I'm going to start with sentence one. You said in your very first sentence, "I don't consider myself a financial expert by any means." And here's where--open up your ears and don't get offended by what I'm going to say because I think this is just such an interesting place to start.

You are a financial expert in one way and you're not in another. But here's why. You are a financial expert. It's your money and you've earned it. So therefore, you are a financial expert. You're an expert at earning money and saving money. And you've saved, even if I ignore any of your other assets that you may have, and I just look at your 401(k) account, you've saved $50,000 in your 401(k).

Do you understand how uncommon that is? I don't know how old you are. I don't care. Do you understand how uncommon it is in our society for you to have $50,000 in your 401(k)? That is awesome. You are a financial expert. But I understand what you mean. It's a confusing world.

There are so many opinions. There's so much advice that you hear out there. And it's a major problem. So here would be another thing for you, another response for you. And this is where it's going to sound harsh. Why are you doing anything with money when you're not an expert in it?

Why is your money invested if you're not an expert? Why did you hire the 401(k) plan provider to manage your money? Why did you hire SigFig, whoever they are, to manage your money if you're not an expert at it? Now, I'm not being harsh because I did this myself.

I remember starting my Roth IRA when I was 18 years old. And I went out and I bought a bunch of mutual funds. I never read the prospectus. I didn't know anything about it. USAA said, "Hey, this is a good mutual fund, and it will take a low minimum amount as long as you invest $25 a month." And I said, "Okay, I'll do it." But my goodness, why do we own mutual funds?

Why do you own? You probably own, between your accounts, maybe 20 different mutual funds. I'm just guessing. It could be 10, it could be 5, it could be 1, it could be 30. But let's just--okay, let's say 10. I'm going to cut my number in half. Question, did you read your prospectus?

Most people don't. Why would you invest your money in something where you haven't--if, indeed, you haven't-- why would you invest your money into something where you haven't read the prospectus? Simplest thing to start with. Go read your prospectuses. Read them for each and every one of your funds. If you're not an expert at your money, you've got to be an expert at your money.

Now, I think we need to change this because you and I both have done this, and I've just learned this, that we've got to change this thing about trusting other people and not becoming an expert in it ourselves. If we could do that, everyone would be happier. I'm a former financial advisor.

I wish all of my clients were experts with money because then they could hire me for what I do and not hire me for what I don't do. Don't do anything with money that you don't understand. If you don't clearly understand how things work with money, don't do it.

Start with becoming an expert. We've got to learn a whole new skill set about learning about money. We've got to relearn how to learn about subjects that actually matter. I get so angered sometimes about our schooling system. There's nothing useful that you learn in school. Now, that's an extreme statement.

I should modify that. There's almost nothing useful that we learn in school, except we think we're highly educated. We think that we know what's going on, but in reality all that's happened is we've learned just enough to think we're highly educated and think we know what we're talking about, and usually we're wrong and we're delusional.

What practical knowledge do you get in your schooling system? So I applaud you for asking the question, and I thank you for being here to listen to my show. That's why my show is here. I'm here to share with you everything that I've learned about money and then continue to learn with you everything else that I want to learn in the future.

I'm an expert in some things, and I'm a total novice when it comes to other things. So I applaud you for asking the question and for listening to my show. That shows me that even though you don't consider yourself an expert, A, you are more than you probably think, and B, you will become it because you're listening to a show like mine and you're writing me an email.

So just consider those things. I would say don't do anything unless you're an expert in it or at least unless you know enough to know what you should be looking out for. Continuing on, I would like to have a decent retirement with an annual income of around $80,000 a year minimum.

Now, let's talk through that. And I'm going to use this as an opportunity to talk about some financial planning stuff. I'm going to go through some numbers, and don't--just listen to the numbers. I'm doing this prior to teaching any shows on how to do these calculations. So if you're not familiar with how to run these retirement calculations and things that I'm going to go through, feel free just to let this kind of wash past.

But listen to the big idea. I'm going to do some shows on how to calculate this for myself. But I can't--excuse me--I can't do any specific calculations for you because I don't--first of all, I don't even know how old you are, and I don't know how long you want to retire.

So you say I want an annual income of around $80,000 a year minimum. I can't do anything necessarily specifically for you, which, again, I wouldn't do it on the radio like this, even if that were the case, because you're going to find out in just a second here how crazy these numbers are going to be and how all across the board, depending on what assumptions we use.

But I made up some assumptions, and I pretend that--for the sake of my example, I assume--let's pretend that you're a 35-year-old guy, and you want to retire at 65, and you're going to plan on a life expectancy. Now, first of all, this is where we get into numbers. Retiring at 65 and planning for a life expectancy of 80 is very different than retiring at 55 and planning for a life expectancy of 95.

Major difference. So I'm going to show you how these numbers work, and you can see why I can't answer a question and why no financial guru can ever answer a question like this on the radio because there's a gazillion and one assumptions. So I would first start with figuring out what are you trying to buy with $80,000?

Now, if you're like anything like many people, that $80,000 just simply represents an approximation of about the kind of lifestyle that you're spending now. But I'm actually not so sure because it doesn't sound like you're making $80,000. You said your base pay is $30 an hour. $30 an hour is basically $60,000 a year.

Now, your spouse may be working. You may be married. You may not be married. I don't know. But it sounds to me like you might be wanting to spend more money in retirement than you're making now, and that's problematic. It's very challenging to do that one. But let's use the $80,000.

The first thing I would want to do is I would want to figure out how much capital I need to maintain this $80,000 number. Now, for the sake of this podcast, let's start with what you hear everywhere in the financial planning-- in the financial online world. Let's use the 4% safe withdrawal rate from the Trinity study, and let's compare that to using the 25 times income formula.

Now, this is grossly imperfect, but it's a good place to start. So the way this math works is that there's a study called the Trinity study. It's very famous. You'll read this all over the place. There's a gazillion and one problems with it, and there's a gazillion and one good things about it.

But basically what it says is what would you need to do to maintain a retirement over a 30-year period of times if you have reasonable investment amounts? How much of your portfolio can you withdraw from-- what percentage of your portfolio can you withdraw without destroying the portfolio too early with a fairly high degree of success?

That's a very generalized version of what the study basically says. But out of that, we can come up with a 4% withdrawal rule. And so if we have 4%, now we know that we need basically 25 times income. So the place you could start is you could simply say, "Okay, if I need 25 times income, then I want to have an $80,000 a year retirement plan.

$80,000 times 25 equals $2 million." So you can do a quick calculation to see if you're on track. So let's say that you say, "I need to accumulate $2 million." Look at what you're making. Look at how much you're contributing to portfolio. Look at your expected rate of return and figure out if you're on track.

So let's, for example, let's assume that you are 35 years old. You want to retire at 65. And you said you're maxing out your account. Let's assume that you're maxing it out at $17,500 per year. Now, I know that you're getting an employer match, but let's just start with the easy numbers that people will be able to grasp on the radio.

So we'll run this in the quick financial calculator. We'll put in a $50,000 present value. So we'll clear the register. $50,000, switch that to a negative number, put that in for our present value. Let's use a 30-year period of time. 30 goes in for N. Let's put in--let's go with 6% rate of return.

I don't know. I don't know what number to use. Let's just use 6%. And let's put in a $17,500 annual payment. So we'll turn the $17,500 negative, put that into the payment, and we click the FV button to give us our future value. So if you are 35 years old and you're going to invest for 30 years putting $17,500 in, if we get a 6% rate of return on the money, then you're going to have $1,753,703.91.

We'll call it $1,753,704. I'll round it a little bit. So, okay, now we're in about a reasonable range. So we know, okay, if you keep maxing out your 401(k) over the next 30 years, you're going to be pretty close to that $2 million amount. Now, I'm ignored for the sake of this.

I ignored the $2,500 that your boss is putting in for you. I ignored you starting to do catch-up contributions at the age of 50. I just know you're about in a reasonable range. I put a 6% return. I don't know if that's accurate or not. We'll come back to that in a moment.

So let's tighten up those calculations, though, because that's actually a misleading calculation. The reason it's misleading is because we didn't account for any kind of inflation. Now, maybe you are, and if you are, that's fine. So let's say that you're currently spending $40,000, and you've calculated that under a normal inflation rate or whatever you've decided is an inflation rate that you need to plan for, that $40,000 of expenses is going to grow to $80,000 of expenses, and so that's where you gave me that $80,000 number.

But my guess is that's probably not the case. My guess is you probably said $80,000 because that's what you want to spend. But we've got to do some calculations for inflation. So a quick financial lesson for you. Here's how we do this calculation. So when we're doing a retirement calculation, it's a three-step formula that we use just to do it with a simple financial calculator.

So no software, no financial planning software, no inflation returns, just the three-step formula, and there are three steps to it. I'm going to do them all in the calculator for you. So number one is we start with solving for the income that we need the first year of retirement.

And what we want to do is we want to use our inflation rate and figure out in the first year of retirement how much money do we need coming in. So let's start with $80,000, and I'm going to use a 3.5% inflation rate over a 30-year period of time.

So we punch $80,000. Let's clear the register. Anytime you're starting, let's clear the register. So let's put in $80,000, and we're going to start, and that's going to be because that's a cash inflow that we need. We're going to put that in as a negative number. So we click $80,000 for the present value.

N is 30. Punch that in. And let's use a 3.5% annualized number, so we'll put in 3.5% for our interest rate, put in a zero for our payment, and let's click future value. So we push the future value button, and the answer that we get is $224,543.50. So what that means is that if you are planning on $80,000 a year in today's dollars, in 30 years you're going to need $224,543 in that first year of retirement to keep pace with your need for expenses.

So we want to make a note of that number because that's the number we're going to solve for is that first year of retirement expenses. Next, step two, is we need to calculate the amount of the portfolio that we need at retirement to maintain inflation-adjusted distributions over time. So here I want to introduce to you the concept of an inflation-adjusted return.

So all financial planning numbers depend on the formula, depend on the numbers that we use. So, for example, if I tell you I want to assume a 6% investment return, the immediate thing that you should say is, "Well, what is that 6%?" Is that a 6% nominal return, which would be a flat return?

Is that a 6% real return, inflation-adjusted return? Is that 6% gross of expenses or net of expenses? Is that 6% gross of fees or net of fees? And the answers to those numbers are going to vary the amounts dramatically. So if you are paying a 1%--let's say that you're paying 1% expenses, well, look at your number and your return number.

Is that net of expenses or gross of expenses? If you're paying, let's say, an advisory fee-- if I were a financial advisor and you're paying me 1% to run your portfolio, then you've got to take that out of your returns. That's coming out of your returns. So let's just assume, in my example here, for the sake of some simple math, let's assume we're using a 6% nominal return, net of fees and investment expenses, and a 3.5% inflation number.

So now we need to solve for an inflation-adjusted return. Now you might think that all you need to do is just simply subtract the inflation rate from the investment rate, but that's not actually true. So a key tip for you, if you're a financial planning student or if you're a financial planner planning to sit for the CFP exam, you always need to solve for the inflation-adjusted return.

And there's a formula for that. So you can't just say 6% minus 3.5% is 2.5%. Now you're not going to be dramatically wrong if you do that. You're going to mess up the answers on the CFP exam, but for general purpose, if you don't know how to do an inflation-adjusted return, you're not going to be dramatically wrong, but you are going to be a little bit wrong.

So here's the formula. The formula for inflation-adjusted return is 1 plus the after-tax return divided by 1 plus the inflation rate minus 1 times 100. So if we're going to use my 6% investment return and my 3.5% inflation number, then here's how we do it. We would say 1 plus the after-tax return, which would be 6%, 1.06, divided by 1 plus the inflation rate, so 1 plus 3.5 should be 1.035, divide those two together, minus 1 times 100, and the answer that we get is 2.415%.

I'm going to use 2.42% for my numbers. So we now know our inflation-adjusted return is 2.42%. So now we're here in step two. We're trying to calculate the portfolio that we need at retirement to maintain the inflation-adjusted withdrawals. So what we do is we next solve for the present value of an annuity based upon the number of years that we're going to use for our life expectancy formula.

And I'm sorry if those words don't make sense. I'm trying to make this as clear as possible, but just stick with me if you don't get this stuff. So we're going to use an N of 30, assuming a life expectancy to 95, so from 65 to 95. We're going to use an inflation rate of 2.42%, and then we're going to put in our payments of $224,543.50, and we're going to put in zero for our future value, and we're going to solve for the present value.

Now, in this situation, because we're now using an inflation-adjusted return, I don't need to worry about growing that payment number by the rate of inflation. All I need to know is what that initial number is. So we're going to put 30 in for the N, 2.42 for the I.

We're going to put in $224,543.50 for our payment. We need to turn that negative because that's going to be a cash flow in for us, and we're going to put in zero for our future value because we're doing an annuity calculation. We're going to wind up with zero, and we're going to solve for the present value.

And the present value that we're going to get is going to be $4,865,243. So that's the portfolio that we need at the first year of retirement in order to be able to maintain that spending rate throughout retirement. Now, the third step of this calculation is we're going to back up, and we're going to calculate for the amount that we need at retirement.

So let's solve for the necessary annual payments to get to the just under 5 million bucks that we need for the future value. So you have $50,000 currently. So let's put in $50,000. We're going to put in $50,000. We're going to turn that negative as our present value. Oops, forgot to clear the register.

So $50,000, change that out, put that in for our present value. So minus $50,000 goes in as our present value. Our future value, we're going to put in $4,865,243. $4,865,243 for our future value. Now we're going to go ahead and use our 6% interest rate. We don't need to use the inflation-adjusted rate because we already have our inflation-adjusted future value.

So we're just going to put in the 6%, and then we're going to put in an N of 30, and we're going to solve for the annual payments. So under this scenario, the annual payments are $54,629.79. I'm going to make a note of that in my notes. $54,629.79. So you need to be saving-- under that scenario, you now need to be saving $54,000 per year.

And you would say, "What?" I assume you would say-- most people would say, "What? "How is it possible that you need to be saving that much money?" Well, that's what the math would say you need to be saving. Now, why are those numbers so different between the $2 million and the $4.8 million?

Well, there's a ton of reasons. So first was we were worrying about today's dollars instead of future dollars. And there's a ton of disparities in my numbers. So inflation rate-- look at the rate of return I used. I used a 6% rate of return and a 3.5% inflation rate.

So a real rate of return was 2.42%. Now here's the question. Is this an accurate number for you? Now, I don't know if this is an accurate number for you or not. And this is why these discussions are in some ways so valuable, but in other ways they're really hard to work through.

So I don't know what's right for you or what's not right for you until you actually look at your situation. So financial planning-- you have to go back and look through a bunch of these issues. So for example, should we use that real rate of return of 2.42% and the nominal return of 6%?

Well, the long-term rate of return of the general stock market is about 10%. So if I use a 10% number, that number changes hugely. If I rerun the calculations, then in a 10% number and a 3.5% inflation rate, now my inflation-adjusted return is 6.28%. So if I solve for the $224,000 of annual income-- put this in here-- N of 30, 6.28 for the interest rate.

Let's use $224,543.50 as our payment. Future value is zero, and we solve for the present value. So now I need $3,188,788 at retirement. Big difference between $3,188,788 and $4,865,243. Let's call that 3.2 versus 4.8. That's a $1.6 million difference in the amount of money that you need. So if I were to back that out-- let me use that now.

Let me use a 10% return, and let's figure out what our annual savings-- so now I'm just redoing steps two and three of the formula. I don't have to redo step one. I'm just doing steps two and three of the formula. So let's run 30 years to save. We've got a 6.28% inflation-adjusted return.

Hang on a second. We shouldn't be-- I need to put a 10. Okay, so we can use a 10% rate of return now. So we put in an N of 30 and a 10% rate of return, and we put in $3,188,755.73 for our future value. Our present value is minus $50,000, and so our annual payments that we need now are $12,801.16.

Big difference. Now, I'm being a little bit sloppy with the math. There are a ton of problems with this example that I've set out, but yet mathematically it should be accurate. Unless I've screwed something up just in my calculator keystrokes while recording this, mathematically it should be about right.

But the difference is that what is your actual portfolio? What is the actual makeup? What's the expected return of the portfolio? What's your expected Social Security return? What's the actual amount? Are your expenses going to inflate at 3.5% or are they not? I'll give you an example. Are you going to live in the house that you're currently living in?

Well, in that case, the mortgage isn't going to inflate unless you refinance it and take cash out of it or something like that. So the mortgage isn't going to inflate, but the rest of your expenses may inflate. So, okay, now if you're maxing out your 401(k), you're on track for that retirement age if you are there at 35.

But now here's the other question. What are you doing as an investor? So the average investor actually has a rate of return of just over 2%. There was a chart that made the rounds this last week on social media, on Twitter, and this chart was put out by RBA Advisors, and I'll link to it in the show notes as far as the PDF of it.

And what he did is there's a company called Dalbar, and Dalbar figures out what the average rate of return is for the average investor. And they do this based upon mutual fund sales, redemptions, and exchanges each month, and they use that to try to calculate what the rate of return is for the average investor.

Now, there's some flaws with the--there's flaws with everything in finance that you see. Don't get--learn--you have to--when it gets to finance, you have to figure out what the data is that's being used, and you have to just work with it and notice the flaws and not put too much stock in one thing.

But they ran out this chart, and they released this chart of the asset class returns versus the average investor for the 20 years from December 31, 1993 to December 31, 2013. The highest asset class rate of return was energy, north of 12%. Health care was second, north of 12%.

Infotech was about 11%. Consumer staples was number four, about 10.5%, looks like. And it goes all the way across. Look for it in the show notes. All the way over to the other end, and Japan's rate of return was about, you know, looks like 6/10 of a--60 basis points, 6/10 of a percent.

Inflation was just over--excuse me, I had that wrong. It was 1 point something percent. Inflation was just over 2%. The fourth worst rate of return was the average investor, getting just over 2% rate of return on their investments. So are you getting 10% or are you the average investor that's getting about 2 point something percent of real rate of return?

The average investor will never retire, period. Period. And that's why, in my opinion, what the reason why you should consider hiring a good financial advisor. But that's a conversation for another day. The average investor is just screwed, basically. So that's the math for you. That's the process of the way that you would figure it out.

But the reason I went through that is to show you where all the holes are. So I'm using a 30-year lifespan. That's a huge number. Are you going to die at 80 or are you going to die at 100? I'm using a 3.5% inflation rate. What's it going to be?

Is it going to be 7.5, 11.5, or 1.5? We're doing a level withdrawal. Do you need to do a level withdrawal? Do you need the same amount of money coming in at 95 as you do at 65? I've ignored investment expenses and taxes for the most part. I'm using a number net of that.

So what are your actual investment expenses and tax numbers? There's lots of massive holes in my numbers, but this is how you have to do the calculations. So if you're trying to figure out what you need to do, you need to do these calculations is what you need to do.

If you don't know how, again, I'll do a soul show where I go a lot slower through this stuff to try to talk you through how to actually do those calculations. But you need to do those calculations. You need to find a good financial planner if you don't have one and sit down and kind of look at your actual situation.

So that's part one answer to what you asked me there. Now let's go on. "My employer uses One America, and I'm very unsatisfied with the program as nearly all of their investment options have expense ratios over 1%. I've talked to my boss and HR, and they aren't going to change a thing.

There's also no fiduciary, so I doubt these expensive funds and such are in my best interest." So here again I'm going to give you something of a nuanced answer. So first, 1%, is that expensive? Depends who you ask. There are lots of funds that are way cheaper than 1%.

I mean you could buy some index funds with Vanguard where the fees are-- I don't even remember what they're--16 basis points if my memory is correct, 17 basis points, 0.17%. So the massive--I don't even remember what the lowest fees are on some of their index funds. So you could cut that 1% expense ratio to basically nothing.

You can cut it to nothing if you'll take over your management of your portfolio and start managing your investments yourself and buy individual stocks, and then you just have a trading fee, but you have a expense ratio of zero. So the reason why it's 1%--well, that's going to have to do with two things.

First, One America is an insurance company, so this is probably-- your 401(k) is probably funded with a group annuity contract, a group variable annuity contract. Contrary to what many people say, this is standard practice. Just about all 403(b)s are annuity contracts. This is very standard. Doesn't make it wrong, doesn't make it bad, but you're going to have--in an annuity contract, you're going to have the cost of insurance.

So look and see, are you actually getting the annuity contract and are you paying the cost of insurance in that? Number two, look at the funds. So the management fee that the advisor on the fund is getting paid is going to be based upon the fund. So I bet you there's a difference in some of your funds.

1% is not the end of the world. Now, I know that I am very sympathetic to keeping low expenses. I think keeping low expenses is helpful. Every academic study that has been done--that I have read, excuse me-- every academic study that I have seen or that I have read has talked about one of the major predictors of success is lowering expenses.

So this is definitely a major, major benefit. However, even today, the average mutual fund is higher than a 1% expense ratio. So this doesn't necessarily mean that somehow your fiduciary on your plan is breaking their fiduciary duty by having a 1% average expense ratio. You're probably in a smallish company, and here's where you get into the importance of perspective.

So I'm going to talk about perspective for a moment. What I mean by perspective is, am I working with you as my client or the company as my client? So the 401(k) is not a right to you. If I'm talking to you as an employee, the 401(k) is not a right.

It's a privilege. It's something that your employer is offering for you, and it's supposed to be an incentive for you. They're not required to offer it. They're offering it as part of their compensation package because it's supposed to be an incentive for you. It's supposed to be an incentive for you to work with them for a longer period of time.

It's called golden handcuffs. They're trying to get you to work with them. A 401(k) is a type of profit-sharing plan. So the employer is deciding to offer you a profit-sharing plan with 401(k) provisions, allowing you to contribute some of your money into it. And they're paying for the cost of the administration of the plan.

They're paying for the fees. They're paying for all of the TPA costs. They are subsidizing the plan, and it's money out of their pocket. Now, clearly, it's not incentivizing you. So it's not working, and that's fine. But you don't somehow have this right to--in my opinion-- you don't somehow have this right to march in and say, "Your plan stinks.

What's wrong with you guys? I'm just going to go ahead and give you all these problems." Now, again, you don't necessarily have that tone in your email. I'm just using it as a point to say that if it's not incentivizing you, just go somewhere else. My suggestion to you is take the money they give you for free and just simply recognize the fact that you're not going to be there for very long-- for much longer.

Here's what I would do. Number one, if you're worried about the fees, contribute up to the match. And it sounds like if they're putting a 4% contribution into your account without you having to make any additional contributions, take that 4% and then go use an IRA for everything else.

There's zero benefit--except for any matching contributions-- there's zero benefit to you for using a 401(k) instead of an IRA. Same tax deduction, same everything, as long as you're under the income limits and you are based upon what you said as far as your income. So go and use an IRA and put your $5,000 into your IRA.

Set up an automatic contribution to that account, and set up an automatic contribution to that account that every payday goes into that account, and it's just as automatic as it is going into the 401(k). It's exactly the same. The only difference would be--let me be careful here-- the only difference would be if in your state-- and I don't know the state law of California-- but if in your state the bankruptcy protection of pension plans is different from the bankruptcy protection of IRAs.

In my state, Florida legislative law applies the same protection to IRAs as it does to 401(k) plans. However, I don't know California laws. That would be just the one thing that would come to mind right now. Here would be another plan that you could do. So plan A--my suggestion is for how to get around this and how to fix your fee issue-- is contribute up to the match and then use IRAs for everything else.

Set up the automatic contributions. Number two, figure out how to use the funds in your asset allocation that they offer that would be the most advantageous. So, for example, you may in your asset allocation-- you may decide that, well, you know what, large-cap U.S. stocks, index funds are going to be the way to go.

But, you know, emerging markets--I'm not so sure that I'm going to go with an index fund over there because maybe you are of the belief that an active portfolio manager may have a little bit of a better results for you in emerging markets. Or maybe you're not. I don't know.

But if that were the case and you don't have an index fund available to you that would cut your expenses down below that 1%, then choose the mutual fund in the 401(k) and put your international funds in the 401(k) and buy your index fund in your IRA. Just go straight to Vanguard and buy it there or whatever it is that you're going to do.

But figure out which of the funds that is available to you in your 401(k) would be the best--the lowest fees or the best expenses-- and look at your asset allocation across all of your accounts. Now, I know this is a little bit advanced. And you said I'm not a financial expert.

So hopefully this makes sense. If it doesn't, keep listening, and it will make more sense as time goes on. Next thing I would say, just don't worry too much about the fees. You're probably not going to be there for very long. A, you haven't gotten a raise in three years.

B, you said you want to do something in real estate. And C, you don't like the plan. So I'm not predicting that they're going to fire you, but you're probably not going to want to stay there for very long. So suck it up. Take the fee for a few years.

Recognize the fact that they're giving you an additional 4% of your compensation. And then if you leave in two years, roll it out, and you're done and gone. There is a fiduciary in your plan, I promise. All ERISA plans have a fiduciary. That doesn't necessarily mean that your human resource coordinator knows who it is.

The ERISA legislation is crazy complicated, and no one actually knows anything of what it says unless they're really good. But there is a fiduciary in your plan. All you have to do is go and ask for your summary plan description. And by law, ERISA law, they're required to give it to you.

Ask for your summary plan description, and it should list in there who the fiduciary is. And the fiduciary is probably simply the company, or they may have hired what's called a TPA, a third-party administrator, to administer it. Just kind of find out. There's a bunch of ways that it can work.

1% fees is not necessarily a breach of fiduciary duty. You can't necessarily apply that and say, well, somehow there's something wrong with the company because of a 1% expense ratio. Again, I'm not defending the 1% expense ratio, just trying to be realistic about this. Organize your fellow employees to ask for better.

Here's my next idea. So if there are a lot of you and you do want a better plan, then organize and just say, hey, this would be a big deal. This is a big deal to more of us, and maybe you would have a little bit more leverage than just you going.

Another thing I would say is, is there another type of plan or another plan available to you? So, for example, do they have some kind of ESOP set up that you can use instead of the 401(k)? Are you married? Does your spouse have a 401(k) that you can contribute to?

So maybe you've decided how much of your expenses that you are going to-- or how much of your income you want to put into retirement plans, and then do that. Change companies if their compensation plan isn't working for you. So remember, this is supposed to be an incentive for you to want to stay with them.

If your company offers this bad plan, move. Go find another company with a better plan. And here's the other thing. If you're making $60,000, your tax rate really isn't that high. I mean, all things considered, you are squarely middle class, and middle class tax rates are not egregious at the moment.

So look at what you're actually saving. Maybe you're better off with making Roth contributions at this point in time, and this is where it would be highly individualized. But if you're making $60,000 and you expect your income to increase over time, maybe it is a better move for you to do a Roth at this point in time.

So you can just say, "I'll go ahead and pay the tax now," use a Roth account, and do that with Roth IRAs. A couple more comments on this. "Starting this year, however, they've started giving everyone an automatic 4% contribution no matter what." So I just say, "First, there's no reason to contribute first to the 401(k) plan.

Take the 4% and go on. Consider the bankruptcy thing and consider what overall amounts you're putting into the account." "I also enjoy getting taxed less as I contribute roughly $680 a check biweekly." You can achieve it another way. Set up an IRA, set up an HSA. So there's a logical fallacy there that, yes, getting taxed less is good, but the 401(k) is not the only way to accomplish it.

"Something makes me think I'm just wasting my money by contributing so much into the 401(k) though. About 10 months ago, I joined sigfig.com. If you've never heard of it, they invest your money for you based on your tolerance level. In 10 months, I've contributed $4,600 to it. They use Ameritrade to purchase funds and such and use mainly Vanguard mutual funds with exceptionally low expense ratios.

They charge nothing for their service unless you have an account of about $10,000 and it's just $10 a month. Some, anyway, have made about $250 in those 10 months. While it's not a lot of money, I feel it can grow quicker than in my 401(k). Don't know anything about sigfig.

Did a quick look at their website. Looks to me just like a robo-advisor, just like Wealthfront and Betterment and some of the other guys just setting up a robo-advisory firm under that scenario and using an allocation. That's what it looks like to me. I don't see anything special about it.

Nothing wrong with that approach, by the way. Just what it looks to me. The big thing I would just point out to you is there's a logical fallacy in your statement here. The performance of your accounts, one is not going to be better than another unless the mutual funds that you own within the accounts are different.

So, based upon the funds that you would see in your 401(k), if those funds do better than sigfig's funds, the vanguard funds that sigfig is buying for you through Ameritrade, then your 401(k) account is going to be doing more. But there's nothing that you can't do. The 401(k) is limited to a certain number of funds, but you could put the same funds that you have in sigfig.

So, you have a logical fallacy here in this either/or. Each account is being run independently and it's just based upon the investment return of that specific account. $250 gain with an account that's grown to be about $4,600 doesn't give me much to write home about over the last 10 months.

I didn't run the exact chart to see what the S&P has returned, but it looked about flat for, what, six months? Which one was I looking at? I'll just skip that right now. I was looking at the chart to see-- It was year to date. I was looking at some-- I was trying to get to your 10-month number and compare it just to what the S&P had returned.

And I was trying to see if I could figure out how your account could be basically flat, which is what I would call a $250 increase. And I couldn't quite figure out how it was basically flat. Let me skip past that because I'm getting myself into problems without more information.

So, just notice-- Learn more about investing. And there's a logical fallacy here between those accounts. I want to make that clear to you. Here's what I really wanted to talk to you about. Here's where these things all work together. Quote, "My next goal is to be able to buy a house, flip it, and repeat.

My ultimate goal is to be able to purchase land and build a state-of-the-art mini storage business as they're a gold mine with very little effort to run once established. I guess I'd like to know where should I keep my focus on. Should I contribute so heavily to my 401(k)?

Should I spread what little assets I have? If so, where? Should I take a risky step and pull the 50k out of my 401(k) and then take the 10% hit and then try to buy that first fixer-upper?" This would be where I would focus. And I know I got heavy into the numbers, and the reason I'm using your letter is because, A, it's a great question, and I want to help you with the answer to it.

But, B, it just shows how-- to me, it's an ideal example of how comprehensive we need to think about our situations, how comprehensively we need to think about our situations. All the money that you're putting into your 401(k) is money that you're not going to have available to buy a house and flip it.

So the major question I would say is, "What do you want to do?" Do you want the money in your 401(k)? Do you want to own real estate? These two things are maybe compatible. You may say, "I want to own real estate, but I want to spread my-- I want to keep some of the money in my 401(k), but I want to own real estate." If you want to own real estate and you want to start a mini storage business, that's dramatically different than if you want to retire with $80,000 of income coming in from your 401(k) and you run the other calculations.

Now, realistically--and I'm not picking on you because this is the same problem that we all face, and this is my--this is why I'm doing this show, because these questions are not simple and easy to answer, and it's going to be different for you, and it's going to be different for me.

I don't want to own a mini storage business, if it were that easy to run. I don't want to own individual rental houses, but you may. So we've got to look at what the individual situation is. So I would say, when do you want to start this real estate business?

How much money are you going to need? You need cash and you need credit to be in real estate. So when do you want to do this? Is this that you read a book or saw an infomercial and it was easy to get rich in real estate, or is this a serious plan?

I'm assuming it's a serious plan. And so what I would say is you need money. You need cash. I don't know--I mean, real estate's not cheap in California. I don't know if you're going to be investing in California, but if you're buying $200,000 properties, you need $20,000, $30,000, $40,000, $50,000 in the bank to be able to put your down payments to get deals.

Can you do no money down deals? Probably, but most of that just seems like pure hype to me to sell books on nothing down. You need cash and you need credit. I think every real estate investor that I've worked with-- I mean, they all have money and they all have credit.

So you need to be focusing less on how much money is in the 401(k) and more on how much money is in the bank. You need to save money, and you need to save money out of the 401(k). So this would be where I would look at it, and I would say exactly like you're looking at.

Maybe the Roth IRA is a better strategy for you, and here's how maybe you could do a hedging strategy. Take the free money, the 4% they put in the 401(k). Put the balance of your money into a Roth IRA. Max those out for you and your--I don't know if you're married or not.

And then if you decide 3 years from now that you want to buy money, take your contributions out of the Roth and put it into real estate. Now, that would be dangerous because it would expose you to the risk of your investments declining in value. So maybe you put $15,000 into a Roth, and now they can only sell for $12,000.

You've got a steal of a deal on a piece of real estate. Well, now that was not good. So if you're serious about cash, I would just put it in the bank. But here would be a few other ideas of how I would think about it. It doesn't sound like you're too thrilled about your job, and I'm just picking that up not because of anything you said about the job, but you said, "I guess I make enough money," and I-- let me go back to what you said.

What did you say at the end here? You said, "I'm making $30 an hour, and I haven't gotten a raise in 3 years, but I can't complain. I know I make more than the average working adult." First of all, I don't care about average. This is the radical--this is the radical personal finance show, not the average personal finance show.

There's average personal finance shows all over the place. So I don't care about average. I do care about the fact that it just doesn't sound-- I mean, you didn't sound too excited about your job. So I'd tell you this. Why not just quit your job and go switch to working in real estate?

If you're maxing out--if you're making $60K and you're putting-- and you're maxing out a $401K and then making contributions to that other SIGFIG account, then why not-- you only need $40,000 to live on if those are the numbers. So why not just quit your job and go switch to a real estate industry?

Are you learning anything in your job? I'd rather make $40,000 in working as a manager of a rental house or apartment rentals or working in a property management company or something like that. I'd rather make $40,000 where I'm learning something that's going to move me towards my goals than $60,000 at something where it's kind of a dead-end thing and I'm just funding a 401(k).

Now, if you're good at what you're doing, you should be able to make far more than $60,000. I would bet working as a manager of a self-storage complex or find somebody else that's already doing it and start managing the whole chain. You're going to need to work into it.

But I'll bet you that you can make a lot more than $60,000 if you can become really skilled in real estate. And if you're going to work a job while you're saving money to build your stake so you can get started with real estate investment, then why not go and work in a business that you're going to start with?

Start with--I would say--and I don't-- again, this would be where--and I'm glad it's an email because then I can tell you how to think without us going back and forth and me trying to specifically solve your specific thing. But here's what I'd say. If you're actually interested in real estate investment, start with learning.

Start with books, reading. If it were me, the best book I've ever found on the subject to get started would be a book written by the author named John T. Reid, and his book is entitled "How to Get Started in Real Estate Investment." You can't buy it on Amazon.

It's not available anywhere except his own website. He self-publishes everything. It's at johntreed.com, and look for his real estate books and read his book called "How to Get Started in Real Estate Investment." It's going to be $30, $40, something like that. Link in the show notes. It's really great.

I would consider reading everything that Reid has written. He's the best author that I have found about writing about real estate, and he's very, very good. I would--second, the authors that I've benefited the most from, for me myself, would be the books of John Schaub. The author's name is Schaub.

He's written a couple of books that are super useful, more accessible maybe than John Reid's books, for kind of a book to get you excited about it. If you're interested in self-storage--I mean, I just did a quick Google search. Here's what I would start. Join the Self-Storage Association. So go and find--here's their website.

It's selfstorage.org. So go to selfstorage.org and make sure you join this association. Membership and benefits. Let's look. Categories and dues. So if we look at categories here, let's see how much this will cost you. Live and real time. Level 1, prospective owner. So that would probably be you, $545 a year.

I'd go spend $545 on that in an instant to be a member of that. So $545 a year to be an owner. They've got level 1, level 2, level 3. But a prospective owner, that would be classified as an individual or entity that does not own an existing self-storage facility or a facility under construction, but is a prospective developer or purchaser of a self-storage facility.

That would be you. Non-voting membership class. So I would join the Self-Storage Association if this is what you're interested in. I noticed right when I went here that there is a SSA Fall Conference and Trade Show coming up, September 9th through the 12th, 2014, at Caesars Palace, Las Vegas.

I'd go to that thing. That's next month. So in a couple of weeks. Take a week off from work and drive to Las Vegas and go to their association and start meeting people. I noticed here--let me look here. Education and events. So if you click on their website, Education and Events, they have a Fall Conference.

That's what clearly is coming up. Online university and certification. So I would start right here, and I would say webcasts, education to go. They've got a manager certification program. So the SSA Certified Self-Storage Manager designation. That would be a good idea to start right there. Go through their course.

I don't know how much it is. It looks like--here, $600 for the full package for new certifications. $600 to get their manager designation so you can go work in self-storage. Don't save a million bucks to try to go and build a self-storage account before you've gone and worked in it and learned what it's actually like from an inside view.

Once you're working in the industry, the world would open up to you. You could have people that you could talk to everywhere--owners, mentors, so I don't know, maybe there's a local association, a local part of this organization. Maybe there's a local real estate investors club. So you need to figure out who are all the people in your area that are doing this.

Figure out what county you live in. Go to the SSA website. I'm sure they have here--they have a facility locator. And if I just click on--I don't see any way here. So let's just--yeah, let's put in California. Here's how I would do it. I would click on California, zero records returned.

Strange. Okay, so I have to get logged in. Okay, so I'm not a member, so I'm not logged in. So what you need to do is you need to join, and then you have this facility locator of self-storage associations. And I would put in California or start with your county or your zip code and just start with closest to you.

Make a list of all of the self-storage locations that are near you and call up the owners and ask them to take them to lunch. Tell them you're interested in the business. I don't know if you're young or old. I don't know, but if it were me, I would say, "Hey, listen, I'm a young guy.

I'm really interested in the business. I don't have anything yet. I'm working in this completely unrelated industry, but I'm trying to do some research. Would you be willing to take me out? Can I take you out to lunch and just chat with you?" And most of them, I bet, would accept that.

Now, if they're in your local area, maybe they would be threatened, so maybe you need to go across town to another place. I would start a blog. I would start a blog or a podcast. There's probably a self-storage podcast, or if there's not, start one. And instead of making it being like I'm the expert, just make it, "This is my journey to learning." That gives you a really good excuse to call people and talk with people.

Start a blog about that and interview these people and start some kind of research project of some kind. Maybe there's a university in your area that has some kind of real estate degree that you can go and you can audit classes and you can write a paper. Now that gives you a really easy excuse to call the people who are running the self-storage clubs and say, "Listen, can I interview you for my thesis that I'm working on?" You could probably be a little shady and just make it up that you're doing that.

You don't have to be shady. Just join the association and write for their magazine. Let's see, publications. Look, they've got the Globe magazine. I'm making this up on the spot. I hope it's helpful. The Globe magazine, "Welcome to SSA Globe, the only not-for-profit magazine serving the self-storage industry. What started five years ago as a newsletter for association members has evolved into a robust magazine featuring information about the SSA's activities, news, and features." Here's what I would do.

You need to start writing columns for that magazine about your journey into the self-storage industry. Then when you call the owners of the stuff, you can tell them, "I'm writing articles for the Globe magazine about my journey into self-storage." Now you have an opportunity to call them, take them out to lunch, and learn, and ask them all the questions, and find out what would you do differently if you were going to do something differently.

Now that you've got that, you've got to design a plan. Whatever the plan is that's good for you. I'm making this mine up on the spot. It's crazy for you, but this is helpful to somebody else. But here's how I would consider it. I would look to say, "How can I learn?" I am sure that if you--let's say you're investing $20,000 a year right now.

If it were me, I would take their $3,000 that they'll put into the account for you, toss in anything you needed to do to get their match, put $10,000 into Roth IRAs, and spend the rest of the money on switching industries. Frankly, if you're serious about investing in real estate, you probably should quit investing at all in the 401(k) or the IRA, and you should build up your real estate assets.

Now, I didn't want to jump too quick to self-storage. You said, "My next goal is to be able to buy a house, flip it, and repeat." Awesome. So start with John Reed's book and figure out what real estate strategy are you going to want to do. I'm going to read--it's one page from his book, and this is a great book.

And I'm going to read a list of real estate investment profit opportunities that he writes about in his books and that he has covered. And these are the legitimate various ways that you can invest in real estate. Now, I'm familiar with some of these. I'm not familiar with others of them.

He writes a monthly newsletter, by the way, which is well worth subscribing to. It would be the first thing I'd do. I think it's $250 a year or something like that. It's not that much. I would go and subscribe to his newsletter and learn about that. But listen to all of these different specialties that you could do with real estate.

You know what? I'm not going to read the whole thing because I bet that would probably be a little bit--this is a good list. So I'm going to read the first column here. And these are listed alphabetically, and there is one, two, three-- there are basically three or four columns depending on how I define column.

So here are some strategies. Adverse possession. Alcoholic and drug addict sellers. Asbestos overreaction. Assembly. Assessment district sales. Bankruptcy. Bargain lots at lenders' auctions. Builder auctions. Builder leftover lots. Building houses. Change address. Change way of measuring square footage. Condemned property. Condo conversion. Condo reconversion. Converting duplex to single family. Corporate surplus real estate.

Cosmetic renovation. Deed mistakes. Delinquent subdivision mortgages. Delinquent tax sales. Development-ready lots. Discount lien releases. Discounted notes. Distressed builder auctions. Distressed owner. Divorce. "Divorcing" partners. Easements to liberate landlocked land. Easy come, easy go sellers. Excess land. Executive suite sandwich lease. Existing options. Failed vacation subdivision lots. FHA repos. Fire-damaged buildings.

Fixers. Flipping. Foreclosure auction. Foreclosure redemptions. For sale by owners. Foundations that are defective. Home builder leftover houses. Houses that smell. HUD repos. Industrial net leases. And there's a whole other column and a half of them. So these are all specific profit strategies that he has identified that you could find to exploit.

And so if you start learning about real estate and you start investing in your education, then you may be able to figure out what strategy is going to be the best for you. And it may be storage units. That's actually one of his -- that's one of his profit strategies listed on here.

Let me find it again. I just closed it. So -- where is it? So storage units -- here we go. Storage units. Storage units. It's on here. One of them. So that may be one specific way of doing it. But you also may pursue recreational vehicle parks. Maybe that's better where you are.

So you would research these certain things and you would develop a plan for yourself that's going to be good for you. So once you figure out your plan, what type of strategy you want to do, then, again, consider how you can learn about it. So should you switch and go and learn construction?

Maybe what you're doing is a job that's an office job. In reality, you would be better served by going and learning construction. And maybe you can be an owner builder and build property and rent it out. Maybe you don't have the money for that. So that's not a good plan.

Maybe you should go into property maintenance. Maybe you can adjust your living situation and become a tenant property supervisor where you lower your living costs. That allows you to save more money. You manage a building and you get experience with that. Maybe you should start a property management company.

Maybe you should become a real estate agent. Maybe you should become a mortgage broker. I don't know. But maybe -- can you get closer to it? So here's what I would say. Start slow and start fast. Don't take money from your 401(k) and cash it out and pay a 10% penalty if this real estate thing is just a kind of a gamble.

Maybe I'm interested in it, so let me go. But, I mean, that's a great way to just destroy your money because all of a sudden you take 50 grand out. You buy 50 -- A, you pay a bunch of tax and penalty. B, you invest it and you do a stupid investment.

And now you've just completely destroyed your 50 grand, and that was your stake to get started. But on the other hand, if you've worked a plan, you're an expert, you see an opportunity. And if you see an opportunity where you're going to do a flip and you know because you are now an expert, you know that this flip is going to double your money in 90 days, and you need 30 grand more than you have saved outside your 401(k), and if you are really confident and you know what you're doing and this is not just kind of a middle of the night idea, absolutely, take the money, pay the penalty, and do it.

But you better be sure. This whole idea that we don't take money from 401(k)s, it's a mathematical calculation. Calculate the taxes, calculate the penalties, and calculate the lost growth on the money that's in the 401(k) and calculate what your expected return is from your investment. Be conservative and be careful.

Now, most people take money out of their 401(k) to buy a car, you know, or just because they do, or because, you know, their brother-in-law's cousin is pitching them on something cool and they haven't done any research and they go and do it. So it's not that you never take money from a 401(k), but start with, you know, stopping contributing.

Slow down. So that's what I mean. Slow down, start fast. So start slow, start fast. They're both important and there's no answer, no specific answer. Just go back to paragraph one or minute one and become an expert. So if you really want to get into something like real estate investment, that's awesome.

Now, your job is just a funding mechanism, which is basically giving you cash to build your stake, your kitty, your funds. Then you've got to go out and visit it and invest it. Work hard to become a real expert and then figure out where the best place is for you to apply your expertise.

And remember, if you do start a self-storage company, you can always set up a 401(k) and you can set it up with a--you can get the cheapest funds out there, you can get the cheapest TPA, you can do it on the cheap. And I would--I love people doing things on the cheap.

I think that's most of what I wanted to get across to you today. And I think it is. I had one other thing on my list, but I think this show has been long enough. I was going to go over a comment from a listener on my Walmart show, which was a very good comment.

And it was good stuff, but I'm out of time. I hope this has been helpful. You know, Jason, when I saw your email and I just figured this was a good way for me to kind of talk you through how I would think about it. And I hope that my point has come across today, that what ticks me off about the investment world is people are focusing sometimes--you get this myopic field of vision where you say, you know, expense ratio is the only thing that matters.

Listen, expense ratio matters, but expense ratio is such a tiny part of an overall financial plan that it's a very important part, but it's a tiny part. Expense ratio doesn't matter if we hate our job, you know, and that money is better spent on taking a year off and backpacking around Europe, because that's going to allow us to get some zest and vitality back in life.

401(k) is important, but a 401(k) is not so important if we're going to have to go through 30 years of doom and hating life to get through it. Now, again, not everyone hates their jobs. My wife is always encouraging me, "Listen, Joshua, not everyone is as crazy as you are.

Not everyone is as extreme as you are." And she's 100% right. But my point is that all of these things are important, and it's not as simple as a five-minute answer. So I'm going to close on Friday with two things here, and instead of sighing like that, I should start with, I'm going to close on Friday with two things here.

One is I listened to a video this morning. It's two minutes long, and this is by Darren Hardy. And Darren Hardy is the publisher of Success Magazine, and he's doing something awesome. He's doing this thing where he does this Darren Daily, and it's his daily mentoring where every morning you get an email from Darren with a two-minute video, a quick audio thing, a quick exercise.

It's awesome. It's five minutes a day, but it's all about a growth plan. And so today was entitled "My 1-1-5-3-1-30-35 Plan," and this was a really great reminder. And I just thought--I had never heard him talk about this plan, but basically it's how he approaches personal success and self-development, and I thought it was a really great way to approach it.

So I'm going to play this two-minute video for you, and then I'm going to come back and close with a poem and get you out of here for the weekend. So I'm going to give you my 1-1-5-3-1-30-35 plan. Number one is take your number one goal, whatever your number one goal is.

What is the one skill that is going to determine the most to you accomplishing that goal? And then next, take five books on the topic and go immediately to Amazon and order them. This is what I do. I pick the skill, buy five books, go buy three DVD or CD programs, and then pick one seminar and go to it on that skill.

One time for me it was relationships. My number one goal was creating more intimacy in my marriage. So I bought the top five books, I bought the top three CD and DVD programs, and I went to a seminar. And then this is how you consume it. It's a lot easier than you think.

So this is my 30-30 plan. In the morning when I first get up, first thing I do, put my iPhone on 30 minutes and I just read for 30 minutes. I'm going to get through those five books over a period of a month or two. And then I listen to the instructional audio for 30 minutes each day while I'm driving around, working out, or walking the dogs.

That's it. That's my personal development plan. The reason why you create extraordinary results is the consistency of that small discipline compounded over time. And then this is the five-step study program that I go through. As I'm going through that material, I'm studying that material, focusing on that one skill.

Then I'm extracting the three best ideas. It could be a 300-page book, but I'm only looking for three ideas because if there are 100 ideas, there are no ideas. So just get three. Number three is act. I implement one idea right now, this week. As soon as I get the idea, right now, this week, and I practice it.

And then I measure the improvement over a period of 30 days. And then I do this plan to review, where I review it, I adjust, and I do it again. And that's his plan. When I heard that this morning--it was early this morning-- I tried to take a quick look at my email, and I like to see his stuff because they're so short, and it's really fun to watch.

And when I heard his plan, I just thought, "What a great way to organize it." So Jason, consider that. Set out a 1-1-5-3-1-30-35 plan. So remember, again, just to refresh, number one is what's your number one goal? Now, it may not be becoming a real estate tycoon. If it's not, then focus on something else.

But if your number one goal is, "I want to build financial independence," then what's the number one skill that's going to get you there? Well, my number one skill that's going to get me there is I need to learn the skill of being a real estate investor. What are the five books to start with?

Well, I would start with John T. Reed's beginning book. And I would start with--so if it were me, I would start with his "How to Get Started in Real Estate Investment." I would read his "Guru Ratings," which, by the way, is a treasure trove. If you want to find out where to go to avoid those who are idiots in the real estate world and complete scam artists, then I would recommend to you John T.

Reed's "Guru Ratings." If you want to find out why I don't recommend Robert Kiyosaki books, be careful. It's going to have the most scathing and accurate destruction of Robert Kiyosaki. So I'm just warning you that it's there. If you're a big Robert Kiyosaki fan, then be careful when you're there.

But pick out the five books. So I would say John T. Reed's "How to Get Started." He has a list and a reading--he has a recommended reading list as far as what way that he recommends people get started with real estate. So his "How to Get Started" would be a good place to start.

And then that will lead you into some of his other books where he'll talk about strategies. So if you wanted to get through some other strategies, you might start next with distressed real estate or how to buy real estate for at least 20% below market value or how to increase the value of real estate.

You may read Lee Robinson's book on landlording, which is wonderful. Best book I've ever seen on landlording. It's called "Landlording," and the author's name is Lee Robinson. And you might pick up John Shavs' books and get five of them and get started with that. You might choose three CDs or DVDs.

Now, I don't know what great real estate ones--where I would go for that is I would go over to Bigger Pockets, which is a really thriving real estate online community. They've got a great podcast. I would listen to all their podcast episodes. I would find a real estate seminar, and I would join that.

And then read for 30 minutes a day in that field. Listen for 30 minutes a day. And then as you're reading and listening, look for what's the three best ideas. What can you implement right now? What are the skills, just like he talks about? What can you measure, and then what can you improve?

So I commend that to you as a good place to start. I'm going to close today, wrap up here, with a poem. This is a poem by Jesse B. Rittenhouse, one of my favorites. As we go into this weekend, remember this. "I bargained with life for a penny, and life would pay no more.

However, I begged that evening when I counted my scanty store. For life is just an employer. He gives you what you ask. But once you have set the wages, why, you must bear the task. I worked for a menial's hire, only to learn, dismayed, that any wage I had asked of life, life would have paid." It's Friday afternoon.

I hope that you all have a wonderful weekend. I hope that this was useful. Jason, I hope you still like me after my response to you. Thank you all so much for listening today. I really appreciate it. As we go here, remember-- I've got to start doing my disclaimers.

Remember that nothing in today's show is intended to be personal financial advice, and you should additionally concede the services of a competent professional to apply to your specific plan. There, disclaimer done. Thank you for the ratings on iTunes and Stitcher. I appreciate that. I would be thrilled if you could take a moment, if you like today's show, it would be so helpful.

Take a moment, right on your phone, right now. I'll be done in a second. Take a moment and click over to iTunes right on your phone or Stitcher or whatever you do. If you would leave a rating and a review for the show, I would be thrilled. Thank you so much for listening.

I hope you all have a wonderful weekend. I bargained with life for a penny, and life would pay no more. However, I begged that evening when I counted my scanty store. For life is just an employer. He gives you what you ask. But once you have set the wages, why, you must bear the task.

I worked for a menial's hire, only to learn, dismayed, that any wage I had asked of life, life would have paid. Hey parents, join the LA Kings on Saturday, November 25th, for an unforgettable kids day presented by Pear Deck. Family fun, giveaways, and exciting Kings hockey awaits. Get your tickets now at lakings.com/promotions and create lasting memories with your little ones.