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This thing that I am about to unveil for you is going to make you rich beyond your wildest dreams. It'll make you rich, not only you, but also your entire family. And it will not take any time at all. Aren't you glad you don't have to listen to that crap from me all the time?

If you'd like to keep the show free of that kind of stuff, please go to radicalpersonalfinance.com/patron and help keep that off the show. Happy Friday, everybody. Today it's Friday Q&A. And let's see. I've got, I think, three or four questions lined up for you. We're going to have a quick conversation about the actual rate of return, what actual support for what the value of financial advisor can actually bring.

We're going to have a quick conversation about what's the fastest way to become a 1%-er. We're going to talk about how on earth can you learn to trust insurance people. And we're going to talk about the role of an IPO within a broader investment portfolio. Here we go. Welcome to the Radical Personal Finance podcast.

My name is Joshua Sheets, and I'm your overly effusive and overly ebullient host today. I can't help it. It's Friday. It's a beautiful Friday. I like doing Q&A. And sometimes, you know, I just got to have a little bit of fun. And I hope you don't mind coming along for the ride.

On Fridays, I answer your show. And today, these are all voicemail questions. If you would like to get your question answered, go to radicalpersonalfinance.com and leave a message. But today, sit back, relax, and enjoy these answers. I do love doing these shows. And sometimes, I do emails. And sometimes, I do voicemails.

I really like doing voicemails because it helps the audience to hear the questions. And if you want a much higher probability that your question is going to be answered, leave a voicemail for me. You can do that in one of two ways. Either pull out your phone, hit the Voice Memo button on it, record an MP3 file-- please make it about one or two minutes long-- hit Email, and email that to me at joshua@radicalpersonalfinance.com.

Or the other way that you can do it is go to radicalpersonalfinance.com. And over on the side, you'll see a little button that says, send us a voice message. That'll work on your phone. It'll also work on your computer. And you can record a voicemail message for me. If you have a question that you'd like me to answer for you that you would prefer to email me, you feel free to email it to me as a text file.

And from time to time, I will do those questions. But I do give priority to the voicemails. And I get far more of those types of questions than I can get on the show. And if you want to get special consideration, just mark in there that you are a patron.

In fact, if you are a patron at the $5 a month level and up, then you will, in fact, always get moved to the front of the line. And at the moment, I will actually guarantee you that your question will be answered on the Friday shows. I may not always be able to guarantee those.

If we get a few thousand patrons at $5 a month, which is one of my goals over time, and if I get hundreds of questions, I won't always be able to get them to the front. But for right now, I can pretty much guarantee if you want your question answered, just let me know you are a patron at the $5 a month level and up, and I will answer it.

So with that, let's get straight to it. Our first question comes in from Rick. Here we go, Rick. Sorry, it's a little bit noisy. Hi, Joshua. This is Rick Komaric. And in your last podcast, the Dole Roller episode interview, Rob asked you if there was any academic study showing that an investor could do better with an advisor than by himself using index funds.

And yes, there is a study. It was done by Morningstar. And it showed that those who invest with DFA, which, of course, all have advisors. That's the only way to get those index funds, earned 109% of the fund return. So they actually earned more money than the fund itself returned.

In addition to that, Vanguard just released its paper called "Advisor's Alpha." In addition to that, we have Morningstar, who issued the metrics of gamma, which is measuring its advisor's contribution to an investor. Hope that helps. And I'll talk to you later. And yes, I'm one of your Patreon members.

Take care. So the reason that I wanted to make sure to play this for you is because I want to thank Rick publicly for sending me the paper regarding DFA's returns. I was not familiar with this particular paper. I will link to all three of these papers in the show notes that he referenced-- the Morningstar discussion of dimensional fund advisors results, also Vanguard's paper on what value a financial advisor actually can bring, and then the Morningstar corporate paper on gamma.

What they're trending toward is calling what the value that an advisor can bring gamma. I don't know why we always have to stick with Greek letters, but for whatever reason, that's the deal. And in the financial comparison scenario, the words alpha talks about who can find the best advisor, who can find the best stock picker, or mutual fund manager, that type of thing.

Basically, it's outperformance from one manager to another. Beta refers primarily to the asset allocation, the overall returns of a market. And then they're using this little catch-all term gamma now. And that's the term that is being applied to the results for an individual investor. I should, at some point, do an entire show on this topic.

But I am glad to have the DFA Morningstar analysis that Rick mentioned to me. Because what it illustrates is that the investors who were using dimensional fund advisors' funds did better. And let me explain-- if you're unfamiliar with dimensional fund advisors, let me explain who they are and what they do.

Dimensional fund advisors is 100% committed to a passive indexing strategy. So they pursue, just like Vanguard, who is much larger and more well-known, they only do passive investing, where they're not trying to specifically choose an active strategy. We're not trying to say, we think that ExxonMobil is going to do better than this other oil company.

Or we think that Coca-Cola is going to do better than Pepsi. They're not pursuing that type of individual selection in their mutual funds. What they are pursuing is they are actually simply choosing and saying, we're going to own the whole market, but with a couple of twists. One of the things that they do is they don't try to always ride the indexes completely.

So when the S&P 500 adds a new firm or kicks one firm out and firms are replaced, if you're running a normal index fund, you need to immediately update your mutual fund to match this change in the index. But the dimensional fund advisors, portfolio managers, have a little bit more of a leeway with what they actually do, when they actually get in and out.

The big thing that, to me, is important about dimensional fund advisors is the only way that you're able to access dimensional fund advisors is through an individual financial advisor, to whom you are paying an additional fee for his or her purview over your accounts. Now, ultimately, obviously, this adds cost.

So clearly, they're not going to be as inexpensive if you're layering advisor fees on top of mutual fund fees. But there are some benefits in that arrangement that go in all directions. There are benefits to the mutual fund company. There are also benefits to the advisor. And most importantly, there are benefits to the client.

Now, I'm not trying to do a DFA commercial here. If you're interested, go and research their stuff. They are perfectly capable of marketing their own services. But the major aspect that I see as the benefit is that, with an advisor and a client working together, the client should be able to make more intelligent, non-emotional decisions.

Emotions are the death of a good investment plan. Almost any emotional reaction is going to be wrong in any scenario, whether it's on the upside or on the downside. It's not to say that you can't move quickly. But even those who are moving quickly, it can't be based upon emotion.

There may be such a thing as a gut feeling, I guess. In some scenarios, that's fine. But that's not necessarily emotion. But the problem is that we, as individual investors, are pretty horribly equipped to actually handle the raw emotion of investing at some times, especially in the world of stock investing, where any time of day or night, you can pull out your phone and you can get an exact to the dollar calculation of what your shares are worth.

So there are many, many problems associated with the ability to actually know on a daily basis. But it makes us much more likely to overreact to good news and bad news and make improper decisions. Well, my thought is, I believe that a good financial advisor, in addition to all of the aspects of financial planning, that a good financial advisor should be able to bring some peace and calm to that situation, should be able to be, in some ways, a shock absorber.

That's the best scenario I've come up with. The shock absorber is what takes the impact of the road and cushions it for the individual who's in the car. And that should be, in many ways, the role of a good financial advisor. And then there are many techniques to doing that as a good, competent financial advisor.

It's techniques of warning in advance. Here's what's going to happen. Training and coaching your clients to be comfortable with the emotion that they're going to face. If you know you're going to face a certain emotion, if you know you're going to face a gut-wrenching fear, if you know you're going to face a euphoria that causes you to be tempted to do something that is probably not the best move, then if you're warned in advance, perhaps you can avoid it.

Or you can think through how you're going to handle that. A simple scenario would be a financial advisor should take a client through the scenario and say, OK, it's 2015. There hasn't been a major stock market correction in quite a while. Let's talk through what that's going to feel like.

Here is the balance of your account. You have half a million dollars. Let's talk through how you're going to feel if you pull out your phone and you're checking your account summary and you find out that you now have $285,000 in that. How are you going to feel? And smoke those feelings out in advance so you can make sure that the portfolio is positioned in such a way that we can get through that time.

And then as an advisor, you have to use whatever tactics and techniques you can use in an individual situation to improve that. So maybe you need to adjust the asset allocation of the portfolio. Maybe you need to have assets that are pulled out and just sitting in cash. Maybe the client says, well, if I had $100,000 in cash instead of $30,000 in cash, I'd feel a lot better.

Because I would know that I could get through a couple of years. Because the advisor would say to the client and say, well, listen, if you look over here and you're spending $50,000 a year, you have $500,000 invested. But in addition, you have $100,000 in cash. And you know that even though this account value dropped by that much, you're looking over here and you know that you've got two years of cash with no other change.

Are you going to feel better about my simply saying, don't touch it, turn your phone off, and don't check your account summary? And so those are the types of conversations that a client and an advisor should have. So what was my point in this? My point was to A, expose you to these articles, because I think they're well-done articles.

And for many of you who are financial advisors, I think this is a good resource for you to have in your back pocket. If you haven't read Vanguard's discussion of the value that an alpha brings, an advisor brings, it's an excellent job that Vanguard has done with that paper, and then also the corporate Morning Star paper.

All three of those will be linked in the show notes. I'm going to answer another question for Rick without playing the question. He asked and called and said, basically, what's the best way to study for and pass the CFP exam? He said back in years ago, I think it was 2007, he had taken the classes that were required to be prepared for it, but never sat for the CFP exam.

So Rick, quickly, and for anyone else who's interested, the answer is you need a CFP refresher course. The best one that I know of is the one that I went through, which was Ken Zahn's class. And Ken Zahn is spelled Z-A-H-N. So go to-- let's see, it would be KenZahn.com.

And he will send you-- when you sign up for that class, he will send you a couple of books to prepare in advance. Those are the books that he actually teaches from for his 6 or 7, or whatever, 6, 7, 8 classes. He actually uses those books as his textbooks that he teaches through.

Prior to the refresher course, you will need to study and read those books, do all the practice questions. Then you'll go to a four-day refresher course. And that's a pretty intense scenario. And he'll walk through a four-day review. And then after that, you've got lots of practice exams. Take the practice exams and then go sit for the test.

But I know there are others that do it. I don't have any experience with any others than his class. I liked his refresher course so much that I went through it twice. I went through it once, and then I had a scheduling conflict where I wasn't able to sit for the CFP exam as I had planned.

So I actually went through it twice. And I learned a ton in that class and really enjoyed it. So that's what I would do. Ken is on one of those. I need to reach out to him. If I do ever take advertisers on the show or set up affiliate relationships or things like that to make more money on commissions, he is one of those that's on my list of products and services that I just had a great experience from.

So KenZahn.com, check that out. All right, next, let's take a question on becoming a 1%. Great program. Love it. I had a quick question for you. Maybe it's not a quick answer. What's the fastest way you've seen to become a 1%-er? You see a lot of bashing and all the trashing of the 1%-ers.

But I'm just curious, from your experience, what's been the fastest way you've seen someone become one? You don't see much about that versus the, oh, look at how evil they are. So I'd be curious as your perspective of this. Hopefully, I'd be really interested in your response and your experience.

Love the show, and keep it up. Fun question. Short answer. Well, how do I-- I was going to say it was a two-word answer, but I don't know how many words it is. Facebook. Start Facebook. Or start Twitter. Start something like that, or Instagram, or something like that. In 2015, that certainly is the fastest way that I know of to make a massive-- to go and become a 1%-er.

Just Mark Zuckerberg. How long ago did he actually start Facebook? I think I got my Facebook account, it would have been 2005. I remember where I was when I first signed up for Facebook. I remember I was actually in a lobby of a hotel, a lounge of a hotel I would often go to when I was living in San Jose, Costa Rica.

This is a place some friends and I like to go, and I would take my laptop down, and I would work there because they had Wi-Fi. And this was before Wi-Fi was widely prevalent in individual homes. So I had to go to the hotel lobby. And I remember signing up for my Facebook account, and there were my 55 friends from high school.

But compare that to where it's grown to be today, to be 2015. That is the fastest way that I can think of. Now, it's also the most riskiest way. You've got some pretty heavy, stiff competition. And so you've got to balance that. What is the likelihood of your inventing the next app that goes from $0-- the next Instagram that goes from $0 of value to huge value?

It's pretty low. But it's probably the fastest way I know to go from $0 to a billion dollars. So that's my quick answer. Probably the more important question that I would demonstrate out of it, though, is that the speed is purely due to-- well, if we're talking about wealth, let's talk about actual wealth retained.

So the only thing that's going to impact the wealth that you make is the first four parts of my five-part path to wealth, or what you can actually do, your plan for wealth. The first thing is, how much is your income? Number two is, how much are your expenses?

And number three is, what rate of return do you gain on the difference? And then can you avoid catastrophe? Those are the ones that are going to apply to the speed. So if you want to go from nothing to a 1-percenter, you need to amp up all of those things massively.

You need to earn a very high level of income. You need to have a proportionately very low level of expenses. And you need to earn massive rates of return on the difference. Now, what is it that the tech people do? What's the theme that goes through that? Well, what they do is they are earning a massive rate of return.

A good general rule of thumb is that the highest rates of return are always going to come from business. Business, private enterprise, that's where you create money. So if you can create money, you can earn a higher rate of return. The highest rates of return, potential rates of return from businesses, are going to come from businesses that can exponentially increase their reach.

So if you and I start a garbage company, we've got to invest in a massive number of garbage trucks. We've got to hire a bunch of employees. We've got to start getting contracts. And let's assume that we just need to, one to one to one to one, go and sell and get contracts with various municipalities to start a garbage business.

That business can grow, and it can scale. And it can scale much more quickly than, say, me working in my backyard making handmade bird feeders and selling them out of my driveway. But it's nowhere near the scalability of something like Instagram, an app that can be created once and put out there, and then the number of users can go from zero to massive overnight.

So the reason why the tech companies grow so fast is because they don't have the constraints on their growth that many other businesses have. They're able to just simply generate massive rates of return as measured by their user base. And then once they have a massive rate of return from their user base, then that creates money, that creates value that can be sold, either through an IPO or through a takeover, a private sale, something like that.

That's why they grow so well. So speed in that situation is going to be driven by the fact that they can expand. They can compound, because they're not subject to the constraints of real life. They're a purely digital product, a purely digital medium. That's exactly the same thing that what I'm trying to do with Radical Personal Finance.

One of my motivations, why did I go from working face to face with individual clients to creating a podcast? Well, I looked at it and I said, I want to grow wealth quickly. And I believe that I can grow wealth steadily and slowly face to face with clients. But I can grow wealth far more quickly if I can get my content into the digital medium.

Because in this type of scenario, it doesn't matter whether-- it's no extra cost to me whether 100,000 people download my show or whether 100 people download my show. It costs me exactly the same amount of money. But the flip side, as I build out additional business models, the flip side is that my income can grow exponentially.

Now, originally, it was going to be the show and my practice. Then I could harvest the best of both worlds. Well, unfortunately, the financial services business is stuck in 1937. And so we can't allow any kind of interesting-- so I had to walk away from any kind of interesting advertising.

So I walked away from the financial services business. But this is what I am taking advantage of, the fact that my show is able to now, in a digitized form, it's able to get into a scenario where it can grow at a compounded rate over time. That's what I'm taking advantage of.

Now, as far as applying it to your actual life-- so if you actually want to go from 0% to the 1%, you've got to say, well, what's appropriate for me? So I don't have any skill with coding applications. Unless I have a brilliant business idea or a brilliant app idea and I can hire the actual coding work done, which is doable, I don't have any skill with that.

So what I'm going to do is-- if I were going to do this with looking at business, I would look and say, where do I see a need in the marketplace? And then you just go and try to fill that need. And if possible, I would personally want to go and look at an industry that's out of favor, that's unpopular, that's dirty, or that's not sexy or glamorous in any way.

And I would try to find a place where my competition is relatively low. As much as possible, I would try to build an infrastructure onto this that would allow me to actually profit from something that can compound. And I would try to serve an industry in a way that other people aren't serving.

Let me give you an example. It's still related to tech. But one of my brothers is actually a web programmer. And he works in an industry where they service home health care providers. Now, what this company that he is involved with has done is they have created software that works within this one specific industry.

And they grew it from nothing to the best software in the industry in a relatively short amount of time. But that's not the large, massive, mass competition space. But they're still taking advantage of the same trend. So if you can create and figure out what's a business that I can serve that's-- I mean, there's nothing-- what is sexy about the home services, the home health care industry?

There's nothing particularly attractive to that. Very few college students are saying, well, when I get out, I'm going to go and work in the home health care industry. Well, that's the type of industry that I would go and look for. It's like law and medicine and politics, I don't want to be around there.

Because where do you have to deal with? You have to deal with all the smartest people in the world who are all going into there. So your level of competition is much higher. I don't want to go into law. All the lawyers are brilliant people. And they all work super hard.

And now my competition is this much different caliber of person. I want to go to where the industry is that nobody else wants to touch. The best example in my personal life was-- one of my backup business ideas is to start a daycare, a daycare or a school. You say, what kind of 30-year-old guy wants to go and start a daycare for kids?

This one. Because the competition, I think, is much lower. That is not a very prestigious type of industry to set yourself apart in. That's not the kind of thing that most people aspire to. But it can be very profitable. And I know of a number of other industries like that where you can go and you can find something that's profitable.

Now, once you're in an industry that you feel like you have a competitive advantage into, if you're going to go, you need to create some ability to where you can compound your efforts. So let me give you an example. Franchising. Look at franchising. Look at the difference that it makes between one guy in a truck going and hauling junk versus one guy saying, here's a business idea.

Maybe I can teach other people to do that. And so the money, the big growths are always when you can get leverage on your time. When instead of going and being two guys hauling junk, or instead of going and-- what is the ones? 1-800-GOT-JUNK or College Hunks Hauling Junk.

Instead of being the guy out driving the truck and hauling the junk, you figure out the business model. You crack the business model. And then you sell the franchise rights. You sell something that's not connected to you. So that's where you get the much higher rate of return. Now, the flip side might be, let's say that you have the potential for a high earning capacity.

There's no reason why you have to go and make a fortune in private business. You can also do it just simply with earning capacity. So maybe you're running a company and you're a well-paid CEO or upper level management. Well-paid CEO-- what do these guys make? I mean, the CEO of Home Depot or Walmart, $30, $40, $50 million bucks a year.

I don't know anything specific. But they make tens of millions of dollars per year. It's hard not to get into the 1% if you can make tens of millions of dollars per year. Or being a highly paid professional. You're a very accomplished neurosurgeon. So you command with your surgery ability.

You can command millions of dollars per year of compensation. If you've got that skill, or if you're willing to go down that path, that can work just as well. Or you could be the business person behind the scenes. So any of these things work. The point is that it's all a function of those three things.

Just this morning in our private irregulars Facebook group, one of the things that the patrons of the show who are at the irregulars level, which used to be $10 a month, is now $25 a month. One of the major benefits of that level of patronage is access to a private Facebook group.

And that's where I try to spend most of my time interacting with the listeners. Shared this article this morning. And it's called "Root to an $8 million portfolio started with frugal living." And I'll just read a few paragraphs from it here, because it's going to emphasize my point. "Ronald Reed may have spent years pumping gas, but he was even more adept at pumping up his portfolio.

Mr. Reed, a longtime resident of Brattleboro, Vermont, died in June at the age of 92. His friends were shocked when they learned his estate was valued at almost $8 million. Long widowed and with two stepchildren, he left most of his money to a local hospital and library." So how did he manage to pull it off?

"Besides being a good stock picker, he displayed remarkable frugality and patience, which gave him many years of compounded growth. He lived modestly, worked as a maintenance worker and janitor at a JCPenney store after a long stint at a service station that was owned in part by his brother. Those who knew him talk of how he at times used safety pins to hold his coat together, and sometimes parked his 2007 Toyota Yaris far from where he was going to avoid having to feed the parking meter.

Quote, 'If he could save a penny, he would,' says Bridgette Boakum, a senior client associate at the Wells Fargo Advisors Office in Brattleboro, who was assisting with his estate. When he died, Mr. Reed left behind a five inch thick stack of stock certificates in a safe deposit box. The shares represented the bulk of his estate, and his executor and Wells Fargo still are working to determine their exact worth.

Mr. Reed owned at least 95 stocks at the time of his death, many of which he had held for years, if not decades. They were spread across a variety of sectors, including railroads, utility companies, banks, health care, telecom, and consumer products. He avoided technology stocks. Friends say Mr. Reed typically bought shares of company he was familiar with, and those that paid out hefty dividends.

When dividend checks came in the mail, he plowed the money back into more shares, Ms. Boakum says. He goes on and talks about what he actually did. Now, my point here is here's a guy who works at a service station and as a janitor, and he dies at the age of 92 with an estate valued at $8 million.

Now, of course, many people listen to that and say, what a waste. He could have spent the money. Ignore that. Just focus on the point that he was wealthy. How did he-- he's in the top 1%. How did he become in the top 1%? It wasn't necessarily through his income.

It was through a little bit of his income, coupled with his frugality, and strong investment performance. He invested in stocks instead of bonds or CDs, so he took advantage of the growth potential of businesses, which led to a much higher rate of return over time, and he had a long time period.

That's the function of wealth. So you've got to look at your own situation, and you've got to see what are my advantages. If you don't have the ability to go-- I'm not a neurosurgeon. I'm not an attorney, so I'm not going to go out there and start working as a trial attorney making $5 million a year.

So for me, I'm drawn to business, and I would say, let me give me a business and let me figure out how to grow this business, and I'll just apply my sweat equity to it and make it grow. That's my skill. But another person may not be. There are lots of 1% attorneys.

There are lots of 1% physicians. So the point is, look at your situation and recognize what your advantages are. The higher the income, the better. The lower the expenses, the better. And the higher the rate of return, the better. There's nothing else you can do. There's nothing else you can do.

You do have to avoid catastrophe along the way, but there's nothing else you can do. So what that means, you get a multimillion dollar contract playing basketball. For some people, that's the path to the 1%. And for others, it's working as a janitor. Those are the only things you control, though.

So getting into the 1% is just simply a transition of getting through that. And if you mess up any of those things, if you're on a low income-- trying to think of how many-- if you have a low income, but you invest very wisely, and your expenses are low, you can get wealthy.

If you have a low income, but your expenses are high or equal to your income, you don't have any money to invest. And so you're not going to be wealthy. If you have a low income and low expenses, but you don't invest well, then you're not going to be wealthy.

So you've got to do each of those things right. Now, if you have a high income and you have high expenses, you're not going to be wealthy. And there's a massive percentage of NFL players that, after they are retired from the NFL, after making millions for some of them, they're broke and bankrupt.

Why? Well, you can spend millions just as-- not as easily, but you can spend millions pretty easily if you develop a certain lifestyle. So a high income is not a guarantee of wealth. But a high income, coupled with frugality, coupled with great investment returns, will lead to potentially massive wealth.

And that's why, when you start looking at some of the athletes that you can look at-- I mean, look at Shaquille O'Neal. The dude has more money than-- I mean, he's done very well for himself. It's awesome. What has he done? He's invested wisely. And you can go and research them at some-- I don't remember all the names, but you can go and research.

I mean, you find this guy has 60 restaurant locations of this and another. I mean, you can build your wealth. So a high income is going to be great. And so the best, fastest results are going to be with the highest income possible, the lowest expenses possible, and the very highest investment returns.

And you've got to figure out, in your situation, how to achieve that. So hopefully that helps a little bit. It did make me think of-- and I went and looked it up. Joshua Kennan wrote an excellent article-- it was a few years ago-- and I went and found it.

And I guess it's called, "How Much Money Does It Take to Be in the Top 1% of Wealth and Net Worth in the United States?" It's an excellent article. I will post it here in the show notes for today's show. So you can go and read that. It'll give you something else to look at as far as even how to measure the 1%.

The stats that are thrown around are really not well done. Well, what else is new when you pay attention to the media? But my point is, he actually goes through and tries to figure out how to do it. Here's my last-- how to calculate what the numbers are. He does a good job with it.

Here's my last thing that I want to mention on this subject. Getting in the 1%, I think, is probably not a great financial goal. I mean, I hesitate to say it's stupid, but I'm pretty strongly there. What does it matter to get into the 1%? Do you think-- and if you do get into the 1%, I think it's more accidental than not.

Did Mark Zuckerberg plan to get into the top 1%? Did Bill Gates plan to get into the top 1%? These things can happen. And yes, good decisions can get you closer. But to me, I think it's a vanishingly difficult goal. And if that's your goal, you're likely to spend your life and waste it on a useless goal.

Ronald Reed is dead. And all his money went to a library and to a hospital. My hat's off to him. And I am glad that he is able to send the money to where he thinks it's valued. I really do respect that. But I look at that, and I say, what a waste.

What a waste to send all your money to a library, to a hospital, in a world where the libraries around me-- I don't know what they are about you, but the libraries around me are massive. They're incredibly fancy. And they're empty. Now, maybe that trend will change. I like to use my fancy library.

But man, that seems like a total waste of money to me to put money into that. And hospitals, I don't want to put money into the hospital system the way it is right now. It's a disaster. So that's probably a little bit uncharitable of me. Because on the one hand, if that was his goal, and that was what he wanted to accomplish, I mean, I applaud the man for following through.

And it's his money. It wasn't my money. So in many ways, I have no right to say anything. But I look at that, and I say, what a waste. Not a waste of a life. If he was surrounded by people that loved him, if he was able to do good in a way that made an impact, then awesome.

I'm not saying it's a waste of a life. And I admire his frugality. But I look at it and say, how much better to actually, instead of accumulating all that wealth, to actually put your life into something that you can make a difference in? The problem with making money a goal is money is stolen.

It's swindled, another way for stolen. It's taxed. It's a very poor goal. But yet the other things that people mainly want can be achieved without money. So I think wealth should be a natural byproduct of a life well lived. But I think it's a better byproduct than it is a goal.

If you develop the character of a man like Mr. Reed, the habits of a man like Mr. Reed, then it's natural, I think, that you will wind up wealthy. And then you'll be faced with the burden of saying, what do I do with all this money? And was that a good use of my life?

I personally-- and again, I hope-- I'm not being uncharitable toward Mr. Reed. I just heard of this story this morning. My only point is I hope he left behind a much greater legacy than just the money. Because the man's dead. And that money will be spent quickly by the organizations that he left it to.

Again, the libraries around me are not lacking for funding. They have the fanciest buildings. They have the fanciest new carpet. And they are empty. And the hospitals around me are not lacking for funding, either. So that money is a drop in the bucket in their operating budgets. But it's everything in his life.

I just hope it wasn't everything in his life. And I'm sure it wasn't. He sounds like the kind of guy I'd love to have on the show. So don't take my comments as being uncharitable. Just my point is, being in the 1% is not a goal. Build the life that you want somebody to eulogize at your funeral.

And if money is a byproduct of that, great. And if money is not a byproduct of that, great. But build the life that you want somebody to eulogize at your funeral. So I hope that helps. Let's go to Brian. Hi, Josh. My name is Brian. And I'm calling because I really enjoyed your show since I found it a month or so ago.

By the way, Brian was very complimentary. He also gave a bunch of details. And what I'm going to do is I'm going to skip forward here to get to his questions, I guess. I think we're in pretty fair shape when it comes to saving, both short and long term, living within our means, and making sound decisions with our income and investments.

My big problem really comes to my confidence level in insurance and in insurance salesmen. I have basic car health insurance, renter's insurance, but have very little confidence that they'll actually be there to help in a time of need and really assume that the insurance companies will find a loophole to deny claims if they need to.

So I'm calling to ask you to please help me get over this great distrust of insurance. These are very important financial planning instruments. I know that they're vital to any family and sound financial planning. So any recommendations that you have or conversation you can have about this, I'd really appreciate.

Thanks a lot, and we'll talk to you. Brian, it's a great question. And I'm not going to talk you out of your distrust of insurance people. I don't trust a lot of people. And I don't think that skepticism or cynicism is particularly a bad thing. I will talk about the insurance industry and what I've learned.

But to me, what's the old joke about paranoia? Just because you're paranoid doesn't mean they're not out to get you. The financial world, in fact, the world is rife with problems. What happens, especially in the United States of America, we have become very complacent with the idea that there's always a fallback position.

Think about how conveniently and easily you'll swipe your credit card everywhere. Well, the reason you'll do that is because your credit card company wants you to have that confidence in them. So that's why you have all the fraud prevention stuff. That's why you can dispute the charges and all of those things.

They've got to create that trust. So that's not-- but you've got to be careful, because the world is not necessarily full of people who are all moral and upright, always willing to do the right thing. Depending on where you are and who you're dealing with, you've got to be careful.

You're the steward of the resources that you have, and you've got to make sure that you are caring for them properly. Now, with regard to insurance, well, I think it's good to be suspicious. I think it's important to do your research carefully. I think you should research your insurance agent.

I think you should research your insurance company. I think you should read your insurance contracts. So I think these are important things to do. My wife is an amazing, wonderful woman. And one of the things that I love about her is she will not sign anything until she has read the entire thing.

And when we close on our house-- so I'm almost as uptight as she is, but not quite. But she is much more particular than I am, and she's less subject to peer pressure than I am. I'm the kind of guy, I'm much more easily pushed over and rushed or hastened, things like that.

Just sign, Josh. OK, OK. I'm much more likely to give into that. She won't give into that at all. So when we close on our house, I specifically told the real estate attorney who handled the closing, I said, if you want us to sign anything, either A, be ready to sit there and wait, or B, send it to us in advance so we can have read it in advance.

And so we did. We sat there, and we read. They didn't send it to us in advance, so we sat there. And I read every page, and she read every page. And then we signed, and we asked questions, and we signed, and we asked questions. Well, let me tell you how many people in the years that I worked as a life insurance agent-- let me tell you how many people actually read their insurance contracts.

About one. I can't remember who it was, but I think one person I actually worked with was detailed enough that actually went and read the insurance contract. Actually, I do know who it was-- a guy who was a real estate investor. And he actually read his insurance contracts. Now, in the insurance business, with life insurance, disability insurance, long-term care insurance, that kind of thing, whenever you deliver an insurance contract, depending on the laws of your state, there's a certain period of time in which you have what's called a free look.

And in that free look, in Florida, it's two weeks. You could read the contract, and any time in the first two weeks of owning it, you can return the contract, and you're entitled to a full refund of your money without any costs or expenses associated with it. There's no risk to it.

So that's the point, is you're supposed to have time to sit there and read the contract. But nobody does. But you should. So what I always tried to do was I actually tried to walk people through their contracts. Once I realized that people didn't read them, I said, listen, most people don't ever read this.

Let me show you a few things that are important in here. Now, obviously, that can be done in a way to disguise pertinent facts. Let me point to paragraph B, section 2, when actually the section where the gotcha is is paragraph A, section 4. But I used it as just a point, like, look, notice this, notice this, notice this, notice this.

And insurance contracts are actually pretty usually well-written. They're nothing like reading a prospectus. Prospectuses are hard to get through. But insurance contracts are not that tough to get through. Just sit down and read it. But you know what's even a more damning statistic? It is not how many clients read insurance contracts, but actually how few agents read their insurance contracts.

It's horrible. Or how few people read their prospectuses for their investments. Or how few people read their annual reports. We don't do it. So I think you should be distrustful. I think you should be careful. And I think you should read the fine print carefully. In today's modern world, when people get snookered, if you go back and you actually read the contract, it was written in there.

They just didn't understand it. So don't sign anything that you don't understand. Now, as far as people, there's often this reputation, I think, especially with insurance. There's a reputation that insurance people have of perhaps not being so trusted. If you don't trust your insurance agent, get a new one.

My experience has been that many of the agents and financial advisors that I've known personally are mostly intending to do the right thing. But the business can start to wear on you over time. You can start to get frustrated with how little people know and how little they question, how little valued you can tend to be.

That can be a real scenario. If you're working with somebody and you value them, let them know. Because what happens if you only hear from the people that don't value what you're doing or you only hear from the people that are unhappy, that's tough. So let the people that you know know.

The biggest thing that I would say that would help you to be well-protected when dealing with insurance people or investment people or frankly, anybody is ask questions. One thing I have noticed, and this is primarily anecdotal from my experience, but I have observed it also in reading about other people's stories, is it seems like wealthy people are just willing to ask more questions and ask better questions and aren't scared of asking dumb questions.

If you don't understand something, ask about it. If you are dealing with a debate of what kind of home insurance should I get, just ask the agent and ask lots and lots of questions. And if you get somebody who's not willing to answer your questions and doesn't simply say, I don't know the answer to that, but let me write it down, let me go get you an answer, then find a new agent.

That will protect you from the majority of problems that you'll face. If people ask questions, I think they would actually do better. It's like this. I don't trust insurance companies. I think you should verify and then trust and then verify and then keep verifying and keep verifying. Companies should be working to earn and keep your business.

But look at the population that we live in. When's the last time that anybody around you actually questioned our government on something? The United States of America and most of the major Western economies, Western countries where people are listening to this show, the United States of America is utterly bankrupt.

We owe over $200 trillion of total debt, about $18 trillion of direct debt and the balance of that unfunded liabilities to Medicare, Medicaid, and Social Security. It will never be paid. But yet, when's the last time somebody actually questioned the people who are running our money and asked, wait a second, what are you doing?

The problems that the US government faces are not the problems of the government. It's our problems because we don't hold people accountable. If we fix our own houses, then maybe theoretically at some point our corporate houses might be fixed. I'm not going into a political rant here, but let me wrap up with just this.

Don't worry about trusting. Research and verify and read and question and then make sure the companies that you're doing are doing business with you. The final comment that I would make in addition to those things is, be careful with the companies that you do business with. And be careful as far as how long of a leash that you give them.

I'll give you a simple example. I have Comcast Internet. Comcast is probably the worst company I've ever dealt with in my life from a business perspective. If I could fire them and still get internet today, I would fire them in an instant. It is horrendous. It has been an absolutely horrible experience.

Unfortunately, in my area, they're pretty much it. And they keep on sewing up their little monopoly, freezing out the competition, integrating with Time Warner. It just gets worse and worse and worse. And the United States keeps falling behind and behind and behind in terms of the quality of the service.

And every time a company comes in and says, OK, we're going to fix something and do a little bit better, then what happens? Well, Comcast sends their lobbyists up. And they're all the same, all the big ones are the same. I don't trust Comcast a bit. Not a bit.

But I still have to use them. But I keep them on a short rope. And so if I got in a situation where I were dealing with a bill, I know I got to move quickly. Because I don't trust them. They're thieves, crooks and thieves. Now, there are other companies that I've worked with.

I'll give an example. I've done banking for years with USAA. USAA has treated me amazingly well. USAA holds my car insurance. They have done a tremendous job. They've earned my trust. Still going to verify. But they've earned my trust to where I'm much more comfortable with them from years of dealing with them, that they have a culture in which they actually care about me.

Part of that goes to the ownership structure of the company. It's a mutual insurance company. It's not a stock insurance company. So I feel much more confident with them. Now, USAA won't write my homeowner's insurance. I don't trust my homeowner's company a bit. But I still have to have it, and that's about the best I can get.

What's my point? My point is simply, understand who you're doing and cover yourself. Read your contracts from cover to cover. If you've never read your insurance contracts, get every one of them out and make it a project. I'm going to read my homeownership policy. I'm going to read my car insurance policy.

I'm going to understand the terms. And if you don't understand, stand up for yourself. Ask the agent. Explain this word to me. Read your investment statements. I used to hate it. When I was handling investment accounts, we would do sometimes account opening statements that were 200 pages. 200 pages.

Zero people ever read those 200 pages. But you know what? Nobody ever cared. The clients trusted me. And thankfully, I had looked-- I hadn't read all 200 pages, every one, but I'd looked carefully through it. I knew there wasn't anything there that was screwing them. I carefully pointed out the parts where they needed to be aware of them.

And so the clients trusted me. And that was what happens. But the problem is we've gotten so numb to it that we just sign stacks of stuff without reading it. If every one of you listening, and I as well, if you sat there and said, OK, Mr. Investment Advisor, you're going to put this 200-page document in front of me.

Well, I'm going to sit here right in your office, and I'm going to read it. All of a sudden, maybe the advisors would start pushing back. And they would call up the attorneys. And the attorneys would say, well, we've got to change something. And we might actually get to some reasonable contracts.

Unfortunately, nobody does that, because we're all conditioned to simply sign stacks of paper. Research the company and choose the person carefully. Ask lots of good questions. And caveat emptor. It's your money. You're responsible for it. You don't need to trust an insurance company. You just need to trust that they're going to follow through on their contract.

You need to verify that they have the ability to do it. You don't need to necessarily trust your bank. You need to research them and make sure that they have a good history and are capable of performing. You are responsible. I don't think it's a bad thing to have distrust.

But I think most of the people that are involved, which I guess is the question, is most of the people that are involved, they're not necessarily untrustworthy. They are doing the best they can. Most insurance agents I know are pretty good people. And they really care. And they're doing the best thing they can do.

So just ask them questions. Let them do their job. I hope I didn't get too much of that. Next question. Last question for today comes from Pete. Hi, Joshua. I'm going to just send you a voicemail since the mailing you a voice memo from my iPhone didn't work. This is Pete up in Boston.

I love the show. Call them one other time. I have a question in general about investing in IPOs as part of a broader investment strategy. In particular, I'm curious about the Shake Shack IPO tomorrow, which is a burger and fry joint that started in New York City and is expanding quite rapidly all over the world now.

But what is the role of that within a broader investment portfolio? Thanks so much. Love the show. So it's an interesting question. And obviously, if any of you know, Shake Shack went public a couple months ago. I sat on this intentionally for a few weeks because I didn't want to comment on Shake Shack.

And I also just got behind with Friday Q&A shows with the work on the new website. But I do want to answer the question. And I'm going to answer the question from two perspectives, from the portfolio question that Pete asked, and then also from the flip side of the portfolio question, and also the role of an IPO.

From a portfolio perspective, I don't think there's any difference of an IPO in your investment portfolio than any other aspect of your investment portfolio. If you are going to invest in, let's say, Shake Shack, then you're going to have an investment philosophy. It's going to be a reason why you're investing.

And then that investment philosophy is going to drive the role that that investment has in your portfolio. If you are a short-term trader, and this is what you're doing, and you're managing your portfolio or a portion of your portfolio towards short-term trading, then you're going to be measuring the mood and the sentiment of the crowds.

And you're going to try to take a guess as to what you think is going to happen with the stock price once it goes live. And you're going to go ahead, and you're going to put your trades in just like you are accustomed to doing. If you're an investor, and you are accustomed to investing in quick, casual, or fine, casual, quick serve restaurants like Shake Shack, then you're going to sit down, and you're going to say, well, where does this company stack up against its peers?

What's the price that I think I can get it for? What are the earnings? What's the return on equity? How does this actually-- is this a good investment? And you're going to slide it into your portfolio based upon that. Now, what most people do when they're investing in IPOs is-- not what most-- what some people do when they're investing in IPOs is they just jump in.

And sometimes that can work, and sometimes it can't. Compare Shake Shack with Facebook as an example. So if you're just a Shake Shack customer, and you say, well, I don't know anything about investing, but I heard they're having an IPO, and so I want to just own some because I really like this company.

If you're right about your gut feeling of the company being a solid scenario, and if it's well-run, and if they do a good job of avoiding all the risks of their business and growing their empire, maybe it was a great decision. Or maybe you just got in on a gut with actually no knowledge of investing and didn't actually sit down and figure out how much is the company worth?

What's the intrinsic value? What am I willing to pay? How much of a premium am I willing to pay for their future growth versus their earnings currently, et cetera? That's the hard type of investing that most people don't do. So the role of an IPO in your portfolio should be congruent with your overall strategy and approach to investing.

And that's the major thing that most people need to focus on. Do I know what my overall strategy and approach to investing is? Have I selected an asset allocation? Do I have a need for something that fits this? And it very well might be the fact that I always keep 5% of my liquid capital available for long shots that are home run options.

And I think Shake Shack is the next Chipotle. If that's the case, then you already know. These things should be decided in advance of the IPO, and then the IPO just fits that characteristic. Or if you're aware of an IPO that you know, OK, this company is kind of interesting, then you should go back to your investment plan and you should see, how do I moderate this?

How do I modify my asset allocations here? Where's the money going to come from? How is this going to fit? Is this going to overexpose me to the restaurant industry? Is this going to overexpose me to shakes and burgers and fries in an era where everyone's going to salads and chicken wraps?

It's got to be built in as an investor into your portfolio, into your plans. That's simply not how most people approach investing in an IPO who are talking about it. Many people approach it from-- individual people from an excitement perspective. Sometimes it works out. Academic research that I've read indicates that it mostly doesn't.

And that's why I want to talk about the role of an IPO. I think it's important to recognize what the actual role of an IPO is. Let's say that you started a burger joint that serves malts and burgers. I guess we can do shakes. Let's say that you started Shake Shack.

And you've grown this thing little by little, and you're growing pretty well. You've got a pretty successful restaurant. You've taken on a few investors. What's the role of an IPO for you? It's diversification. It's a way for you to cash out. And to me, this is what most people don't seem to understand.

When an IPO is offered, it's being offered so that the current owners can cash out. So the current owners are saying, we don't want to continue to own this, and we want to make our millions. We want to convert this stock that we own, which we can't get cash for right now because it's privately held, and we want to convert it into money.

Everyone who's involved on the sell side of an IPO has an incentive to get the highest price possible. So if the owner of the company-- let's say there's an individual owner, and then there are a few early stage investors, some angel investors that came in, and they own that.

If the owners of the company, they need an exit plan. That's what these guys do, people that run a venture capital firm. They need an exit plan. OK, we're going to come along. We're going to invest in your small company. We think it's going to multiply by 5x within this period of time.

We think it's going to multiply by 20x within this period of time. And our exit is, yes, this is a type of industry that's going to do well in an IPO. And that's how they cash out. They've got to find a buyer. And you're the buyer in the IPO.

So the seller has an incentive to get the highest price possible. The individual owner or owners who started the company have the incentive to get the highest price possible, because they're giving up ownership and control now. They've got to deal with the hassle of going public. The early stage investors who may have funded the company, they've got an incentive, because this is how they're going to measure their return on equity.

Also, the investment bank that's handling the offering, the investment bank is being paid based upon commission. It could be a fee, depending on how they've arranged it. But in essence, they're getting a commission. And their job is to market this product, the stock that they're selling, at the highest possible price they think the market will bear.

This is why you'll see the market adjust. And they're offering it at the highest price. And the higher the price and the more shares they can sell, the more money they'll make. So they go out, and they do their roadshow. And they go out, and they offer their terms sheets.

And here's all the company, and here's all the information on it. And they're trying to whip up the market into a froth, a frenzy of people saying, we want to buy this company. Every IPO is a great investment. So you recognize that. The decks are kind of stacked a little bit against you.

Now, of course, they've got to release all the information. They've got to do a full disclosure. And so that can help you. But recognize that everyone on the other side is trying to get the highest possible price. That's different than a stock that's traded for a period of time, and you're just buying some shares that are being offered.

And especially if you're trading in a small volume, and there's always shares available, you don't know what's going on. And just on any given day, the share price reflects the totality of all the investors. But in an IPO, the initial public offering price is reflecting the highest price they can get.

Now, of course, they need to get an incentive. They need to theoretically sell and offer it at a lower price than what it's worth so that you'll buy it then, and they can get the market going for it. So it all works pretty well. The research indicates that usually the IPOs tend to underperform.

Most people don't seem to understand that, at least the offering process. So I say tread carefully. If there is a company that you feel very strongly about, and you sit down, and you run the value, and you say, here's what the value of this company is worth. Here is what I'd be willing to pay for this business, which is a good way to approach stock investing.

I'd be willing to pay total-- if I could buy this business today for this amount of money, here's what I would be willing to pay. And then you can get it at the per share price that you're happy with, fine. And if that comes in the form of an IPO, awesome.

There are some IPOs that have done-- all companies have gone through an IPO initially. But by that, there's some companies that have gone public recently that have continued to perform well. And there are many companies who haven't. So as long as you understand the game, and you know who the suckers are-- what's the old quote from poker?

I can't remember exactly, but basically, there's a sucker in every game. And if you don't know-- or there's a patsy in every game. If you don't know who the patsy is or who the sucker is, it's you. Make sure you're not the sucker. Make sure you know what's going on, and you're dealing with something that is a business that you're confident in.

And hey, if there's a restaurant that you love, and you just want to send some money that way as a show of support and something to tell your kids, go for it. There's lots of things we can spend money on. So you can't get too serious about it. But that would be how I would answer your question.

Hope that helps. I guess the last caveat is just I'm really not an expert on that type of thing. So I know the process, but I've never been involved. I've never worked inside of an investment bank. I've never been a trader trying to swoop up shares on day one.

So it's more for me an academic knowledge, and that's what I've shared with you. So if anybody else out there is more knowledgeable or knows of great resources, feel free to come by for today's show and comment and share those with us. Hopefully that was helpful to you guys.

I know I was a little bit loose and made some mistakes and whatever. But hopefully this was helpful to you. I had fun with these questions. These are great questions. Love to answer your questions. So make sure you come by radicalpersonalfinance.com, leave a voicemail. Hope these answers have been useful to you.

If you're enjoying these answers and if it's been beneficial to you, please consider becoming a patron of the show. The patrons are the reason why so far I'm able to keep the show commercial free, free of corporate interests, free of all of that crap that I really would like to avoid.

And the goal is to get the Patreon subscriptions up to $6,000 a month by June 1. And let me tell you where we are right now. Right now we are at $1,218.50 per month. So if you're not supporting the show yet, there's room for you. If every member had listened to the show, $2 a month, we would be there today.

And many of you go ahead and sign up at a much higher rate. And I want to thank you for that. Next week we will be doing the monthly Google Hangout Q&A for patrons of the show at $10 a month and up. So if you would like this weekend to get in before that, come by radicalpersonalfinance.com/patron and sign up at the $10 a month level and up.

And you'll get access to that in addition to all of the other benefits for the previous levels. So I think that's it. It's a beautiful Friday here in South Florida. I hope that those of you who live in the frozen, frigid north that you're warming up a little bit.

I'm going to go out and fire up the grill and spend some time and spend some of my life energy with those that I love. I'm going to cook some steaks on the grill tonight and have a good time with my family. Doing a little financial coaching over dinner as well, if someone's coming over for dinner.

So the perks of being a financial advisor. And the perks of not wearing a suit and tie anymore. So sometimes you do financial advice over steak and baked potatoes. So y'all have a lovely weekend. We'll talk with you next week. Thank you for listening to today's show. If you'd like to contact me personally, my email address is joshua@radicalpersonalfinance.com.

You can also connect with the show on Twitter @radicalpf and at facebook.com/radicalpersonalfinance. This show is intended to provide entertainment, education, and financial enlightenment. But your situation is unique, and I cannot deliver any actionable advice without knowing anything about you. Please, develop a team of professional advisors who you find to be caring, competent, and trustworthy.

And consult them, because they are the ones who can understand your specific needs, your specific goals, and provide specific answers to your questions. I've done my absolute best to be clear and accurate in today's show. But I'm one person, and I make mistakes. If you spot a mistake in something I've said, please help me by coming to the show page and commenting so we can all learn together.

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