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Sit back, relax, and enjoy. ♪ Welcome to the Radical Personal Finance podcast. My name is Joshua Sheets, and I'm your host. Thank you for being with me. Today we have Q&A, and this was a live Q&A call, a conference call that was recorded with the patrons of the show.

Some interesting topics came out. I thought the call flowed well, and I decided to share it with you. So instead of my handling your pre-recorded or pre-asked questions, today you get to hear me handle them live. ♪ Been doing these conference calls with the listeners, the patrons of the show, patrons at the $10 and up level, and they've been really fun.

Which, by the way, this was the deal of the century for some of you who are patrons. A couple of the calls, we've only had a few people there, and so I've had lots of time to be able to answer individual questions. So this has been super, super fun.

There are a couple left, doing two more, and then I'll be back to a more regular schedule of what I've put out on the Patreon page of a monthly schedule instead of a weekly schedule. But here during the month of October and November, I've done one every week with patrons of the show at $10 and up, and there's been some really cool topics, some really cool discussions, and I decided today to release this audio to you for your show today.

So we're gonna get straight to that super quick. I'm gonna cover sponsors today in record time. Two sponsors today. First sponsor is Jay Fleischman. Jay has been on the show recently. He was on episode number 214, and then also recently, 258, as we launched his sponsorship on the show.

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Go to radicalpersonalfinance.com/patron. You'll find all of the benefits there, including benefits of being on calls like this. With that, here we go. Let's kick it off with Bob. Any questions, anything you're thinking about, Bob, that I can help you with, anything I can be of service to you on today's call?

Yes, yes. Knowing the business that I work in, I would like to hear your opinion on disability insurance for self-employed. Hard to get, but valuable to have. Hard to get, yes. Have you shopped around? I'm a licensed producer as well, and knowing how hard it is to get and the hoops you have to jump through, I wanted your input.

I've got a couple of workarounds, and I'll give you some ways to approach it. First, though, have you ever tried to get it? Have you ever applied for a policy before? Yes, yes, and I'm not qualified. Rejection. Based on income or based on where you work? No, no, no.

Based on medical. Okay. All right, so a medical disqualification, that's the hardest to overcome because what that means is if you're in a situation where you're dealing with a medical condition, then that's not related to whether you're self-employed or whether you were employed as a straight W-2 employee. Depending on the medical condition, you want to shop around, and you want to look to see -- you want to shop around, and you want to look to see if you can get a better offer from another carrier.

How many carriers did you apply with? Two. Okay, and both of them turned you down? Yes. Who were the carriers? I don't remember. It's been six years, and at the time, I wasn't licensed, and I had an agent that was doing it for me. I'm confident in that agent, but I didn't -- I let him shop it because he was independent.

Okay. It's worth shopping yourself. What I would do -- you are licensed now with a health and life insurance license, right? All four terms, yes. Okay. Yes. Go to the broker that I used to use was a broker called DI Broker. Go to DIBroker.com and call their specialist and just tell them the details of the medical condition.

Tell them what you're facing and talk to their underwriters on the phone. The way those brokers usually will work is they will have a phone answerer, basically somebody basic, and then they'll have a back-office underwriter. Just go ahead and ask them, maybe -- just tell them what you're doing and ask them, "Do you need to talk to one of their internal underwriters or just give them all the details?" And what they'll do is they will look at the case.

What you can do if you want to find out without making a formal application is submit what's called an informal inquiry and submit to them an informal inquiry, and depending on the carrier and depending on the case, what that means is you'll give them your name, all your contact information.

You'll give them your Social Security numbers and your medical records, and then what they'll do is they'll pull your medical records. They will verify and look at the details of those medical records, and then they will -- they'll shop it around. They'll talk to some underwriters, some of the carriers, without doing a full-blown application.

So that can help you to get an answer on the medical question independent of the income question. So that's where I would start is with a disability insurance broker like DI Broker and submitting an informal inquiry. Assume for a moment you get good news back on the medical situation, and they say, "Hey, you know, we'd be willing to consider it." And DI Broker, I mean, they'll shop it with everyone.

So depending on the case and depending on whatever, you might end up with, you know, Standard Insurance Company or you can place cases through them with Boys of London. And so sometimes, depending on the medical condition, they can achieve a specialized scenario. So it's all very subjective. As far as the financial underwriting, the things that hurt you on being self-employed are usually two things.

Number one is generally your income is -- you're going to show a lower income than you actually enjoy because you're going to be writing off so many expenses. And so that's good for your tax bill, but at the end of the year, it's bad for your disability insurance applications, and it's bad for your mortgage applications.

So you got to take that into account. So most self-employed people are dissatisfied with the offers that they get. So to make up round numbers, let's say that you are showing $5,000 a month of income, but by the time you take out all the deductions, you're actually benefiting at $7,000 a month of expenses, part of which are flowing through your account.

Well, remember, they're not going -- your disability insurance broker isn't going to offer you anywhere close to 100% of your income. They're going to offer you, you know, maybe $3,000 a month. So this really annoys most business owners. They look down and say, "Well, what am I going to do with $3,000 a month?" What I would suggest to you is consider -- consider that $3,000 a month.

If you did get disabled, it's better than nothing. So it's not 7, but it's better than 0. So it's worth doing. The way you can supplement that is you can consider supplementing that with a disability overhead expense insurance policy. Are you familiar with DOE coverage? No. Okay. So the way it works for business owners is that you can get a personal disability insurance policy, and that personal disability insurance policy can cover your income.

But as a business owner, you can also get a disability overhead expense policy, and that overhead expense policy can cover the expenses from your business. So with the expenses from your business, you can use that to run some of those and cover some of those fees and costs that you have associated with your business.

That would be your rent, your phone lines, your web servers, your web hosting, that kind of thing, depending on employees, depending on the makeup of your business. Employees can be problematic, or they can work, but you can cover some of your overhead. So let's say that you have $2,000 a month of monthly business overhead.

You can get a disability policy that might cover $1,500 a month of monthly business overhead. Now, with that $1,500 a month of monthly business overhead, if you get disabled, they'll cover that for a certain period of time. Disability overhead expense policies are generally short-term policy. Usually about a year or two years at the maximum, whereas an individual disability income policy can cover you out through maybe, you know, age 60, 65, 70, depending on the policy.

So it's going to be a short-term deal that helps to cover your overhead. So look at your cash situation and see, would that be helpful to you? The purpose behind disability overhead expense policies is to cover you if you got disabled, to keep the business going in absence of some of the revenue so that you can either, you know, by the end of 24 months, with most entrepreneurs, if you're disabled, at the end of 24 months, you're going to know, I'm going to be back to work, or I'm going to sell this thing.

And so it helps you to keep the business going in the interim and keep your bills paid so you can either keep the business as a going concern, so you can sell it at the end of two years, or helps it to still be healthy enough for you to come back into.

So that can be a way for you to get a little bit of additional coverage on top of a personal policy. And sometimes it's worth your checking into, based upon your medical condition, it's worth your checking into as a component of your disability plan because it might have different medical underwriting.

Because they're shorter-term policies, there are some medical conditions that are unlikely to cause problems in the short-term, but likely to cause problems in the longer-term. And disability insurance, disability overhead expense policies are shorter-term policies, so that you might be able to find some wiggle room there on the medical underwriting.

The third idea doesn't work as well now as it used to, but one thing you might consider doing is looking for what's called a long-term care insurance cash indemnity policy. I don't know if these are available in your state. You need to find a friend or call somebody who does long-term care insurance and ask them or ask a broker if they know of any company that writes long-term care insurance cash indemnity policies.

So let me explain the concept to you. It's hard to find these anymore, but most -- they're not indemnity policies. Yeah, they are. They are indemnity policies. I'm getting my lingo confused. Most long-term care insurance policies are reimbursement contracts. So let's say that you have a long-term care insurance contract that covers you at $5,000 a month, and in order to get benefits from that, you need to submit at the end of the month, you need to submit receipts for the cost of your care.

So let's say you have $4,000 of care, then you can submit receipts for that $4,000, and they'll reimburse you for up to the amount of the cost of your care. But there is another type of policy that's called a cash indemnity policy, where they will -- if your policy is for $5,000, as long as you meet the circumstances of the contract where you would qualify as needing care, they'll pay you the straight cash fee.

And so it'll be, you know, again, $5,000. What that can be useful for is it can be useful for somebody who needs to cover living expenses in addition to long-term care policies -- long-term care expenses. Now, the qualifications to qualify as needing -- as getting benefits under a long-term care contract are different than under a disability contract, but it is possible that a really significant disability would indeed qualify you as needing care from the long-term care insurance contract.

And so the cool thing about it, if you can find one of those policies available in your state, the cool thing about it is that it'll give you a potential benefit there that can come in as cash, and those are medically underwritten differently than disability insurances, and also they don't have the stringent financial underwriting.

So I only could have replaced one of these, but I had a client of mine who was a rancher, and he made a lot of money, but due to the nature of his business structure, his income, his paper income, his net profit at the end of the year was always extremely low, and so he couldn't qualify for a disability insurance policy that was worth anything to him based upon the amount of income he could prove on paper.

But the long-term care insurance contract, we were able to get some contracts in force where it would cover him as a cash indemnity contract for $5,000 or $6,000 a month if he ever needed care, and so that provided a little cushion for him where if something happened and he met the minimum requirements of the policy to pay him out benefits, needing help with at least two of the six activities of daily living, then he would get simply a straight cash compensation, which he could use for anything that he wanted to, not just for the care expenses.

So those would be my three big ideas for you. See if any of them pan out for you. Okay. A follow-up on that. The last one you talked about, is that kind of like an AFLAC-type plan, and then the other for business owners, is that through my BOP policy, business owner policy?

No, your business owner policy covers you for-- that's written with a property insurance company, and that covers you for the things that are associated with the business liability, on-premises, things like that. This is totally separate. So the disability overhead expense contract will be written-- it's from a health insurance company, or a life insurance company, and you'll get that also through the same broker that you get a personal disability insurance contract through.

So again, check with the DI broker, and they should help you out with that. Since you're licensed, you can talk to them directly. And on the long-term care policy, no, that is not an AFLAC policy, but you should check the terms of the AFLAC policies to see if they have anything that's going to interest you.

But no, the long-term care cash indemnity policy is not written by AFLAC. It's going to be written by another company. The company that used to offer them here in Florida was a company called MedAmerica. The challenge is this is the most difficult area in the long-term care insurance marketplace because what happened was these policies used to be popular, but the companies that were offering them are not as financially sound as they once were.

And so if you do buy that type of contract, you need to go into it with your eyes wide open, and you need to keep a careful eye on the actual carrier to make sure that they continue to be financially sound, and you need to be prepared to bail on the contract if the company starts to get into trouble.

So it's the riskier side of the companies that offer that type of contract. All right, perfect. Thanks, Josh. You're welcome. On it, as a business owner, there are also a lot of things you can do to minimize your risk due to the structure of your company. So with owning a business, a plan for disability, remember that some things-- insurance will solve some of the problems, but unlike an employee, you have more leeway.

So an employee who's just a straight W-2 employee, if they get disabled and they can't work, they're screwed because that income is the only thing they have that's covering themselves. Well, as a business owner, depending on the nature of your business, you can go ahead and put in more systems.

You can hire more people. You can set things up and plan in the business so that if you did get disabled, everything wouldn't fall apart. So keep an eye on both sides of the planning. Insurance is less relevant for business owners than is good planning. So I think it has a place and it's valuable, but also recognize that even if you can't get it, there's a lot you can do to set yourself up to protect yourself even without insurance.

Agreed. Joshua, thank you for the answers. Detailed, that's what I need. Good stuff, Bob. All right, let's see. Who has a call next? Let me go--I've got a few more callers that have joined. Let's go to Indiana. Nate, anything I can answer for you today? Yeah, I do have a question.

My dad has a cleaning company up in Fort Wayne, Indiana, northern Indiana, and he has a bunch of low-wage part-time workers. He has, like, 20 people that work for him, and probably three-quarters of them are doing whatever they can to pretty much, like, maximize their welfare. And he was explaining it to me.

There's something like if they earn over 15-- between, like, $15,000 and $30,000, they're basically not making any more money. They don't get married, and they have, like, a couple kids, and they're doing all this stuff to maximize their tax credits. And I don't really fully understand it, but I was just wondering if you could say something about that.

And they seem to think it's just going to keep getting easier for them, but I tried to explain to my dad, you know, this whole welfare state thing isn't sustainable, and they're probably putting themselves at major risk. So I just wondered what you thought about that. Well, I applaud them for making use of the system.

That's one of those areas I struggle to know--me personally, I struggle to know how to talk about the ethics of that situation. The conservative, you know, hardcore conservative libertarian in me wants to get up on my soapbox and jump up and down and rail at people about you should-- you know, you're ruining the system, you're destroying everything.

You know, how can you do this? What about the values of taking care of yourself and not being a leech off of the state? So that makes me--you know, that's my initial response. But then on the flip side, as I've watched, I've actually changed a lot my own personal opinions over the last number of years.

If you look at the way that the U.S. government operates is we advertise most of the benefits to try to reach people that are in that situation. So, you know, the federal government runs advertisements for the, you know, food stamp program. There's advertisements for the WIC programs locally. There's advertisements for welfare payments.

I mean, so they're advertising the services. Yeah, I've noticed that. It seems like they're, like, must be gaining more benefit. They must think they're gaining more benefit than they are from, you know, not doing that. And I've heard Warren Buffett talk about trying to increase the earned income tax credit and all this stuff, and it just doesn't make sense.

Like, when you're already operating at a major deficit, how can you keep offering those programs? Well, and this is where we get into the very fun and very divisive political discussion is -- and these are my opinions on the subject. If you recognize the interests of the people who pull the purse strings, the interests of the people who pull the purse strings is power.

And so the way that you manipulate power and the way that you manipulate people once you have control over the purse is with money. And so you use the federal government and you use the purse strings of the federal government to create power for yourself, and you do that during your time in office.

And then once you leave office, you've accrued the power for yourself, and then you go out into the private market, and that's when you benefit. So if you go and just go and study and watch what happens with the -- watch what happens with those who run the government, and after their time of government service, then they go and slide over to the market, and that's when they get their compensation for all the inside deals.

And so the inside deals happen -- you need a voting block to get you in, and so you give away money as much as possible, and that helps you to secure a vote. And then you need a -- you need a -- you need the corporate interest, the large corporate interest, to secure your -- you know, to really move and fund your campaign.

And so, you know, you can make the argument that, well, it's a sense of altruism and trying to help and keep people from being poor. I haven't seen enough evidence to convince me of it. That's the divisive political argument. That's why I think it's not. Now, to answer your question, how confident are you predicting the date at which the U.S.

government is going to run out of money and not be able to do it? Are you ready to set the date on that? No, it seems like they can just push that into the future perpetually. Exactly. So -- I mean, money -- the money is so fake. It just doesn't make any sense to me that we're even living in a money economy, because when you look around -- I was a naturalist for years, an environmental ecologist.

And when you look around at natural systems, like, no other animals are living in a money or really even a barter economy at all. And I don't -- I mean, I feel like, in a sense, like money is evil because it's forced everyone into far more labor than is needed.

When you look at hunter-gatherer societies, they're only working -- they're putting in a few hours of real work a day and then having lots of leisure time. But in our country, you know, people are working their tails off. It's weird. So you're opening probably one of my most -- the most interesting cannons of worms that are just fun to talk about.

And it's the kind of thing that, over a cold drink and a good cigar, you can go on for hours, all night long, on this stuff. It's -- have you studied the history of money at all yourself personally? No, not really. I know it kind of started as agriculture.

But I'm sure there was, you know, some hunter-gatherer tribes that would just, you know, get together every once in a while so they would use a barter system. I'm not sure if that's really how it started. That's -- so with my understanding, and I'm not an expert in this space, I'd encourage you to go find someone who is.

I'm a student. I'm not an expert. But there is a popularly held misconception. And I'll just give you a few thoughts and I'll answer your question. And this is one that I don't want to take the whole call and go for an hour on the topic. But I'll give you a few thoughts.

There's a popularly held misconception that money developed from -- out of a barter economy. And this goes back all the way to, you know, I think Adam Smith was one of the writers who popularized this notion. And he went back and said, "Well, here's how money developed. We all started, you know, we were hunter-gatherer societies.

And then you had a deer, and somebody else said, 'I want some of that deer in here. I'll trade you an arrowhead for the deer.'" And blah, blah, blah. And we developed the barter system. And then we needed some kind of currency that would be useful. And that currency would be -- you know, so it came to the coin system.

That's popular mythology around money. From all the research I've done, that there is no historical evidence that that was how money was developed and created. And there's substantial evidence that goes against that and demonstrates that that's demonstrably false. That money is normally, actually, and has historically been a system of credit.

And that it's almost always based upon a system of credit. So I don't buy necessarily all of the arguments that people say, "Well, we just have to have a currency system that, you know, is based upon we all need gold and silver coins, and based upon the gold and silver coins, then we're going to be able to run things." I don't buy the barter concept, personally.

Now, there are a bunch of other areas that these theories branch off into. And so I'm also not a fan of the way that the system currently functions. But we're doing some research on it, and you'll find that money has generally come down to a system of credit. And so back to the current situation, as long as the U.S.

government can maintain faith in the credit of the U.S. government and the credit of the dollar, then our current economic system will continue. And this is what always really troubles people, is they look at it and say, "How on earth do I go through... How on earth is... You know, with the trillions of dollars of debt and the massive issues all around, how has the government been able to keep the fabric of society together for this long?" And I think they'll probably be able to do it much longer than people think.

But at the end side, so back to the employees, at the end, in the short term, I don't think they have much to worry about, because the political force is, on all sides, is to provide people with more. You don't see any political candidates on either the Democratic or Republican Party arguing for cutting back on anything.

You don't see anybody arguing for pulling back on the welfare state. All of the political candidates, with maybe the exception of Rand Paul or Ted Cruz, which neither of them looks like they've got a shot at any kind of traction in the Republican Party, all of the political candidates are big government progressives who are going to continue to expand the welfare state.

And so, once you recognize that, you can... My opinion, who knows? History could prove me wrong, but my opinion is that you're not going to see any change in policies. Nobody is advocating for any serious change that's going to affect your dad's workers. In the long run, I think, ultimately, that I'm convinced that, in the long run, there will be the so-called "Great Default," that there is no possibility that the U.S.

government is able to maintain its overall promises. And so, those promises are multifold. Number one is you have the national debt that is on the books, and so that's about $18, $19 trillion right now. And then you have the major debts, which are the welfare programs, Medicare, Medicaid, and Social Security, and you total the unfunded liabilities up with that.

And depending on what estimate you read, I go with Lawrence Kotlikoff's numbers from Boston University, you're up at about $200 trillion. And so, there's no possible way that that debt will be repaid or that those obligations will be shifted. And so, what will happen is, in my opinion, and this is a prognostication, and I could be absolutely wrong, but what will happen is that, ultimately, the voters will, over time, screw everyone who's got the obligations from the government.

And so, all of the welfare programs, they'll be pulled back because they're unaffordable. The long-term payments to the pensioners, Social Security, Medicare, Medicare benefits will be pulled back. And you can see signs of that to some degree, I think, if you pay attention to inside situation, to inside industry.

So, where I noticed this as a health insurance agent was in the long-term care space. We were talking a moment ago about long-term care insurance policies. In the past, Medicaid had generous benefits for long-term care coverage for seniors. And that coverage, and so many times, when I was selling long-term care insurance, people would say, "Well, Uncle Joe needed care.

He had Alzheimer's, and the federal government paid for him for nine years to stay in a nursing home. And he had plenty of money, and they just had that as part of his benefit." Well, that was true, but it's no longer true. And the government has pulled back on all of those benefits, such that there is still long-term care coverage as a component of Medicaid, but it's nowhere near as generous as it once was, and it's much more restricted than it used to be.

So, in the long run, anybody who's depending on the welfare state for their livelihood is gonna get screwed. Now, what's that long run? I have no idea. Is it 10 years, is it 40 years, is it 50 years? I don't know. So, my encouragement to your dad would be have him put in place and try to just simply provide education as much as possible to fulfill, I would say, his moral obligation to his workers to educate them, give them some, provide for them some resources so that those who are interested can liberate themselves.

Because as long as you're living, as long as you are living off of the back of the state, you're a slave of the state. And so, if I were him, I would try to promote, I would try to promote some education and some knowledge for his workers, try to make some resources available, offer to help any of them that want help, but ultimately, he's not gonna change anything, and they're not gonna change until circumstances force them to change.

Those are my thoughts. Yeah, I can definitely see that. In a certain sense, I feel like almost all of us are slaves to the state. Just property taxes, and it's just impossible to live a life without government. Well, that's why I promote the stuff that I do, and why you're promoting urban farming.

The last call, you know, when we talked two weeks ago on this call, that's why, here's the dichotomy that I see. And again, this is kind of that fun, personal argument back and forth. In the aggregate, I don't see, the state has never been more powerful over our individual lives, in the aggregate.

But on the individual level, there's never been more freedom than there is now. And so, yes, on the whole, society is carefully manipulated and controlled, but you and I as individuals can come out of the cave, to use Plato's allegory, and can make decisions that will enhance our own personal liberty.

And there's never been more freedom, ever, that I'm aware of in the history of the world, to make those kinds of decisions. And when you can compound the fact that just simply by waking up, paying attention to your own situation, and living a lifestyle of freedom yourself, you can help to enjoy the freedom.

And when you compound that with the ability that each individual person has, to influence other people individually, but also to influence people on a public stage, there you have the greatest harbinger of liberty of all time. Because you can start an urban farm, you can teach other people to start an urban farm, you can, and every individual person can go on Facebook and has their podium and their soapbox to be able to challenge other people and to affect other people.

So, the way I look at it, and I am more optimistic about the future than almost anybody else is, and so as long as you prepare and plan for the death of the welfare state, which I don't see any way that that could ever be avoided, I don't have a clue as to when it will happen.

But I could be wrong. But as long as you plan and prepare so that you are personally okay when the welfare state starts bouncing checks, then in the long term there's going to be more liberty and freedom for all of us than there ever has been in the history of the world.

So, that's how I approach it, is on the whole, yes, government will continue to grow, state will continue to control, but as individuals, there's freedom. Encourage yourself with the statistics that give you hope. So, I focus on schooling because if you look at that, there have never been more people learning and developing independent education than ever before.

And if you look at the trends, the mass trends, look at what has happened with the Khan Academy, look at what's happened with online education, that is the brightest hope for the future, is that steadily, little by little, the school systems will systematically implode. They're overburdened. The teachers are going to be replaced by online teachers.

And so the best teachers in the world are going to be teaching the classes. Everything is going to be available for free online. Once you break that system, and there's no reason for it, no need for anybody individually to break it, it's just going to happen based on the market forces, then systematically that will result in a decreasing power of the state.

So, those are my political prognostications. Now you can sit back and we'll find out if I'm right or if I'm wrong. I have no idea. Anything else on that, Nate? No, I think we're probably good on that. Cool. Let's go on. I mean, we could talk for hours about that.

You've indulged my political vent, but let's see who else has a question. All right, who else would like to ask a question or chip in a topic for today? I've got a Maryland caller. I've got a 240 area code. Who's that calling in from Maryland today? Hello, my name is Daria.

I'm calling from Maryland. Hi, Daria. Can I answer any questions or help you? Yes, I do have a question. I feel that for other listeners it will be very basic, but I guess I should ask anyway. I'm really new to financing, but I've been reading books and trying to figure out how should I start investing, what would my portfolio in the future look like, and so on and so forth.

Now I am at the point when I know that when I save some money and I know that I want some individual stocks, some bonds, maybe treasury bills and rates. But what I don't know what to do next, so I assume that I need to open a brokerage account.

But the thing is I don't know how to approach opening a brokerage account, because I'm thinking that there are, first of all, several of them which I don't know how to choose. I'm thinking there are fees associated that I might not be aware of. And I'm also thinking that probably they offer different investment vehicles, and depending on what I want, some may have it, some may not.

So maybe if you can give me first advice, let's say I want to open an account and start investing, how should I approach this? Great. So I can do that, and I'll give you some suggestions. Before I do that, is it okay if I ask you a couple of quick questions just to get a sense of where you are in the process?

Okay. Do you have an employer-sponsored retirement plan, 401(k) or 403(b), something like that available to you? Yes, and I have a match, and I use it to my advantage. I do. Okay, so you are participating, great. And why are you-- and so you desire to purchase individual stocks, or you're trying to purchase mutual funds.

Tell me about what type of investment plan you're hoping to pursue. So I read a book which is called "Investing 101," but Christy Christoph--I don't know if you know it, but it's something that I started with to get myself oriented. So I know that I should probably purchase mutual funds, but because I work in the biotech industry and I have a PhD in a relevant discipline, I really want to--I have certain companies in biotechnology that I would like to have in my portfolio, and I wouldn't trust any broker to select them for them because I know maybe too much about the industry to trust other people.

So this is the reason why I want to have some individual stocks because I feel I understand how to handle those. But I also want to diversify and have some mutual funds because I know very little about other industries and I know how biotech is risky and so on.

Perfect, okay. So you said exactly the words that I was looking for, and the words that I was looking for was, "I work in this industry and I have some knowledge of this area and I have expertise." So the reason that I was looking for those words is I think that the mistake that most people make is assuming that they should be investing in stocks when they should really be considering investment on a larger scale.

So one of my personal opinions is I do not like that when I say the word "invest," most people automatically assume I should purchase publicly traded securities. When I use the word "invest," I would like people to think about all of the options that are available to them, and that can be everything from making sure that your car maintenance is up to date so that you don't have an expensive bill right at a moment when you can't afford it to purchasing the office building, the five-story office building that your company is in so that you can manage it and rent it out to your other friends.

So if you look at investing, you've got to look at a couple of things, and I look at it, I think about it as a scale from passive to active. And so in many ways, I think that we should reserve the stock market as one option, and we should look to see what are the returns that I could expect to achieve from the stock market and use that as a placeholder, and then look to see can I beat that with something else in my life, some other inside information or some other inside knowledge that I have, and do I have the time and the ability to pursue that.

So I like for people to think about investing bigger than just putting money into stocks. That said, stocks are powerful, and the ability to own small shares of other individual companies that people are running and pursuing for an entrepreneurial-- from an entrepreneurial perspective is really, really powerful. When it comes to investing in individual stocks, there is a lot of noise out there and a lot of marketing hype about how people can beat the stock market.

There are thousands and thousands of books about here are the types of stocks you should buy, here are the specific ways that you should approach it. The majority of those books and the majority of that advice has no-- there's no proof to it. They're baseless claims that, well, you can beat the stock market.

At the end of the day, if you purchase the stocks of 10 so-called blue-chip companies, 10 big publicly traded companies, that's probably going to be pretty decent investments. They're well-regulated, they're well-run, the boards of directors do a good job of keeping those companies working. But to say I'm going to have some kind of inside information, you need to really be dedicated to that scenario in order for it to be worth it.

So I try to discourage people from buying individual stocks and then let them kind of prove to me that I'm wrong. And the way that you can prove to me that I'm wrong is to say, well, there's an industry or there's something that I'm very interested in and I have some knowledge, I have an ability to look and I want to do the research and I want to look to see.

So biotech would be a good example of that. You're involved in the industry, you would know what the companies are, you have an interest in it, and you have an ability to look at press releases and things like that and perhaps look for ways to find the companies that are going to be more promising.

So how to go about opening the accounts. Before you open any kind of account, sit down and create an investment plan. It doesn't have to be complicated. Just sit down and write down on a piece of paper what you're investing for, why you're investing, and what you're trying to accomplish.

This is the missing step that most amateurs never do is they never say, here's what I'm trying to do. And you should have a goal for what you want to do with the money, you should have a strategy, and you should be able to identify, here's what I'm trying to do.

So the reason this is important is if you start there, you're going to make better investing decisions. If your reason for investing was, I want to buy a new beach house in three to four years, well now you're going to know that I'm probably not going to pursue the same scenario as, I want to potentially strike it rich and make some massive growth by investing in some small companies.

So create a plan, make it simple, there's plenty of information out there, but at least start with being intentional. What am I trying to do? Next, look at all of your assets and figure out how much money can you afford to risk. So you should look at your savings, you should look at the money that you have in your 401k plans, and you should look to see how much money can I afford to risk.

And only risk the money that you can afford to lose, especially in something speculative like biotech. My guess, and you may have more knowledge than I do, my guess is that in biotech, you're either going to have flat companies and losses, or you're going to have the potential for a company to hit something big, invent some hot new drugs, and have a huge, huge rate of return.

So you're probably going to have a very wide-ranging investment portfolio where only a few of your companies are really going to make it big, and most of them are going to struggle, some of them are going to go bankrupt, some of them are going to develop some steady streams, but you're really looking for the big wins.

That might be the case, I might be completely wrong. Make that plan. When it comes to actually buying stock, your company pension plan is probably not the right way to do it. If you're going to buy mutual funds, depending on the type of mutual fund you're going to buy, that's going to depend on the type of brokerage account.

So if you were going to purchase index funds, well, you'd just go to Vanguard.com, you'd open an account with Vanguard, and you'd purchase your index funds there. But if you're going to purchase other types of mutual funds, you might want to purchase them directly from the mutual fund company, you might want to purchase them through a brokerage account, through an online discount broker.

You can also purchase your stocks through an online discount broker. And for you choosing them yourself, that's probably going to be all you need to do. There are a number of good ones. So there are some big names, E-Trade, I think Schwab, TD Ameritrade, are some of the ones, Scottrade are some of the ones that come to mind.

I am in the process of bringing on a sponsor on the show for a company called Trade King. We're in the final negotiation of a sponsorship deal. And Trade King, I interviewed the CEO on that show, his name is Don Monsenaro. I interviewed him a couple of weeks ago from the FinCon Financial Bloggers Conference.

And they're down in Fort Lauderdale. And I decided to bring them on as a sponsor of the show. I really like them, I like what they're doing. They're not the biggest company, but I feel very confident that that would be a good choice for you. You can open an account with them, and you can, they'll wait a couple of days, and once you hear them, or maybe it might be a couple of weeks, but once you hear them come on the show as a sponsor, there'll be a special deal for listeners of the show, a special bonus if you open an account with them.

And you can open an account with them, you can place your trades, and you can purchase the stocks of those companies with them. So that's the specific answer for how to open a brokerage account. I don't know of any reason why you would choose anybody other than Trade King, but as with anything, you should go and do your own due diligence.

But I will be bringing them on the show as a sponsor, and they can help you with a brokerage account to purchase those individual companies. Make sure that when you're doing it, you're doing it within the context of your bigger investment plan, and your bigger financial plan, and your financial goals.

And then you'll be able to make really good decisions. You'll be able to stick with your trading plans, and hopefully be able to make a lot of money. It'll be awesome. Does that help a little bit? Yes, that's perfect. I actually, I was considering Trade King. I think I heard the podcast that you did.

And so, yeah, okay, so that's perfect. And then in terms of strategies, yeah, I'm thinking about it, and they're actually evolving of what I want to do. And my original idea was that I want to buy a house in cash, and I want to retire in 15 years. This was my kind of overall first thing that I was thinking on, and then I was trying to calculate what it means to get to this goal.

But, you know, things are evolving as I am learning more and more about the area. Right, and so that's where -- that's exactly the type of plan that you want to put together. And so you start with how much money would I need to pay for the house in cash?

Then you also look to say if I want to retire in 15 years, how much money do I think I would need in order to retire? And then you can plug that into a financial calculator, and if you know those numbers I'd be happy to help you do some math right now on the call.

But you plug those numbers into a financial calculator, and you see based upon how much money you have, how much money you can save, and your time horizon, and you ask yourself, "Is this a realistic goal that I could achieve?" And then you're going to know, "Do I think I could hit this with my investment plan?" And so depending on how fast you want to retire, that's going to drive, again, how you invest.

Mm-hmm. Mm-hmm. Makes sense. Yeah, I know rough numbers. I don't know if it's going to be too burdensome to do it right now, but I can do it. Let's do it real quick. It'll be fun. I've got a calculator right here. So how much money do you think that you need to retire?

So I was thinking that $60,000 or $70,000 a year. Well, I would – okay, probably a minimum of $50,000 a year is what I would plan to do when I retire. And then if I retire in 15 years, I would assume that I would live at least 20 years after that.

Okay. Yeah, and then – So let's do an – let's use that as an example. Let's use the 4% rule as a good guess on kind of a good ballpark range and assume that you want to spend $50,000 per year, and so you need a portfolio that you can withdraw $50,000 per year from.

And so multiply $50,000 times 25, and that gives you $1,250,000. So that's the value of your portfolio that you need at the time of retirement. Now, ballpark – and again, this is a public call, so feel free not to say, but how much money do you have saved currently?

And again, you don't have to answer if you don't want to. I can. I mean, the thing is, there are different things. Do I count 401(k) or do I not count 401(k)? Yes, count your 401(k). Oh, okay. So 401(k) is probably $40,000, $45,000, and then – it's actually a mixture of the raw pre-tax and post-tax, but let's say $45,000, and then plus savings probably around $40,000, $50,000.

And I do not have any debt, neither college, no mortgage, nothing pretty much. Congratulations. Okay, so we've got $100,000 now. And then how much every year do you think that you can afford to contribute to your investment account? Every year? Okay. Right now, I'm using YNAB that you recommended to see how much I can actually contribute.

Okay. I think I can at this moment $3,000 a month, which will make me $36,000. I persuade my husband to help me out, let's say $40,000 a year. Okay. So let me do this math for you, and let's assume that you want to retire in 15 years. That was what you said, right?

Yes. Okay. So the way that we do this math – and this is just rough math, but to give you an idea of the type of investment plan that you need, we put in – into the financial calculator, and it's simple once you know how to run the financial calculator, but you're going to learn that on your own.

I think I did a show on that, or I need to do some videos on it. So first thing we're going to do is we're going to put in our future value. So we type $1,250,000, and we put that in as our future value. We hit the FV button on our calculator.

Next, we're going to put in our present value, and we're going to put in $100,000. And then depending on the calculator, usually you need to change the sign and put it in as negative, so you put in minus $100,000 as our present value. And then we're going to put in our annual payment.

So we're going to do an annual payment here, and we're going to put $40,000 of a contribution into the account as a payment. And then we're going to run this for 15 years, and we're going to solve for the necessary interest rate. I just solved for interest, and the calculator is running here.

It's going to tell us how much interest we actually need to an interest rate that we need to earn on our money. Hang on one second. I forgot to--I made one mistake. Just a second. $1,250,000. It's hard to do it and then talk at the same time. $1,250,000. Okay, and it's running again here.

It's going to tell us what our annual percentage rate of return is that we need. Okay, so under that scenario, all we need here is a 6.2% rate of return. That's all we need to earn on our investment. And the way that you can check that is we can just run the numbers again.

And so what I'll do is I'll say, okay, 6.2%, we've got $100,000 starting point. We're going to do this for 15 years. We're going to earn 6.2% annual rate of return, and we're going to contribute $40,000 to the account every year. So what does that end up with? And at the end of 15 years, we would have $1,250,000.

So the reason I ran that math is to show you that if you can afford to save that much money, you only need a 6% rate of return to hit that financial goal. Well, you should be able to get a 6% rate of return just with buying an index fund and not putting in any--and putting your money in stocks and not worrying about investing in biotech stocks.

So you have the decision to say, "Do I just want to buy index funds or do I just want to buy real estate and make 6% and reach those goals and have a much higher certainty, or do I want to invest in biotech stocks?" And so you have to look and say, "How much rate of return do I think I could earn in biotech stocks and do I need to?" And that's what I mean by actually running a scenario because--the next question, do you have a guess as to what rate of return you would hope to earn if you were going to run your portfolio yourself and invest in biotech stocks?

Oh, good question. Well, I was thinking 10% should be possible if I make sure that I spend enough time. Maybe more, but as you said, you've got to be lucky as well as knowledgeable. Right. So if you're in the 10% range, my guess is I wouldn't think it would be worth pursuing biotech stocks as your investment strategy if you only wanted or needed 10%.

10%, you should be able to get there with much simpler, much safer investment approaches versus investing in speculative biotech stocks. So if I were you, what I would do is I would create a plan where the majority of your money is going to go into well-chosen mutual funds and I would do that within your 401(k) and things like that.

And I would produce--I would put something like--I would have a goal of maybe investing $2,000 a month or $2,500 a month into more conservative investment. And then I would take maybe a little bit extra, maybe $500 or $1,000 or $1,500 a month, and I would use that money to fund my brokerage account.

And so what you're doing there is you are having a major portfolio that's your conservative portfolio, and then you have a small portfolio that you're investing aggressively. And the hope is that you can make 50% rate of return or 30% or 80% by picking the right biotech stock, but you're not counting on that to be your whole financial plan and you're not putting all of your money at risk in a very speculative way.

So that's what I would do is I would have kind of my core portfolio be a little bit more conservative, and then I would have the satellite portfolio--that's kind of one of the words that they would use, this type of approach, your core and your satellite. I'd have my satellite portfolio be much more aggressive.

Now, you've got to pick the numbers, but knowing that you could save--if you want to live on $50,000 a year and knowing you can save $40,000 a year and knowing that you don't need that high of a rate of return to hit your financial independence goal, I would focus a lot of my portfolio in a conservative direction, and then I would put a little bit of the portfolio in the speculative direction.

That would seem like how I would approach it. Well, thanks so much, Joshua. Actually, in my wine lab, I budget $500 of stock, which I have not invested in, but I'm budgeting that much money because I know how it goes in this area. Okay, well, that's wonderful. I don't want to take any more of your time, but I have a lot to think about, and it's perfect.

Good. Good. Go slow and make sure that you study, study, study, study. Go slow. Don't invest in something you don't understand, and go slow and don't invest any money that you can't afford to lose. And, I mean, you're obviously very, very bright, and I think you could put something together very nicely for yourself.

All right, I'll take one more question for today. Who wants to ask the final question? Hey, Joshua, I just want to follow up. Actually, I thought that was pretty interesting, but wasn't one major piece of the formula missing, like her age and how many years she was going to be retired?

Yes. I used, just as a sample, I used the 4% rule, and so the data and the research behind the 4% rule is assuming a 30- or 35-year retirement, but what you find is that the right portfolio construction, that it can actually be basically most of the portfolios at a 4% distribution could last into perpetuity.

So if you're in that 3% to 4% range, then your portfolio should be able to be structured to last for a long period of retirement. What I was trying to do with asking those numbers and keeping it simple was simply trying to find out, does she need a 6% rate of return, or does she need a 66% rate of return?

So if she had told me, "Joshua, I actually want to spend $150,000 per year," then I immediately know that my ending portfolio needs to be closer to $4 million. And so if I put $4 million into the calculator, and let's do this again real quick, 15 years, we're going to start it with $100,000, and we're going to make $40,000 of contributions into it.

Then now, if we need $4 million at the end of 15 years, we're going to, give it a second to run, and it's going to tell us our rate of return. It's going to be way, way different than 6%. The reason I say that is because I believe that many financial...

Okay, so now we're at an 18% rate of return. So she would need an 18% rate of return every year if she wanted to live on, whatever I said, $150,000 a year. So she needs a $4 million portfolio. I think that's still a workable financial plan. But you have to then ask yourself the question and say, "Where am I going to get the $4 million of...

Excuse me, where am I going to get an 18% rate of return?" Well, now you wipe out, "I'm not going to get it in index funds. I'm not going to get it in conservative, you know, mutual funds." So now I need to either be very, very good at biotech stock investing, and I would need to ask myself specifically, "Do I have these skills?

Could I develop these skills? I need to put a lot of time into it, or I need to move into business." And I need to say, "How could I take my $100,000 that I have of capital, and how could I develop some sort of business that I would be able to sell at the end of 15 years that would be worth $4 million?" And business people do this all the time.

And it might be something as simple as, you know, buying a franchise locally. It might be a good idea that you've developed. But I don't think it's out of the realm of possibility to say, "I'm going to accumulate $4 million over the next 15 years." I intend to do that, but I'm not going to do it with publicly traded stocks.

So that's why I was just doing some rough numbers to get an idea of do we need 6% or 18% rate of return. Is that helpful? Mm-hmm. Yep. Cool. Awesome. All right. Well, thank you guys so much for joining me on the call today. I've enjoyed chatting with you all, and I will be doing these again through the month of November.

I intend to change one or two of the times to try to do an evening call to help some other people join in, but I've enjoyed these. And I thank you all for calling in. So if you have any questions in the meantime, join us on the next call.

Otherwise, feel free to email me, and I'll see you back on the show. Thank you all for coming today. The L.A. Kings Holiday Pack is back, the perfect gift for the hockey fan in your life. A three-game pack starts at just $159 and includes a holiday blanket. Buy today, and you'll receive an additional game for free.

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