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We also talk, however, life insurance, how to protect spouse and kids with group life insurance and we talk a little bit about, again, where and how to save money for long-term goals. So we have some real gems in here today, I hope you 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. This is the show where I work hard to equip you with the ideas and inspiration you need to live a rich life now and also to build a plan for financial freedom in 10 years or less.

Today you're going to hear some ideas on how to do both of those things. I've been switching our Friday Q&A calls to be a Live Friday Q&A call. And a quick note about that here as I begin, I really am enjoying this. I like the personal interaction. I enjoyed it very much a few months ago when I did it and I like it.

I do warn you, I am still learning. It's a completely new skill set to figure out how to balance the appropriate length of an answer and how to stay on point. So frankly, I did my best but I was just thinking back a little bit after the fact about some of the answers and I did my best.

But I intentionally often leave my best here for you without going back and editing it tightly sometimes simply because I want to lead by example. Anytime you're acquiring a new skill, you're going to find yourself in a situation probably where you're not very good for a while. They talk about the stages of competence, right?

If memory is right, you start with unconscious incompetence and then you move to conscious incompetence. Then you move on to conscious competence and then finally perhaps to unconscious competence. But right now with these Friday Q&A shows, I feel like I'm in the stage of conscious incompetence at the moment.

So bear with me. Stick with it. Feel free to use that forward button on your phone. That's the beauty of podcasting. If I run a little longer, I'm not able to do a perfect job. But I do try to leave these breadcrumbs here. And again, those of you who've listened to the show from the beginning, I am confident that I have measurably improved and increased in ability over time.

And I've tried to leave those breadcrumbs here to encourage you in your endeavors. Don't expect to be good at things when you start. I've heard it said anything worth doing is worth doing poorly at first. You're not going to be good at things when you start even when I'm not good.

But what we can do is we can continue to get better as we focus on developing the skills. So I think five or ten years from now, you tune into a Friday Q&A show if I'm still doing them in that format, and they'll be smooth. They'll be articulate. They'll be precise.

But they're not totally there yet. But I'm working there. So as you're listening to today's show, my hope is you'll find some good ideas. But also watch what I'm doing and how I'm doing it because I believe it's a good model that all of us can apply. Before I hit play on the interview for you, a couple quick announcements.

Number one, sponsor of today's show is YNAB. You need a budget. This is the personal budgeting software that I use. And they've just recently made some measurable improvements. If you have tried YNAB in the past and didn't like it, the biggest complaint that I've heard in the past about YNAB is in the past, they didn't automatically import transactions.

Personally, I find that to be a benefit because then I'm forced to manually enter the transactions which raises my level of consciousness around my spending. But if you don't need that level of consciousness and if you have a lot of transactions, it can be a little bit annoying, totally recognize that.

So in the latest version and update of YNAB, they have completely fixed that and now you can set up automatic import. And I think that's the best way to do it because you can set up the automatic import or if you still want to have the pain of entering in your spending transactions, you can force that pain onto yourself by doing it manually.

YNAB is the budgeting software that I use to budget my business software and my personal software every single day. I'm in the app multiple times a week. So I commend it to you. It's the best solution I found for budgeting my family's money. Get a free 30-day trial at RadicalPersonalFinance.com/YNAB, RadicalPersonalFinance.com/YNAB, short for you need a budget, RadicalPersonalFinance.com/YNAB.

Quick announcement as well, I have been participating in the online investing conference. That conference, the early bird registration has now ended. Hopefully many of you took advantage of that. However, the late registration is still available and I would recommend to you if you have any interest in finding out about some of really the world's – some of the world's leading commentators on investment opportunities in 2016, if you have interest and want to hear their insight on some of the major opportunities that might be available in this year for your investments, go to RadicalPersonalFinance.com/OIC which is an acronym for Online Investing Conference, Online Investing Conference.

You get free access to introductory videos where you can find out the gist of what they're talking about and then if you decide the conference is right for you, feel free to sign up there. Finally, I'm about to play the Q&A but I intend to offer these Q&A calls just about weekly and they will be offered to patrons in the future.

At the end of this recording, you'll hear me kind of quibble a little bit and it's just very raw. I'm not editing it but you'll hear me just talk about the patron program. You'll hear my answers and I've made a few missteps on the patron program but I'm focused on trying to improve it consistently.

One of the ways that I do want to do that is I will be continuing to do these Q&A calls. If you would like to have a question answered on the show in this format, I would recommend to you that you sign up to become a patron and that way you'll get access to the day and time and phone number for this call and you'll be able to join and access the call as a patron.

I have a long queue of emails that I get from listeners and subscribers, plenty of questions that I could answer. I just have too many to answer and so this is one way of me prioritizing the answers for the patrons of the show. So if you'd like to participate with a question or a comment or on anything you like, please consider becoming a patron of the show.

Go to RadicalPersonalFinance.com/patron and you will then gain access to the Q&A show information. Great, welcome to the Q&A call today guys. I'm looking forward to speaking with you all. Just real quick, very simple, I'll let you kick us off with a question. Feel free to talk about anything that you'd like to talk about.

We'll talk and we'll have a little bit of back and forth if you have questions, comments, but I'm happy to hear your input. So let's start with Scott in Indianapolis. Scott, go ahead and ask your question. Well, thanks a lot, Joshua. I have a question about, a two-part question about liability umbrella insurance.

I think a lot of us radicals kind of have a handle on what type and how much life insurance or disability insurance, but in terms of umbrella insurance, I'm kind of in the dark. There are two schools of thought that I've read about. One is yes, umbrella insurance is good in the event of damages that exceed your homeowner's and automobile insurance, but the flip side, completely 180 degree from that is no, you don't want umbrella insurance because that will make you an easier target for a damaged payout.

So my first part of the question is, is it good, bad, or does it depend on the individual situation? And the second part is how much umbrella liability insurance do you need if you determine that you do need some? This is a fun one. I've also read those different perspectives.

It's an area where I'm weak on in terms of practical experience. I've looked for, tried to find somebody who would be an expert on this area to bring on for an interview. And in fact, if there's anybody listening to this podcast who is an expert on this topic, who'd like to talk about it, I'd love to have you on the show.

Just email me, joshua@radicalpersonalfinance.com, and I'd be happy to bring you on and discuss it. But I was taught – so I've never sold liability insurance nor have I worked extensively in that marketplace beyond just what I did to pass the CFP exam and beyond the basic certified financial planner recommendations.

So the basic rule I was taught though, my instructor in preparing for the CFP exam, he said, "If you ever see liability insurance as an option on the test, make sure that you go ahead and check that because it's going to be right." The rule that they taught was liability insurance, umbrella liability insurance is always a good idea.

So I have no differing opinion to that. I think the whole easier target thing, I don't know. It doesn't make sense to me that – I'm speechless because I just don't know the answer. I don't think that prudent protection is going to make you a target. I think that probably more of the other things that you do in your life are going to make you a target.

I think you can minimize that risk is to simply focus on living a less flashy lifestyle. So for me, I always have been into the concept of never let people know how much money you have, never let people know how much you're worth, and I think that most wealthy people live their lives that same way.

Now obviously, you live in a certain zip code, you live in a certain type of house. People are going to make assumptions about that. I don't think that having insurance is going to make the difference. If someone can present to me evidence to the contrary, I'd love to see it and I'll change my opinion, but I've never seen evidence for that.

As far as how much, it's generally so cheap, I don't see any reason not to protect – essentially, I don't see any reason not to protect most of your assets or especially at least not most of the assets that aren't protected by some other mechanism. I know that's kind of fuzzy, but that's just been – if I had $5 million net worth, having a $5 million umbrella liability policy to me just seems like a decent place to start.

I don't know anything more specific than that and rather than me go on and on, I'll just repeat what I said. If there's an expert in this area, I have a few friends who deal here in Palm Beach and like the high net worth market that maybe I'll reach out to them personally and see if they'd like to come on and talk about it and I'll see if I can get you a better answer in the future, but that's all I got, Scott, unfortunately.

That's fine, Joshua. That's pretty much my assessment as well. I picked up an extra $1 million umbrella insurance policy about a year and a half ago and it's only like $100 a year. It's really cheap and the extra $100 doesn't really move the needle in terms of our cash flow statement.

So yeah, thanks for your time. That helps. The only other thing I do know that you want to make sure of and most of the time the insurance agent will do this for you, but make sure that your coverages are lined up properly. So if on your homeowner's insurance you have a liability limit of let's just say $500,000, you want to make sure that your umbrella policy is picking up at $500,000 and it's going from $500,000 to $1.5 million.

You want to make sure that it's not kicking in at a million dollars. You don't want there to be a gap between the coverages. So if you line those things up properly, then there'll be a good interplay between the home and your car and the umbrella policies. I think it's the big thing I've learned to look out for on liability insurance.

If you can find an expert liability insurance agent, I think it's really, really valuable to have because there can be a lot of little things that you want someone to go through. This is again where my friend who specializes in working with high net worth families here in Palm Beach, he'll talk about going through and recognizing, "Oh, okay, we've got the jet skis on the yacht." Well, you've got to make sure that those are covered because you don't want to have a loophole where one of the teenagers was riding the jet ski that was on the yacht, there was no insurance policy in force, and now there was an accident of some kind and you're found liable.

You've got to make sure that everything is covered. So I think in addition to the umbrella policy, it's important to have somebody just talk through all the little risks, make sure that all the vehicles, that the ATVs are covered, that the shed, the structures are covered, just all of the little things.

I think that's also important in approaching liability insurance. So that's the best I got. Again, I welcome any readers or listeners who have better opinions. Joshua at RadicalPersonalFinance.com. Let's go next and I'll let you guys choose who would like to go next. I wouldn't mind going next, Josh. Go ahead.

Yes, I actually have a bunch more questions after listening to that answer about insurance, but I'll leave those for another day. My question I was calling about was just about a simple life insurance purchase through my W-2 job. My wife has recently decided to stay at home and leave her job and on the re-… You have to stay with our two kids at home, but when redoing my benefits, I kind of was looking through the different options I had again and I can elect to change some of those.

And one that I had never considered before was spouse life insurance or child life insurance. I always just skipped over them thinking she was either covered or financially. I didn't think there was a… If we lost a child, I didn't know financially how that would impact us. So I always skipped over those ones, but I was looking at the prices of them and it seems to go up in $10,000 increments for about 37… Or I guess it's like 18 or 19 cents per week if you cost it out.

So that comes to about $480 a year for $500,000 of insurance or like the last caller said, it's just under $100 a year for $100,000 of insurance. And hearing him makes me think, "Okay, that lines up price-wise with other things, which is good." But I'm just kind of curious about the overall thought process of how to decide whether I should go for this or not.

I'm more inclined to skip it still, but I just want to make sure I'm not missing anything. My answer to the question is it's going to depend on the numbers and there are a couple different steps to the thinking process. The first thing you have to ask yourself and let's separate the question of spouse versus kids and answer them separately because they're very different approaches.

So the first question when you're thinking about, "Does my stay-at-home wife, does she need insurance coverage?" My answer is yes, she does. So hopefully most people will agree. The only exception would be if you're financially independent and you don't need it and I'd still probably buy it. If my wife is a stay-at-home mom and if she died, I mean, I don't know what I'd do.

I don't know how I'd build. I would have no possibility of continuing the plan going forward and being able to take care of our children in the way that we've dreamed. So there's no question about my having as much life insurance on her as I can get. So let's start with yes, she needs life insurance.

Next you got to figure out how much. Now when you have somebody who is a wage earner, then you can calculate their economic contribution to the household and you can calculate the economic needs. It's relatively simple. The best way is you do a needs analysis and you figure out how much money they're bringing into the household and you can figure out the appropriate amount of life insurance or you can just simply say, "I want to replace their salary." When you have a stay-at-home spouse, it's a lot more difficult because I can't prove in my family, I can't prove what the economic value is of my wife.

I'll tell you, it is huge. It's massive. She's far more valuable to our family than any amount of money that she could earn out in the workforce. So that's what I'm trying to protect. Now it gets a little bit fuzzy as to figure out what's an appropriate amount of life insurance and the only thing I've ever been able to figure out to do is to say, "Get at least half of what the wage-earning spouse has in insurance coverage." You could probably go through and figure out, "Well, how much would I need to buy these certain services?" But it's just such an unknown.

Even though I like precision, I've never been able to get to that level of precision. And so when I used to sell insurance, if the husband was going to buy $2 million, I'd get at least $1 million for a stay-at-home spouse. If the husband needed $1.5 million, I'd try to get $750 or $1 million for the stay-at-home spouse.

I have about $2.5 million of insurance on me and my wife has $1 million on her. So it's similar ratios. That's the best I can get to with the amount. Then you got to decide, "Well, what's the best way to do it? Is it best to do it through your job or is it best to do it independently?" The answer is it's always best to do it independently unless you can get just some crazy screaming deal through your job.

You want it independently because you don't want her ability to have life insurance to be connected to your job. Imagine the scenario where you lose your job and you're staying at home now and she's caring for you and then all of a sudden she dies during that time. Not only did you lose your life insurance, but you lost her life insurance as well.

I always want to have the appropriate amount of life insurance that we can get in an individually owned life insurance policy. It's probably going to be a term life insurance policy, or at least for the majority of it, because you have a temporary need when your kids are younger and you have a temporary need, that 20-year time span, so that's a great fit for a term policy.

You want to get it with that individual term policy so it's not connected to your job. Now, once you've got that in place, you go back and look at the insurance at your job and you say, "Is this a good deal?" Here's where it can be a little bit fuzzy.

Let's say that you've got $2 million of insurance on you and you got a million-dollar life insurance policy on your wife as a separate term policy that you own personally, and then you're looking at your group benefits and you can see that she can get $350,000 for just pennies.

Take that number that they quote you on the benefits statement and compare it to what you're paying for term insurance. Sometimes it'll be more, sometimes it'll be less. If it's substantially less, if it's cheap, maybe I'm biased because I'm formerly an insurance agent, but if it's super cheap, I would usually just add it on because I feel good having a little bit of extra money, especially knowing that sometimes with some insurance companies, you can't quite qualify for as much as you'd like.

Frankly, I'd like to have a little bit more insurance on my wife and I haven't really applied for it, but I do know from having been an insurance agent that right now, if we were to go and apply for more life insurance for her, we couldn't economically justify it based upon the internal underwriting guidelines.

So if I had the opportunity to pick up a few extra $100,000 at my job for a couple of bucks here and there and it's substantially below the open market rates, I would do it, but it's not a precise answer. Now if you don't have the insurance in place individually, then definitely yes, get it at the job and also if you can't get a good rate on insurance individually, let's say your wife is sick or is unhealthy in some way and she's being quoted too high of a rate, well then it's very compelling to step in and get the insurance coverage at her job.

So it's a matter of running the numbers and comparing what premiums you're quoted at your job versus the premiums in the open market. Have you done any of that analysis yet? No, actually I haven't done anything at all. In fact, outside of just the free insurance, we get the hidden cost insurance that we don't pay for through my job and her job that are just some multiples of our salary that are paid for by the companies.

We don't have really any life insurance at all and I know it's a big gaping hole for the whole avoid catastrophe part of it. We have been passing on it just because we keep thinking off the cuff, okay, if one of us dies, we can still get by, but obviously there's going to be impact and it was just a matter of is it a catastrophic impact?

I mean, obviously beyond losing the spouse or whatever, but financially it's like, well, the answer was always, yeah, we see a way that we could get by without it, but obviously things would be a lot easier if we did have it. So we just, being ignorant, we just kind of pass on it rather than buy it without knowing what to buy or how to analyze it or even simple things like what's a screaming deal considered?

I only had one data point, which was the deal from work and now after hearing what you said, maybe I should have got independent insurance while she was, or before she quits work even maybe, but they probably have rules about how long after that you can quit. Yeah, I haven't run the numbers on anything.

Okay. So about what age is your wife? Sorry, I went back on mute. She is 30, she's 34. Okay. So a 34 year old female, healthy non-smoker, you could buy a million dollars of term life insurance, annual renewable term insurance, which probably gut instinct here, I would say probably in about the $35 to $40 a month range.

So that's about $400 a year, something like that. So and you can run some numbers. In fact, what I'm going to do, I'm going to hit pause just a moment here and I'm going to run a quick quote so we use real numbers. Okay. So I just ran some rates here and to answer this question a little bit better and the website that I use, I won't link it in the show notes, I'll just simply say it here in the audio, but I use a website that I've mentioned on the show before called thestamagency.com.

T-H-E-S-T-A-M-M-A-G-E-N-C-Y. And the reason I'm not linking it in the show notes is because this is a website that's for brokers. I've interviewed, it's my friend, Todd Simpson, he's been on the show before. This is the agency that he runs and they do, they have on this website term insurance rates that you can run if you want to run term insurance.

And so there's no sales funnel. This isn't like all of the terminsurance.com and all the gazillion options that exist there. There's no sign up to contact agents. If you're just trying to get an idea of how much insurance is going to cost for you, you can use this. There's no follow-up funnel for you.

So a 10-year level term insurance policy for a million dollars for a 35-year-old female in the state of Florida, preferred best non-tobacco here, we're talking an annual premium of $230 for 10 years level term. That's with protective, MetLife 230, Banner Life 240, and Principal 250. Now preferred best is a little bit tough to get, but let's just start with that.

And that's why I say you got to actually get some real numbers. Or if you wanted to stretch it out to, let's get 15-year, and let's just look at 20-year term here, level 20-year term insurance, protective life for a 35-year-old female, a million bucks is $371 a year level for 20 years.

So we're actually talking even for level term there, we're talking less. This website doesn't quote annual renewable terms, so it doesn't do it well anyway. So I can't quote you those prices. Let's just stick with level term. So we're basically talking about $25 to $40 a month. You can get, again, 20-year level term insurance for $380 a year for 20 years.

So when I look at those numbers and I compare them to the financial scale that most of us are dealing with, those numbers are insignificant. It's not going to make or break somebody. You obviously have to, each individual listener, obviously have to check your budget and see is this $30 a month, is this going to make or break me?

Is this going to make a big difference? And you might need a little bit less, you might need to figure something else out. But when I look at that, I just say in the grand scheme of things, that's not a big deal, especially as compared to the peace of mind that I get knowing that I have a lot of insurance in place.

Because I'll tell you what, if my wife passed away, my business would be closed down, it would take me a long time to figure out what to do. And the insurance would make a big difference. So you could compare those numbers, got a little off track there, but you could compare those numbers to what you're being offered at your job.

Now it's not going to be a direct comparison because what you're offered at your job is actually a yearly renewable term policy bundled within a group contract. So it's not directly comparable. But if Protective Life is saying they'll offer you a contract for $230 a year for 10 years level for a million bucks and you go at your job and you find out that instead of $230 a year, it's going to be $400 a year, well then there's no reason for ...

I wouldn't get the group insurance in that place. I'd go buy the level term contract out in the open market. Now if on the other hand, you get in there and you say, "Well, it's a hundred bucks a year," now you know you're getting a good deal and go ahead and buy it there at your group contract.

So that's how I would answer the question of insurance for your wife who's a stay at home mom and do that. Now let's switch to the kids because it's a different conversation. With regard to insurance for kids, there are a few different schools of thought. One school of thought is make sure that you have just enough money to bury the kids.

Another school of thought, if something happens and you've got to pay for a funeral, that can be an unexpected expense, so therefore you want to make sure that you cover that with insurance. That's one school of thought. Another school of thought is just don't bother with insurance. It's unlikely to happen.

It's not really going to be a big deal. Another school of thought is to buy a lot of life insurance because of the money that you're investing into your kids. And then there are other variations of it. Personally, I believe it's very valuable to have insurance for your kids.

I own life insurance policies on both of my children. When it comes to how to do it, the challenge is that you cannot buy term life insurance for kids in the open market, or at least if you can, I've never found out where and how to do it. If any listener can show me where and how, I'll be happy to spread that information.

I've never found a place to buy a term life insurance policy for my kids in the open market. The only place I've seen those policies offered is as bundled with a group contract, just like you have the option there at your job. The cool thing about those term policies that are offered there as a group contract is they're really, really cheap.

Now, there's not going to be that much insurance, but they're pretty cheap. And so it's just a matter of saying, "Is it going to be 19 cents a month? Well, if so, then I'll go ahead and do it just in case. If it's going to be five bucks a month, I don't know." You have to run the risk of it, and you could compare the amount of the insurance versus the amount of the benefit.

I usually just told people sign up for it because usually those group contracts, they're very, very inexpensive. The statistical likelihood of your children dying at a young age is tiny, but you'd be glad to have it if it happened. What I have done is purchased small whole life insurance policies for my kids because to me, the biggest value of those is the ability to buy additional amounts of insurance in the future.

So I have $25,000 whole life policies on each of my kids, and the policies are carefully designed so that they have maximum growth and death benefit, minimum premium payments due with a good quality insurance company. And then also they have a couple of riders on them, and they have two riders that to me are very important.

They have one is a waiver of premium rider where if the child ever gets sick or disabled, the premiums are waived on the contract. And they also have an additional purchase benefit rider where those small $25,000 policies actually have a total of just under about a million bucks of additional purchases that are available.

So if for some reason my kids got sick or hurt in the future, they would not be able to and they couldn't get more insurance, then at least in that situation, we could go ahead and buy more insurance under the contract that they have, even if they couldn't medically qualify for it or if they couldn't occupationally qualify for it because one of them has started racing cars in NASCAR or something like that.

So to me, that's important. Many people feel strongly differently about it. You buy them at age zero, they're about $20, $25 a month. And cash accumulation in kids' policies is very slow. It's a really bad rate of return in the very beginning. It's really, really bad because of the costs of insurance when you start that little.

But you will at some point recoup the money if you cash them out. Their whole life policies, they'll go paid up in somewhere between 10 and 20 years. So I just like them. I think it's flexible and I'm willing to – that small amount of money is small enough that it's not – I don't ever view it as something that is going to make my family rich, but I like having it as a backstop.

And it makes me feel good knowing that if something happened and one of my kids died, there would be enough money there to do – probably to do something in their honor. And yes, we have other savings accounts and emergency funds and things like that that we wouldn't have to go to a life insurance policy, but I like having a life insurance policy.

It's one of those where I can't give you a hard and fast rule, but that's how we've approached it. Any follow-up questions on that? No, that's really helpful to hear how you think through that and all the details on the policy for the kids. Thank you very much. The only limitation I might have on the spouse insurance through my work is I think – if I'm not mistaken, it does cap out at $500,000, so I may – I know you're talking on the orders of multiples of millions, one or above, so that might be the other factor that pushes me out into the open market even if it was a better deal than the open market.

So yeah, thank you very much. It's all very helpful. You're welcome. I consider a million bucks to basically be the minimal insurance policy that I'd ever even bother with, and the reason for it is a couple of things. For most people, the cost – and again, we're talking mass market, the majority of listeners listening to this show, middle market, median income, upper median income, a million bucks of insurance is on the range of 20 to 40 bucks a month for most people, and that's just not a lot of money.

Saving – going to $13 a month instead of $19 a month in order to get 500,000 instead of a million, OK, fine. You can do it, but I've never bothered with that little amounts. Number two is a million dollars of insurance today is really useful. Twenty years from now, figure out what that million dollars would be worth.

Let's do some quick math here. Let's punch a million bucks into a calculator as a present value, and present value, let's say 20 years, let's run this in as a 3% annual inflation, no payments, and let's see what that'll be worth in 20 years. So in 20 years, a million dollars of insurance is going to be worth $543,794, the equivalent in today's dollars if we have a 3% inflation rate.

So when you're buying a term policy like this, a 20-year term policy, you got to factor that in as well. So I just basically think a million bucks is the minimum unit, and if someone wants to get half a million, fine. It doesn't work in my head, but that's up to you.

Run the numbers, and what you'll see is – quick comment that might be interesting to some people. The way insurance is priced, it's generally with most companies, most insurance policies, there are exceptions, but it's completely linear, but there's a policy fee in the insurance. What I mean by it's linear.

So if I'm looking at this 10-year term $100,000 contract that's on the screen in front of me, that's $230 a year. If we were to increase that to $2 million, it would basically be about double except for the policy fee. So usually an insurance contract will have a policy fee.

It could be anywhere from $50 to $100 a year, and that policy fee is how the insurance company calculates the cost of maintaining the contract, the cost of sending out the annual notices, the cost of all of those things. So let's say it's a $50 policy fee. So what that means is if the contract is $230 minus a $50 policy fee, the cost of insurance is $180, and that number is linear.

So if we wanted to figure out if those were the real numbers, if we wanted to figure out the exact additional cost, we would take the $230, pull out the $50 policy fee, which equals $180, and that's $180 for a million units, a million dollars of insurance. Multiply that number times two, it would be 360, and then we would add the $50 back in.

So that would be $410. So the cost for a $2 million policy would be $410, and the cost for a $1 million policy would be $230. That's how insurance is priced. That's how it works. So when you get down to the very minimal numbers, $150, and you know you're going to have a built-in $50, $75, $100, $90 policy fee, and that's in every contract, there's no reason not to increase the amount of insurance to the point where the policy fee is a negligible amount of the premium.

That's another reason why I just assume we're starting at a million bucks. This other little tip I would say is I would always choose a higher amount of insurance in a shorter term if I had to. If I'm trying to figure out a budget, I'd rather have a $2 million – and you got to actually look at your situation, but in general, a good rule of thumb, have more insurance for a lesser amount of time so that you have more coverage in the beginning in case something happens then.

That's just a little thing that I lean towards as well. All right. Last question. Who wants to go next? Hi, Joshua. Is it okay if I go? Go for it. I'm sorry, Brandon. Thank you again, Joshua, for everything. I just wanted to say I love your podcast. I have a question.

Basically, my wife, at her work, she's been contributing about $15,000 a year in our fourth review. Lately, I've been looking at our overall finances and I'm wondering if you could share with us what you're looking at right now. I'm looking at our overall finances and it just seems like the way we have it right now, we have about $450,000 in our combined retirement account.

Some of that is Roth. Some of that is traditional IRA. Then we also have almost $100,000 in cash. Whenever I run the numbers, it just seems like that just will be very excessive in our moderate payments that we're basically living off of. We live fairly frugally despite having three kids.

Probably our expenses are, without the mortgage, it's about $38,000 a year. It just seems like if I project out what we have already tied up in our retirement accounts, that it just, to keep squirreling away in there, just doesn't seem to make sense rather than we have other priorities like maybe buying an investment house to basically diversify a bit there or rather than putting 529 accounts that are just dedicated to our kids, having something more flexible and also maybe having some money as a dry cotter or just save for a potential business for me since I'm going to leave my work soon.

With all that in mind, my wife tried to basically stop contributing as much into her fourth rebate, but the investment advisor at her work, because she's at a nonprofit, he was kind of trying to talk her out of it and saying that he's never heard of anybody regretting putting too much into their 403B.

I don't think he's seen our finances yet, but I'm meeting with him tomorrow. I just want to know where he might be coming from. I just want to make sure my wife is comfortable with the whole conversation too. Even though I am, just your thoughts on that and what we need to consider and any other opinion on it.

Mad Fientist: Probably what would be the most helpful response is let me tell you what the job of most financial advisors is. This is where people get frustrated with the term "financial advisor." In general, so she's working at a 403B, what type of nonprofit institution is she working at?

David Keefer: She's a nurse, so she works at a hospital. I guess the banking advisors, they basically take care of the fund there. Mad Fientist: Okay. The type of conversation that most financial advisors have with people is really, really boring and it's primarily based around trying to encourage people to save money.

If you look at the statistics and look at the data, the majority of people simply don't save. They don't save much. They don't save much at all. We who are financial advisors, we've been trained to try to get people to save money and to try to get people to squirrel away as much as possible.

The entire industry lives and breathes that. Is it for nefarious purposes? Well, there's a little bit of self-interest in it. The advisor is getting paid probably in a position like that where they're working with the nurses in a 403B program. They're partly probably getting paid maybe some salary or some base compensation and then partly some type of performance-based compensation.

So there's a little bit of self-interest. Maybe that has an influence. I mean I've certainly been under that influence where you want people to fund your accounts. This is often a criticism of financial advisors. If you're managing money and you're getting paid based upon how much money is in the account, you want to manage as much money as possible.

I think that is a legitimate potential conflict of interest. But my guess is more than that. It's just simply that we feel like it's the right thing to do. It's basically the crusade. It's the gospel that we preach to say you've got to save money because most people don't.

So you've got an advisor who is spending all day every day meeting with people who are saving $5,000 into their accounts, who have account balances of $50,000 and they're accustomed to speaking to people in that circumstance. The type of family who is a young family with three children who has a half a million dollar net worth who's putting $15,000 per year into a 403B, you are in the top few percent of people in the United States in terms of wealth accumulation, assets, and financial planning.

So this is not a normal situation that that financial advisor is facing. The next thing that you've got to pay attention to is that most people who are advisors in that type of capacity are not financial planners. They are, well, depending on how cynical you want to be, we'll just say they're financial advisors, they're account advisors.

You could perhaps be so cynical as to say they're commissioned salespeople. That certainly can be the case. Most of the people I've met personally, they're not bad people. They're not trying to do anything nefarious. It's just the job that they've taken. So you're not dealing with someone as a representative of an account like that.

You're not dealing with somebody who is a comprehensive financial planner who specializes in going out and helping people build out their whole financial plan. Most people who are financial advisors, who are with various firms, who are even, well, if they at least have a CFP certification, they probably can do a financial plan because they're required to do one to do that.

But most people whose business card says financial advisor, they can't run a financial calculator. They can't build a plan. So you can ask them some questions, but I guess all that we would say would be that your best way to work with somebody in that capacity is not to ask financial planning questions but to ask specific plan-related questions.

They'll be an expert at answering, "Here are the investment options that we feature in this plan." They'll be an expert at sharing with you what the fees are in the plan or how the accounts work or the different options or the matching. Those are the type of questions that that type of financial advisor can work with.

So they really have never heard of anybody putting too much money into retirement because – I've never heard of anybody putting too much money into retirement really because we're not – the modern, I guess, financial independence culture that we're developing is not – this is not mainstream financial thought.

So all that to say, I guess my answer to it is I wouldn't expect too much from that type of financial advisor. I've given presentations to rooms of financial advisors. I'll give the best example. In this little niche that I'm a part of, an 800-pound gorilla website like Mr.

Money Mustache is very well known. I gave a presentation about savings rates to a room full of financial advisors, seasoned, experienced financial advisors, and I put Money Mustache's website up on the screen and I asked how many of them knew of it. Almost nobody had heard of it. I think there was one person in the room who had heard of it.

So you've got to recognize there's a major disconnect in conversation between mainstream financial advice versus this niche, early retirement, aggressive savings, financial independence, people taking control of their lives and control of their financial futures, and they speak different languages. That's why I'm here to try to translate the two over.

You want to ask a more specific question than that or is that, I guess, a place to start? No, that's a good place to start. I guess I'm coming from it too is that I think I've heard you talk about when you started your business, you had kind of – it was kind of hard to get some of that liquid capital and I perceive myself being in that situation maybe in a year or two.

And so I think that's part of it. So I don't know if you wanted to speak to that or I don't remember if that was specifically with your down payment of your house only or whether that was also your retirement account that you were referring to or I don't know if you could speak to that.

Sure. In hindsight, knowing what I now know, if I were to do it all over again, for me, and I'm emphasizing the for me because I have an entrepreneurial bent, because I know what I want because I'm moving in that direction, I probably would never have even contributed to tax-deferred accounts in the first place.

I always contributed to Roth IRAs. I did have some pension plans but I always contributed to Roth IRAs. I didn't spend a long time in the corporate environment where I was contributing to a 401(k). And so would I have still funded the Roth IRAs? Maybe. But I guess in hindsight, I would have put a lot less money behind bars and I would have kept a lot more where I could touch it and where I could use it.

So that's my answer. Now for you, I'll tell you, if you are planning on leaving a job, if you are planning on building up a side business or something like that, I don't believe you'll regret having cash available. There's no reason to go crazy and start cashing out retirement accounts.

I'm not there. A lot of people are. I'm not there. But I do think that you'll find the capital much more useful when it's sitting in a bank account and you have access to it. It'll bring you more safety in your business. It'll bring you more cushion. It'll bring you more peace and it'll give you more options and more ideas.

And it was interesting in the patron, the regular Facebook group, there were several listeners who commented that after my sharing on last week's show about just the limitations of money and retirement accounts, that they had made similar choices. I try to speak very clearly and honestly and truthfully and transparently about what I believe and why and just leave things where they are.

I tell you, I even feel like it's hard because I go against the orthodox of most of the mainstream financial planning profession. But after seeing it at this point, I kind of feel like I was – I guess I was – I feel like I – I don't know if I was misled or what, but I just feel like the whole mainstream financial advice industry is not working well for most people.

Most people are not becoming wealthy. When I look at who is wealthy, it has nothing to do with the 401(k)s. And so I've made the steps and the decisions to walk away and to adjust things going forward. Check back in 10 years and I'll tell you how things are going.

But so far, they're going well and if you have a plan of starting a business, yes. Diminish things at least just down to the match. I'd take the matching dollars probably if they still offer the match. Diminish things down. Do pay attention to your tax planning. Run your tax brackets.

I don't want to be foolish. I want to run some numbers. If you're in a situation where you have too high incomes and you can shelter some of the money there temporarily over the next couple of years, you need to take those things into account because you can save at your highest marginal tax bracket.

If you're going to go to a low income situation in the future, so do some good planning. But roundabout way of saying, I'm not too worried about diminishing retirement contributions. Let's run a quick math just to see. Ballpark, how old are you guys? 37. Okay. So let's just say, is the money that's in the 401(k) and retirement accounts, is that money generally intended for traditional retirement age opportunities?

Yeah, I think so. I think because she's going to get a pension basically. She has basically, you could consider her pension vested at like 7,000 right now. She loves her job, so she's going to continue working for another, I don't know, it could be another 20 years. And then if she does that, then she gets 20% of her salary.

So she could get like $23,000 a year from that if that continues, which seems likely to me, but you never know. So the only thing guaranteed is I think we have about 7,000, well, it's not guaranteed, but 7,000 that she's vested in her pension. And if I quit my job today, I think I've run the calculation on Social Security that I would get in about 11,000 a year.

And her, maybe about the same, but if she quit, but she's probably going to continue working, so probably closer to 30. And so that by itself could pay for our living expenses in retirement. So it's kind of a fail-safe to even have the retirement account as it is now.

But yeah, so I don't know if that answered your question. So let's punch this into a calculator, $450,000 present value. Let's just say 25 years, that would take you up to 62. So $450,000 present value, 25 years. Let's say you get, let's go with the, what rate of return would you feel comfortable using on this projection?

I don't know, kind of a 5.9, I guess, you know, around there. So let's use a 6% annual rate of return, net of taxes, net of fees. That's $1.9 million would be the projected value of that account at 62. So you can project that and you can say, do I feel that that would be adequate given my other sources?

Do I feel that that would be adequate where I'm not taking a huge risk by going ahead and diverting my attention elsewhere? I mean a $2 million account under relatively conservative assumptions there, $2 million account is nothing to sneeze at. So you'll have to take it beyond that with your own individual personal financial planning.

It's more than I can do on the call here. But I would look at that and I would say 37 years old, half a million bucks. If you've got some other uses for the money, I say go for it. That would be how I would handle it. All right, next question.

Hi. Hey, Joshua. It's Brandon. Let's go with Brandon. Let's, yeah, Brandon, you go first and then the other one. Okay. I just have a quick question. Going back to real estate a little bit, in your experience in going to that Schwab conference, what are the general terms that you get with someone when you're doing like a private financing deal?

Like you're going to finance a house that you're going to buy or vice versa. What sort of terms do you see with that? You mean specific numbers or dollar amounts? Yeah, like, yeah, specific like rates of interest and specific time limit. Do you see like people doing 30 year loans or 10 year loans?

I don't know what the industry average is. What would be a good starting point to negotiate? I can't answer the generalized question. One thing that Schwab makes a point of, and he has replaced this rule, but in the past talked about don't pay anything more than 10% interest rate.

And so the only place that you could get a real general answer to that question would be if you were working with somebody like a professional hard money lender. And I think like here in my local area, I got a friend of mine who is lending money out right now in that capacity.

I think he said he's lending money at 12% right now. So that tend to – I would guess if you were to do a survey of hard money lenders there in your area, you're probably in that 9, 10, 11, 12% range is what they're looking for to lend you money under those terms.

My guess would be that if Schwab were answering that question, he would – the answer would not be to focus on the general number, but it would be to put together the deal that works. So what he makes a point of and I think is good is you find the solution – you find what somebody wants and needs and you put together a deal that works.

So let's say that we were talking – he gave a few examples that he's done. But let's say that you have somebody who's working as a dentist or a doctor or some other high-income profession and you go to them with a deal and they would like to buy real estate but they don't have the time to buy real estate.

They're busy. They don't have the time to be out knocking on doors. So you can go to somebody like that and you can write up a partnership agreement if you find the deal and you find the property and they may fund the whole thing and you just simply split the profits on the back end.

You don't have to pay any stated interest rate currently. Or there would be a number of different ways to put a deal together. So I think the better answer to the question rather than focusing on general terms is to say, "What is the interest that somebody has? Does somebody need current income?" If you have somebody like a hard money lender, they're usually focused on the current return from that asset and they're going to be looking for a current rate of return, a current income.

But if you can finance it with somebody who doesn't necessarily need that current income, you can maybe work out a different type of deal. So I could go to people here in my area and if I wanted to put together deals and have people use their 401(k) money to invest in my real estate company and I could put together some contracts that to them, they would lend me money and let's say I offer – if I were to go out today and offer a guaranteed seven, six or seven percent rate of return to somebody for money in their 401(k), current income payment secured by local real estate, there would be a lot of people who after the frustrations of a volatile stock market, there would be a lot of people who would take that deal.

So I would say it's more a matter of looking as with any negotiation, trying to figure out what are the interests of the other person and how can I put together a deal that's going to solve their interests in a way that's best for all of us, not about what are the exact terms.

Right. So maybe I was confused. So if I wanted to buy a house as a rental that someone's selling, instead of going to the person that's selling the house and kind of coming up with a deal with them and saying, "Hey, I'll give you 10 percent down if you'll finance the rest on these terms," you're actually using someone else's money like portfolio as a middleman in that process.

Is that what you're saying? There would be a number of different ways and probably what would be the best is maybe I should get Shah back on and maybe collect some real estate questions and talk him through. But it's all going to depend on the individual scenario. What you're looking for when you're looking for owner financing is usually trying to solve somebody's problem for them.

And so many times what you're looking for is a house that's empty but that has debt on it would be ideal. And what you're trying to do is to take the house off of their hands and maybe just assume their mortgage. That would be one scenario that can work really well.

Now some mortgages have a clause in them that they're not assumable, but even though that's the case, at least Shah taught in the class and we talked about, practically you can still do it even knowing that that's a risk because practically the banks are not going to cause any problems.

So if you have a seller who is just underwater and they need some relief on their payments, then you can take over the house subject to their existing loans. So it's not about all doing it with investors. It's a matter of finding a situation where you can solve somebody's problem based upon whatever debt is on the house.

Probably – go ahead. Well, I guess from a seller's point of view, I own two properties and just thinking about it for our own personal situation, it makes sense that we're ever going to sell either of those properties as long as we don't need the capital for any other business venture to own or finance it to whoever buys it and collect the payment plus the interest for the next 20 or 30 years.

Does that make sense? Exactly. And that's one of the primary areas that John Schaub encouraged the students to look for is if you're looking for a property, one great place for you to find houses is to buy them from a retiring investor. And the retiring investor, that deal will work exactly.

I know a couple of local real estate investors here in my area, mid-60s, same type of thing. They're wanting to slow down and pull back and they just want to get rid of some of their properties and they are very comfortable selling their properties on terms to you or to me.

They would be very comfortable doing that because they know if something happens, they can just go ahead and either renegotiate the deal or take the house back. It solves a problem for them. It gives them income for retirement. It solves a problem for me. It's a win-win across the board.

Yeah, and it takes their liability away from having to do maintenance on the house. They essentially get to keep renting it for a certain amount of time for a certain profit. Exactly. Okay, thanks. My other question was, what are your plans with the Patreon campaign? Are you ready to disclose that yet?

Yeah, I'll go ahead and I'll just talk about it here. I've been struggling with it. This show is going out on Friday. I've only released two shows this week and it's been a difficult last couple of weeks for me to try to figure out what's the next step? How do I take things forward with radical personal finance?

Things have worked well, but I've reached the limits of my capacity and I've got to build the organization behind me, but knowing how to do that is a challenge in this space. I really want to build more value in the Patreon campaign, but what I've discovered is that even just basically managing additional things, I keep dropping the ball as far as managing the things that I want to manage.

The only thing I've successfully been able to continually do is keep the shows coming out, but what's happened is I haven't been able to build the time behind the scenes for me to build the other products and services. What I intend to do for the Patreon campaign is I think I'm going to lower the prices for – the feedback that I've gotten is the most valuable thing that people really appreciate is the Facebook group.

There's just an awesome community of men and women there in the Facebook group answering questions, interacting with each other. I think it would be beneficial to have more people there, and so I think I'm going to lower the price of that level. I'm removing the top tier mastermind option because – well, I'm removing that top tier and I'm probably going to lower down the $25 level.

What I haven't figured out how to do is what bonus or benefit to offer to people above – if I lower the price on the Facebook group, I haven't figured out what bonus or benefit to offer people at a higher level that I can deliver on. That's why I haven't quite made the changes on the website.

I'm about ready to do it, but that's what I'm thinking. I've struggled with regard to the advertising. Advertising has helped me to bring in more income, but I just don't really like doing it and I don't – I try to do a good job with the ads and I've chosen the advertisers very carefully.

They've all been companies and services that I really feel are very valuable for people, but at the end of the day, my best profit potential is for me to create more products or courses that are carefully – very, very rich with content and concise. That's what I need to spend my time doing.

I'm going to pull back on the frequency of the shows a little bit so that I can create more products and courses. I'm going to try to get more energy behind the Patreon campaign somehow, especially with the Facebook group. I think these calls are going to – my hope is that these calls will help people to participate.

I intend to offer these only for patrons. Right now, I've opened it up to all patrons, but I think I'm going to open it up to $5 and $10 patrons just to ask questions on these Q&A calls. Then I'm going to pull back a little bit on the amount of content that I'm creating on the podcast so that I can do more – so I can get some products and some things to sell because that's where my highest profit margins are going to come from and I need to help the show be more profitable so I can expand and hire the help that I need to manage more and more of the things behind the scenes.

I wasn't really quite prepared to answer the question, but hey, that is where it is off the cuff as of 2 p.m. on February the 11th. That's where I'm at. All right. Let's go on. Next question. Hi. I'm going to stick with real estate on this question. I currently have six houses and they're all in my name.

I was curious what you're going to do with your properties, if you're going to put them in an LLC or in a corporation or keep them in your name? I'm not qualified to answer the question professionally. Again, it's interesting how much interest there's been in real estate and I'm a total novice on this area.

In the beginning, I will keep them all in my name because I think there are some benefits to that and I think the risk of doing that is generally overstated. For the initial deals, as I learn how to put together the deals here in my area, I will put them in my name.

As I grow and as my portfolio becomes larger, then I will start to establish some different entities. Also, depending on the deal, it's possible that I'll put something into a qualified account of some kind. I don't mind owning some real estate inside a Roth IRA if I do that appropriately.

It's also possible that if I do some deals with investors that we would put those into an entity of some kind. My best opinion is that there are advantages and disadvantages to every structure. The advantage and disadvantage is going to change depending on where you go. The best example I could give that I am actually knowledgeable about would be with regard to business entity selection.

I run Radical Personal Finance currently as a sole proprietorship and I do it intentionally because I get a lot of benefits from a sole proprietorship that I wouldn't get if I put it into an LLC or into an S corporation. A lot of times people say, "Well, you should always just put a business into an S corporation." There are advantages but there are also disadvantages to an S corporation.

If I built Radical Personal Finance first as a sole proprietorship, I will transition it very soon into a business entity. When I do that, I'll lose one set of advantages but gain another set of advantages. I believe it's the same with real estate. Each thing that you do has benefits and each thing that you do has disadvantages and restrictions.

Is that helpful? Sure. Good luck in your purchases. I think, and this is for me, just the ease of buying and selling when you're trying to close quickly and just write a check. At this point, I don't want to get involved with establishing an entity in the initial stages, but I think it makes sense down the road.

Best I got. Mine's a little tricky because I have six houses but they're in three different states. If I did LLCs, I think I'd have to have one in each state. That's a specialty area where I have no idea how that works beyond me at this point. All right, next question.

I'll take one more question here on today's call. I want to go, Mohamed, are you still on the show? You wanted to ask a question. Yeah, I would love to ask a question. My question is, is it worthwhile for me to pick up any extra shifts for extra income?

My background is I'm 37. I have no student loans. I paid those all off. I have a small condo that I paid off. I'm planning to be financially independent in about three years. What would you be giving up by picking up extra shifts? Free time, whatever it is that I do with my free time, either go to the gym or hang out at a coffee shop, library, bookstore.

I don't have a family, so I'm single. Pretty much just be social time or relaxing time. Would you feel greatly hindered or hurt or feel like you've given up something very important if you were to have less free time in exchange for more money? Probably not. I mean, I think I could shuffle things around a little bit, try to have a better regimen to prep food on time and have a little bit more time early in the day maybe to go to the gym.

I guess for me, the question of once you reach a certain point, what you're always trying to figure out is what is the opportunity cost of this decision? What am I giving up by doing this? So if there's something that were very important to you, and I'll just give my example.

We're in different situations. But for me, if I were working a lot of hours as a physician, I'm away from the home, and now I'm going to say I'm going to pick up extra shifts, if that took me away from something that were very important, time with my kids, being able to put them in bed, well, I would be slow to pay that cost because at this stage of my life, those things are more important to me.

If you're just comparing it, however, to free time, I don't personally – me personally, I don't take or create a lot of free time. Most of my time is pretty given to things. So if it's just, "Well, I'm going to sit around or do something that's not so important to me," then I don't see any reason not to put the work in.

It could help you potentially to get closer to financial independence in – maybe it's there in two years. And then what are you going to do at that point in time? So if there's something really compelling and you can shorten out the process to two years – I like to work hard and work hard in shifts.

It works well for my personality. I can really pour myself into something for a short period of time. So you obviously have to be careful to avoid burning yourself out. Pay attention to your health. Pay attention to how you're feeling and those things. But as long as you value the money more than what you value what you're giving up, I don't see any reason not to, but that's a very subjective decision.

Any more comments? Is that helpful, Mohamed? Yeah, that's actually pretty helpful. Thank you. Opportunity cost is the greatest undiscussed – it's the biggest undiscussed thing that we have in our – we don't consider it. And so we need to constantly be thinking about opportunity cost. What am I giving up?

And that opportunity cost will change at different points in time. And so it's okay for one phase to say I'm working right now. I'm working like crazy and this is important to me. And it's okay at another phase to say I'm not ready to work at this point in time.

There's no external scorecard. It's got to be based upon our own internal values. And I find that challenging a lot of times because I look at other people who do more than I do or who make more money than I do or who have other things and I often find it easy to compare myself to other people.

I have to constantly remind myself, "Joshua, they share different values. They have a different vision for their life. They have different goals. Stay focused on your values and your goals." So if we consider that, I think we can make better choices. Thank you all for calling in on the call today.

I hope that these answers have been useful and I hope that you'll check back next week and we'll do this call again next week. I really enjoy interacting with you guys. I just want to say, however, I do my best to give you an answer, but don't take what I have to say as gospel truth.

You got to take it and test it, weigh it out, research it. If you found any area in which I've been wrong today or I've said something that wasn't correct, I'm happy to learn about that. Feel free to come by the blog post for today's show and let me know.

And if any of you listeners to this show have feedback or comments that you think will be helpful for any of these questions, please make sure to come by the blog post for today's show. Share that information on the blog post so that the question can be more fully answered.

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