It's Friday here at Radical Personal Finance. That means Q&A. Welcome to the Radical Personal Finance podcast. This is the show dedicated to helping you live a rich life now while also building a plan for financial freedom in 10 years or less. My name is Joshua Sheets and I am your host on Fridays here at Radical Personal Finance.

Try to do it every week, although last week I was out of town. But generally we try to do a Friday show here and we do a live Q&A. That's where you call in, ask questions, and I do my best to come up with some kind of useful answer for you.

Today you sit back, relax and see if you learn something. I enjoy doing these shows because they're often current and they're social. I'm an introvert by nature. I get recharged by being by myself. The best way for me to build my energy and recharge is just simply to sit back and read a book.

That's one of the most important things that I can do to recharge. But I do often get lonely just being on this side of the microphone. That's why I love your feedback. By the way, you can always email me, joshua@radicalpersonalfinance.com. So if you're going to make a comment, I actually prefer you do it on the show.

That way my email box gets so overwhelmed. But anyway, thank you for those of you who email me. And then also this is a really cool Q&A call where I can speak with members of the audience live and in real time. If you would like to join this show on a future basis to ask a question, this is your most consistent way to be actually able to get an answer from me on something particular to your situation.

All the details of this program can be found at radicalpersonalfinance.com/patron. I don't have a call screen or I don't have a 1-800 number that you can just call into. What it is, this is an intimate group at the moment. And so if you're a patron of the show, you have access to this conference call.

Details of that can be found at radicalpersonalfinance.com/patron. Right now I've got three callers on the line with a total of four different questions. We're going to talk about, let's see, due diligence on buying a house, the number of credit cards to have. We're going to talk about the new iPhone and what would be the best way to purchase an iPhone.

And we're going to talk about defined benefit plans. I'll tell you what, let's start. Erica, you're up first. Tell me the question that you have about potentially buying a new iPhone. Oh, thanks, Joshua. I am still on my old iPhone 5S, which is getting towards the end of its life.

So I've been doing some due diligence looking around. I'm definitely in the Apple silo, so I'm a fan girl and I'll be staying in an Apple. My biggest question was trying to figure out what to do. I had looked at things previously and decided that in the sixes, I would be a success plus and I wanted 128 gigabytes, but didn't want to pay that much.

The great thing about the announcement yesterday is now the seven, the sevens obviously take a step up, but with the memory increase, I can get that 128 at a price point I like a lot better. So I've pretty much narrowed myself in on a seven plus with 128 gigs.

But my question is just sort of to look at the different ways to pay for it and figure out if there is really a free roll there or if there's some risks that I'm not seeing on the financing side. I'm either looking at paying the 186, sorry, 169 upfront, no sales tax here in New Hampshire with the 129 in Apple Care or doing the Apple iPhone upgrade program with that, with what I want, it's 4150 a month.

And after 12 months, as long as it's still in good shape, I can just switch it in. The rest of that balance is fine as long as I take the next phone the same way or I can hold on to it. And with the Apple Care, the fact that if it's still not in good condition, it doesn't seem to be as much of a worry because I figure after either two screens or two repairs, I'll get myself another life proof case if that's the case.

And to me, it looks like a great opportunity to do this. I don't like that I'm going to have another hit on my credit report of having another active account, but I'm pretty much stuck in the high 700s anyways. I'm not sure I'm getting out of there. So it probably shouldn't be too much of a concern.

So I just like any insight you have. - Super fun. It's a great question. It's a very practical question. You're an Apple fan, girl. Let me back up and just give a little bit of preamble. These are my thoughts, my opinions just for other people who are facing this constant question of phones.

And then I'll tell you what I've done because I have an iPhone and I'll tell you what I've did as far as the purchasing model and methodology of it. So I think the biggest financial mistake, speaking purely from a frugality and finance perspective, is to choose iOS over Android.

Now there are reasons to do it. I've chosen iOS over Android and I'll tell why in a moment. But for just the average person, you can get so much of a better, cheaper phone if you're not locked in to the Apple ecosystem. The phones are cheaper. Little things like replacing the batteries.

Apple, you have to go to a service place and have the battery replaced by a service person. Android, you can buy an extra battery and do it yourself. All the little things are just so much cheaper in the Android marketplace than they are in the Apple marketplace. So you're going to pay a premium of a few hundred dollars to hang out in the iOS marketplace.

So I generally would steer most people, especially if they're technologically savvy, into the Android world. It's really, really good, especially for people who are just going to do normal stuff like talk, text, surf the web, browse on Facebook, take some videos and some pictures. You're going to save a few hundred bucks.

And the phones that we have today that are cheap are so much better than the best phones on the market were a couple of years ago. So there are some reasons, I think, to go and consider the world of Apple. If somebody has a pre-existing commitment, I think the most compelling thing is the great integration for those people who are Mac users.

If you do your computing on a Mac, you have an iPad, having everything just put across the same system is really, really compelling. I use a Windows PC because I'm just not willing to spend the money on a Mac at the moment, although who knows, it's possible that I'll do it in the future.

But one of the things that I miss very much that, as I understand it, Mac users have the ability to do is to do all their texting on their computer. And for years, I maintained my cell phone through a Google Voice number so that I could do all of my texting through the computer instead of over the phone.

Now, that's changing with the integration of phone systems onto the computer. More and more systems are allowing you to do that. And also, as we go away from hardware to software solutions, that's more and more doable. So for example, many people these days are on Facebook. Well, Facebook, you can do your texting equivalent right on the computer.

You can also do your calling through Facebook right from your mobile device. So there are all kinds of ways to hack it today. It's just getting easier and easier and easier. But I always found that to be a useful thing. And it's one thing I wish I still had today was the ability to do texting over the computer.

So if you're in the Apple ecosystem, that's really compelling. If you have some particular reason why Apple products are the best, and that's what I have. So if you're an artist and you want to use the Apple Pencil and do all of your sketches on the Apple iPad or some other similar thing, then the Apple is good.

And if you are at the leader, usually you'll get the best software up front because the early adopters are usually Apple. The reason I chose to switch back after being on Android for a while was for audio production. So Apple, coming from the music background, has a better built-in system for things like audio.

And they have the ability to come in with a direct digital signal right into the lightning port with various microphones and different options. So I use my phone. And when I travel, if I'm going to go to a conference or go and record an interview somewhere, then I can just do that directly into the phone.

And I can do it with a digital signal. I don't have to deal with the 3.5 millimeter headphone jack. I can do it with a digital signal right off of the microphone. And I can do it with a digital signal right off of the microphones into the actual Apple device.

And it's just a higher quality output. It's also valuable for me to be able to use the Apple M4A system when I'm exporting from when I record on a show. So in the future, as I travel, I tend to produce episodes of Radical Personal Finance while on the road and then export and upload them directly from my phone.

I've done that while on the road in the past. And so just having that all in the Apple system makes that work a little bit better. But I definitely caution people, if you want to stay on the cheapest side of things and save money, it's really hard to be frugal with Apple devices.

I have found that. The most frustrating thing to me about frugality with Apple devices is for whatever reason, I'm not an Apple junkie, but all of my devices seem to be obsolete in a very short period of time. They just seem unusable. And I don't know why that is, but I have an iPad 2 that's unusable.

But the only thing that works on it is Kindle. It's so horrifyingly slow. I have sitting here on my desk in front of me, I have a couple of iPhone 4s. And what happens is that as the new software packages come out, both of these phones have been stripped off.

I don't even use one of them. It's just sitting here as a backup in case I ever need it. The other one I actually use to run my sound effects into the show from. I have nothing on them. They're completely stripped off. They were wiped and reset. But still, with the changes and the upgrades to the software system, they're unusable as devices because they are so slow.

So I don't know why Apple does it, but it's really hard for me to... And why they don't fix that? Why I can't just have a stripped off phone that's as fast as it used to be? Who knows? Maybe there's a technical reason why they can't. But I find that frustrating and annoying because at this point, sadly, computerized devices just seem to be recycled.

You just have to upgrade them every few years. And so if I weren't operating my business through my phone, I would just have not a cheap, cheap Android, but a middle to cheap Android, and I would just upgrade it every couple of years. So background on the phone side.

Now, as to actually buying it, you've made up your mind, Erica. And as far as you want an iPhone, you've chosen the model that you're going to get, et cetera. So as far as that, in the decisions, Apple, you need the higher memory generally if you're going to use the device, and their memory is incredibly overpriced.

And so because the memory is not expandable, meaning that you can't put a micro SD card in the side of the device and have multiple micro SD cards, you've got to pay for more memory. And so it's definitely an extra expense. But I have always found it to be an important thing to do with the two iPhones that I've owned, the one I currently have, which is 6S Plus, and then the past one, the 4, I've always bought the largest one.

Because if I'm going to buy an expensive thing like that, I need to have the memory. And since it's not expandable, you've got to kind of go for it up front. And I don't see the point of having a tool or a toy that you don't actually have set up the way that you want it to be.

One of my just little tips that I think, if you're going to buy something, make sure that you save enough money and plan ahead for the accessories that you're going to buy for it. Simple example for me with a phone. It's not just the price of the phone, but I'm not going to buy a phone and then not go ahead, buy a case, buy charging cables.

What I do is the phone's got to be charged. It's generally for most of us, our most important tool. So I have a charging cable on my desk, a charging cable by my bed. I go ahead and buy the long six foot one so you don't have to deal with a stupid three foot cord.

I have charging cables in all of my cars. And then I have a travel kit set aside that has its own charging cables in it. So I've got six cables and USB adapters and everything like that set up so that I don't ever have to worry about pulling one from here and pulling one from there.

I don't forget them. It just makes life simple. And so I think you should budget ahead and it'll make your life better and it'll cost you 30 bucks in advance for USB cords and all of that. But it's just one of those little things where you can buy a lot of ease with it.

So buying the higher model, the higher memory is generally what I've done. I can't find a reason. That was a long preamble, not to your question, Erica, but just for the benefit of the listening audience. But I can't find a reason not to just simply buy directly from Apple anymore.

When I was sorting it out, and I've done it twice, I did it a year ago for my phone and then just a couple months ago for my wife's phone. And I sorted through all the different payment options from all the different carriers, etc. And I sorted it through for Apple.

And I came to this conclusion. Yes, if you're willing to buy used, you can go ahead and buy used and you get a little bit of a discount there. But if you're going to buy new, I could never come. I couldn't come up with a reason to choose anything except the Apple program because you can't get basically you can't get a discount on the devices.

And when I went through and looked at the different carriers and looked at their contract prices and calculated the line fees and etc. It just seemed to me so much simpler to just simply buy the device from Apple. The device is unlocked from the beginning. Your carrier agnostic. You can change to any carrier anywhere in the world at any time.

And Apple has a perfectly reasonable program. And the Apple iPhone upgrade program, it's a very simple program. What they do is they take the price of the phone, the retail price of the phone, which is very expensive. We've established that, but now we've decided we want to get one.

They take the retail price of the phone. They take that cost. They add to it the $129 AppleCare package. And AppleCare is their basically tech support where they cover you for two years with a lot of tech support issues. They'll help you fix it. If something goes wrong, they'll help you.

If you crack a screen, they'll help you with those things. So they take the retail price of the phone. They add $129 and they divide that amount by 24 months. And then you pay a monthly payment of 24 months plus tax on the total cost. So you pay the tax up front.

So if the cost is $700, what you said, so they take $700. You add to that the $129 and then divide that by 24 and did it wrong? 700. It actually is a higher price on that at $869 so it's $4,150. Okay, perfect. So $869 plus $129 divided by 24 comes out to $4,158.

So you're paying just a flat, you don't pay any interest charges. The interest is baked into the retail price of the phone. So you're just getting a flat 0% interest rate loan from them and the interest is baked into the price of the phone. And then just pay in the first payment, you pay the sales tax up front as I remember.

I couldn't find a reason not to just go with that because then you have the option after the way it works is after I think it's 12 payments. If you want to upgrade because they come out with their fancy new iPhone 7 and if there's some, for some reason you've got to do that or because it's beneficial to you to do that in some way, then after one year of payments, you take the device in.

You've got basically a guaranteed floor on it. 50% of the value is what you're going to get. It's going to depreciate 50% in the first year and they'll basically give you 50% of the upfront cost without Apple care and then you start a new plan. So the way I've looked at it is none of this is cheap and none of it is, none of it's cheap and it's not good for people who are trying to be frugal and trying to build things to be out upgrading an iPhone every year.

It's totally destructive. But if you can make it pay off, I mean I use mine a ton. I can do my entire business on it and at this point with running a virtual digital business, I have found it to be extremely important and so I'm willing in the grand scale of everything else that I'm doing, I'm willing to spend the money on it at this point.

But that's been my story and I just went with the Apple upgrade program. I couldn't find a reason or a reason not to. Thank you, Joshua. That's incredibly helpful. A lot of what ties me into the ecosystem is both my last computer and went back to the PC world and updating hardware and software separately made me want to throw it against the wall.

And also some of the tools within Mac, I do OmniFocus which I can do on my phone. I do FileMaker Pro which I will be able to do a little bit better from the phone. So there is that benefit there. Absolutely. So thank you for running through your view on the upgrade and thank you for upselling me to the 256 gigabytes because that's, it's a difference of $4.25 a month.

Right, right. And look at it this way. So the problem, sorry, to interrupt you, the problem with upgrading technology is every time they upgrade technology, they're upgrading capability as well. So 256 gigabytes, if you went back five years, you would never fill up 256 gigabytes. But if you were going to take 4K video, all of a sudden if you start taking 4K video, you're going to use that up much more quickly.

So let me give you an example, the reason I went with large memory. Simple example. If you have a phone, I recommend and I should do a show or like a video on this at some point, get some accessories that are going to make it more useful for other things.

So the cameras on the phones are so great. The phone is the least important aspect of it anymore. The point is that you have a camera that is accessible to you and it's a very expensive camera, but it does work really, really well. And so I have for my phone, I have an inexpensive monopod and I have a little clip that goes on, a little grabby clip that goes to the top of the monopod that into which my phone goes.

And then I use one of my external microphones. For any of you gear nerds, you can, the best one is to use an Audio Technica ATR 2100 or Audio Technica AT 2005. I'll repeat it again if you're writing it, Audio Technica ATR 2100 or AT 2005. Those are usually the 2005 is a little bit cheaper, but it's this cheap basically 50 to $70 microphone and it'll send out a digital signal right off the bottom of it into, and you can put the digital signal right into the lightning port on the bottom of your phone.

So with that, although I haven't done it much and published the videos, I'm not going to do it. With that, I can go out to something like a protest or a political event or a meeting or anything like that. And I have the phone on a monopod. I can set the monopod down, carry it.

It's very, very flexible. And then I have the microphone with a USB cord on it with a long USB cord. And I can use that for a kind of man on the street or reporter type interviews. So if I need someone else to hold the phone or I can actually do it myself and I can get really high quality video and really high quality audio right into the phone.

And for someone like a mobile reporter, and this is what I want everyone in my audience to have that equipment so that when a protest is going on around you or when there's a riot or when there's a political event or when there's some kind of something being done, you grab your phone and your little mobile reporter kit and you take your expensive phone that you have plus $100 of accessories and now you can get really high quality video.

And so now when I want to know what's going on with the Black Lives Matter protest, I don't tune in. I don't want to see the local CBS News report. I mean, that's great, but I'd much rather go on YouTube and see an independent journalist who's gone out and said and interviewed people at Black Lives Matter and edited the video together on their phone and talked about what they saw.

And you can do that all on your phone and you can publish a report that day. So something like that is where you actually get the benefit of the phone just with a little bit of extra. But you need 256 gigs if you're going to go out and get 4K video and go ahead and use those types of capabilities.

Thank you so much, Joshua. You're right. And I hadn't even realized the benefit of just doing that on the street. Clearly, we've seen enough. I'm up in New Hampshire, so it's the home of cop block. So we've seen plenty of that, but I just hadn't seen myself behind the camera.

But you're right. With the right tools, if you're in the wrong place, you can spread that information or if it's the right place, too. Yeah, exactly. And I actually was out at a big campfire over Labor Day weekend just hoping to get some pictures and my camera was not up to it.

Although, fortunately, everybody else's were. I see the value of two little kids. So thank you so much for your insight. For sure. Hey, other tip while I'm on this mobile journalist thing, not related to finance. Well, it is. It could save you or somebody else some money with a major trial.

One app, every single one of you listening should have on your phone is you should download an app to your phone called Bamuser. B-A-M-B-U-S-E-R. Bamuser. And you should put that app right on the home screen of your phone. And that app is a live video streaming app where it's super, super simple.

But once you put it on there, go ahead and create an account and test it out. It'll take no more than a few minutes to do that. Free app, free test, free account. And what this does is if you're in a situation where video would be useful, anytime I see a police officer or police activity happening, I always stop.

I take out my phone and I film it. And I recommend all of you do the same thing. If you see something going on that's a skirmish or you're concerned about something, if you're in a safe situation and you can film it, go ahead and film it. You can do that using the native video recording application on your phone and that'll work fine.

But the problem is that the video is then stored on your phone. And it's possible in most, in 99.999% of situations, that won't be a problem because it's just stored on your phone and you can go ahead and upload it to the internet at a later time. But if you are in a contentious situation or if you have trouble, you want to get that video off of your phone as quickly as possible.

And you want to get it to an external location in case somebody comes by, confiscates your phone and tries to delete the video. So Bamboozler will stream automatically to their servers and they'll go ahead and post it online. And so what you can do is get out of the way.

But if you mentioned CopBlock, if you see police activity happening, go ahead, pull out your phone, launch Bamboozler and just film it. Stay back an appropriate distance. Make sure that you work with that, but film it. And that way you're creating an archived video to an external server that's not on your phone.

So if your phone is confiscated, if you're arrested, you won't have to worry about that video not existing. And then you can authorize it to locate all of the metadata as well. So it'll have the GPS, it'll know where it is. Sometimes they have apps that'll know the orientation of the phone.

They'll record the gyroscopic data of the phone, which in some court cases can be important. There are other more complicated apps, but every one of you should at least have Bamboozler on your phone and use it. It's very, very useful to society. All right, lecture over. Let's go on to Jim.

Jim, you got two questions. I don't care which one you start with, so you pick. Okay, great. Thanks, Josh. In a previous podcast, you mentioned all the homework and diligence you did in researching where to buy your home. As we're looking to buy here in Southern California, we found that there are many different cities and jurisdictions that all run together and you really can't tell the difference between them.

So we thought there might be advantages in buying one over the other due to certain city regulations, rules, and so forth. So if you don't mind, what kind of homework and documents did you review and look at when you considered buying in a similar area and there might be advantages to one city over another?

First, you know this, but I do feel compelled to say I would personally, I don't live in Southern California, I don't have my thumb on the real estate market, but as a far distant observer and reader of various reports, I would be concerned about buying in Southern California at the moment as we record this in September 2016.

Do your own research locally and make sure that you're doing everything you can to consider what's right in the local market and what's right in your situation. But I'm uncomfortable with some of the things I see currently. So let's skip that. I just did want to say that for you and for other people's benefit.

As far as the research, the most important thing I think is to start with the municipality. So at every layer of, so when you buy a house, you've got multiple layers of government and those multiple layers of government are going to dramatically affect your living circumstances. And I think the simplest thing is to start with that.

And you can either start on the small or start out to the big. So let's start with the big. You're buying in the United States. That's going to come with a bunch of advantages and it's going to come with some disadvantages. You consider those things. Next, you're buying in California.

That may come with some advantages. It also comes with some significant disadvantages. So you should, the biggest one would be calculating the impact of income taxation as compared to property taxation. So California, a very high income taxes. Some of your other taxes are much lower though than other places.

So you calculate that based upon where you want to live, based upon the things that you're trying to accomplish and other possible places to be. If you're going to be in certain business markets, well, the cost of housing comes with it. If you need to live in Hong Kong, you're going to pay a pretty penny for a tiny little apartment.

But there's also a ton of benefits that come from living in Hong Kong. You can also live in Thailand and you can get a much cheaper place to live. But if you need to work in big Asian banking, Thailand's probably not going to cut it. But if you're an online entrepreneur, Thailand will cut it.

So consider very carefully the larger jurisdictions and locations. Then you just drill down. So then you would have a city or a county and that's going to have certain restrictions. That's where your research is probably going to be the most impactful. Where I live, it was Palm Beach County restrictions that caused me a lot of grief with my purchase based upon some of the ways that I wanted to have my house be and the things that I wanted to do with it.

I wanted to have chickens. Well, I thought that I was buying in a place that was governed by Palm Beach County regulation, but my research had been incomplete in order to identify that yes, chickens were allowed, but I wasn't in the ex-urban tier as the Palm Beach County regulations say where chickens were permitted.

So I thought that I had read all the regulations right, but I was wrong. So you got to deal with the county. You also then have to deal with the city. Then if it drills down, you have to deal with the neighborhood. So there will be various neighborhood covenants, various homeowners associations or property owners associations or communities of some kind.

The key thing to remember is that you are not going to change the community. It's not going to happen. So before going in, before you buy in, you should look at all of those levels of regulations, read the laws and see if you're comfortable with it. For example, here in Florida where I live especially, this is a heavily, a community that's heavily overrun by property owners associations and homeowners associations.

And as a simple example, homeowners associations here in Florida under Florida law, I don't know about other states, but here in Florida law, your homeowners association has the legal right to foreclose on you if you do not pay your homeowners dues. And they can legally be very aggressive with foreclosure proceedings if you don't pay your property dues.

And they are generally very aggressive. Well, I learned this just through when years ago when I was right in college actually. I was Mr. Personal Finance Nerd. There was a friend of mine at work, the company I worked for that was having some trouble with foreclosure. They were current on their mortgage, but they weren't current with their homeowners association.

Their homeowners association was in the process of evicting them. I couldn't believe they had that right. And we're talking, they were being evicted over a couple of thousand dollars of unpaid association dues. And they were being very aggressive with the eviction. So I, me thinking, "Okay, Mr. Arrogant, I'm going to call them up and I'm going to tell them what's what." I call up and the attorney very matter-of-factly explained to me, "No, you're wrong.

The law's on our side. The homeowners association has this right. And if you don't pay us this amount of money by this date, you're out or your friend is out." So I learned that they had the law on their side. I've since learned that almost nobody knows that. But I personally would be very slow and I've said I would never buy a house in a homeowners association.

That's my intention. It's not a, who knows, I guess in theory that could be changed. But I would be very, very slow to buy in a homeowners association. And one of the reasons is I always like to think of the worst case scenario. And so if I am in a worst case scenario and if I can't pay my bills, then I don't want to be dealing with multiple people that could foreclose on my house and kick me out.

I'd rather just only deal with a mortgage company. And the mortgage company has to move much more slowly and there are more delay tactics and techniques that could be used with the mortgage company, with the homeowners association to stay in the property. So think about things like that. Investigate the government at every level.

Read the municipal codes. You can download those municipal codes online, most of them. And what I would do is in hindsight, I would call and speak with the authorities in the county, in the city, if you're governed also by a city, and in the homeowners association. And I would get from them a full listing of the laws and not just go by what I read online.

That was in hindsight where I made the mistake. I downloaded the couple thousand page document from the municipal codes and I looked through it and I thought I had understood it all, but I hadn't. And silly old me, if I had just started with the ten common infractions, I would have seen chickens.

I would have not bought the house or I would have not gotten the chickens, one of those. The other thing I think is to look for when you're doing it, look for any little wrinkles that you can find in differences between counties and cities. So if you look at where you want to live and you look to see is there something nearby that's a little bit different.

The example that I use from here in West Palm Beach is there's Palm Beach County and there's Martin County. And Palm Beach County and Martin County are contiguous counties. Martin County, however, has half the property tax rate of Palm Beach County. And there's a little corner of Martin County that comes down and touches Palm Beach County and it kind of digs into Palm Beach County.

Well, if you can find a good deal on a house and often the property values, if it's an efficient market, will reflect this. But if you can find a good deal on a house, you can basically be essentially in Palm Beach County, but you get half the property rates because you're actually just over the county line.

The house that I did own and then later sold, I was within the city of Palm Beach Gardens in terms of for all practical value, for all intents and purposes, I was in the city, but I was on a little finger of land that stuck into the city that was unincorporated Palm Beach County.

So I didn't have to pay the additional layer of city taxes and that saved me, I never calculated it fully, but I would guess maybe a thousand dollars a year. I never, that may not be accurate, but that saved me a thousand dollars a year. But I was in, I was for all practical purposes, I was in the city.

And you can do this with things like school districts. Most people look for the good school districts, but if you don't need the good school district, then you could do it within the bad school district. That certainly can impact your property values. But me, if I were going to move into a city, I would look for the best property in the worst school district because I wouldn't use the school, so I don't care about the school, but that's going to reflect the property value for me and for other people.

It comes with risks of resale value, et cetera. You've got to calculate, you've got to think that through. But look for any little thing that you can exploit that's going to fit your lifestyle. And there's some famous communities where this works. I mean, you've got the upper peninsula of Michigan is detached from Michigan, but it's governed by Michigan, but it's practically Canada.

Advantages and disadvantages there. You've got up in Washington, there's a little community that's on the very corner, I forget the name of it, but there's an island there that's United States territory, but you can't get at it without going through Canada. And so that leads to just a very different climate, a very, very safe place to live.

You can buy in a state where the state next to you, if you can live in a state that has no income tax, but you live next to the state that has no sales tax, then you just go across the border to buy everything in the state that has no sales tax and live in the state that has no income tax.

Things like that do exist. And so look for any opportunities that you see. And that's just where you ask around, look around, look at the maps, look at the things like that. And then all the normal stuff that real estate agents say and do of doing good due diligence on the actual property, doing good records, making sure your title insurance, I mean, that's all normal standard stuff.

But those are the ideas I have. You have additional ideas to that, Jim? Is any of that helpful? That's exactly, those exploitations were exactly what we're looking at. And those, so exactly like you said, borders, living on one side of a border and taking advantage of things on the other side are exactly what we're looking to exploit.

So you recommend basically municipal codes are the things that you looked at to find a lot of little chickens instances and such. Right. Yeah, that's what I found. I mean, if you want to build an earthship, you're not going to do that in downtown San Francisco. So if you need an earthship, you got to buy land out in the Nevada desert.

So depending, I say first start with your ideal lifestyle. If you want to live in a small walkable town in a traditional stick built house, that's going to be one thing. If you want to build an off-grid house out of a container, that's going to be something else. And there's shades in between.

If you want a front yard garden, if you want different things, you've got to just think about the lifestyle that you want. And if possible, before you buy, go ahead and establish that. Nothing wrong. I have no problem with people who want to live in a covenanted neighborhood where everything is going to be held to this certain standard and they live in kind of perfectville.

That's not for me. But if you want to live in perfectville, you got to make sure that the laws are going to be tight enough that a redneck neighbor doesn't move in and destroy the place. Exactly. Exactly. So second question, if you don't mind. Currently, we have a checking accounts with debit cards and we have only one credit card account.

We have great credit rating, zero debt. Credit limit on the credit card is $22,000. And I have easy, quick, and simple access to over six figures in cash. You've spoken about the need for emergency backups in finance and having credit cards as a worst case scenario if things go bad.

Do you recommend having more than one credit card for any reason? We honestly hardly ever use it. We pay cash for almost everything. We don't use credit hardly at all. And so I don't know if it's really critically necessary to have a second credit card for emergency situations like you've spoken about on previous podcasts.

Yes. One more thought on the previous question. Just the economic principle. I just want to not forget this. All changes occur at the margin. It's kind of an economic principle. So when you're looking for opportunities, the opportunities are going to come at the margin. And you see this throughout society.

It exists in permaculture. They talk about the edge of being the most productive, the edge between two things. And so when you're looking at your life, always look for whatever edges exist in your life or what margins exist in your life. Look for those lines, the county lines, the city lines.

Look for the rates and the tax code when you make that jump into the next bracket, just as kind of a central planning theme. Didn't want to forget to say that. Back to credit cards. I think the best resource that I have ever found on that that's free is the website Credit Karma.

Credit Karma, C-R-E-D-I-T-K-A-R-M-A.com. It's one of these websites where what they do is they provide a service. And in exchange for the service, they are hoping to upsell you on using their affiliate links to purchase other additional products. So this is built, for example, on the same business model as Mint.com.

Mint.com gives you a really cool personal finance dashboard. And the way they make their money is by having access to your information. Then they're hoping you'll click on their offer. They'll get an affiliate commission code based upon your clicking. And they'll have that information for you. But Credit Karma is good because they have a listing where they'll talk about what you should do to build your credits.

So if you use their website, free service, and you put in your information, they'll use the formula for the FICO score and they will go ahead and click and give you, "Hey, here are our suggestions." And they'll show you your strengths and your weaknesses. So they'll say you're too close to your credit utilization score, meaning you have too much, you owe too many balances on these cards.

Or they'll say you're too far away from the credit utilization score, or sorry, you have too few accounts or you have too many revolving credit accounts and no consistent payment accounts. And they'll give you free advice on that that's tailored to your situation. They do a good job with that.

And I've never seen from everything I've heard and read about them, I have an account with them and I've used it. Everything seems to line up. So that would be the first thing that I would do is put your information in there. If you're comfortable disclosing your information to them, I don't have any reason not to be.

And what they'll do is they'll look at your history of your credit report and their algorithm will give you some suggestions. That's creditkarma.com. I believe if I were in your situation, I probably would go ahead and get one or two more cards. When you look at the risks of credit, the biggest risk of credit is always being undisciplined with it, using it, going deeply into debt and winding up with lots of credit card debt.

So if you look at your situation and you have that risk, then definitely you should not apply for additional credits. You've just stated that you're the opposite, disciplined, consistent, have cash and no balances. That may not be other audience members. For someone like you though, I would go ahead and get maybe one or two more cards.

As I understand it, the reason is not necessarily the number of cards, but it's more of the amount of credit available. So if you think through the situations that you would if you were ever going to use a credit card or if you were going to use it for a certain amount and how that would affect your credit score.

If you're the type of person who you have a credit card that has a $20,000 limit on it and if you can put your hands on six figures of cash, then you're no longer a 15-year-old just getting started. Well, what could happen? You might buy a cruise for the whole family and you might take your family on a family vacation.

So you might put $15,000 on a credit card as you're going through the expenses of that until you get it home and pay it off. Well, that $15,000 is going to use up 75% of your credit and that's going to have a temporary impact on your credit score. So I don't have a science for this, but kind of my gut is to say look at the scale of your household and then just make sure that you have credit lines larger than that that are available for you.

If you wind up in a bind and you're trying to, you know, Southern California real estate market crashes, you can't sell your house, you've got to move across the country, you've got lots of money but it's tied up in your business and in your accounts and you need access to capital, you need liquid credit capital available to you.

Well, $20,000 doesn't sound like a ton to me. You could burn through that pretty quickly. So I'd rather have 60 or 80,000 sitting there on three or four cards and just have an American Express, a Discover, a Visa, and a MasterCard, something like that. And I'd rather have 80,000 sitting there and that way when I go ahead and use the 20,000 on moving my family across the country while we wait for the house to sell and we're sitting it through, etc., and if I'm carrying the balance for three months, I'm not destroying my credit right when I need that score to go and do something else.

So that's my unscientific answer but kind of thinking that the biggest impact on your credit score is going to be – oh, a big impact on your credit score in addition to number of accounts, type of credit, payment histories being clean and all of that is utilization, the utilization ratio.

So make sure you have enough money available to you that you can't ever imagine using it. That's how I'd approach it. Gotcha. Great. Yeah, Josh, I appreciate the advice on everything and I think you're spot on and I really appreciate it, your podcast and everything that you do. Thank you.

On the credit cards also, a diversity of issuers is useful. A couple of platinum cards from Visa and MasterCard and an American Express, things like that can be useful because when you go in to buy a big ticket item, some of the credit card benefits are very, very helpful.

Always see if you can get a better deal, as we always say. Always see if you can get a better deal paying cash, etc., blah, blah, blah. But if you can go in and if you're going to buy an expensive – you're looking at buying a home, you're buying a home and you're going in and you're buying an expensive water treatment system or some kind of electronic thing for the house, well, go ahead and put that on the credit card and that's another reason to have big balances available for you.

Put it on the credit card and use a credit card that gives you some significant purchase protection, natural built-in extended warranty, etc. and that can save you money. So a diversity of cards that are well chosen to provide you with some of those extra benefits is helpful. Alright, next we go to – oh, go ahead.

Sorry, I cut you off. What was that, Jim? Okay, we'll go on to Jason. Jason, go ahead with your question, please. Yes, sir. My company that I work for offers a fine benefit plan that's fully funded by the company that is designed to, at the end of, say, 35 years, I think is the max out, replace somewhere between 30% and 40% of your income at retirement.

My question that I've always had – two questions. One is, is there a way to accurately reflect from year to year what my pension benefit is worth as far as a – from a retirement standpoint, as far as maybe a net worth or projected retirement income? And then secondly, how does the benefit – how is it beneficial to me as far as life insurance purchase?

For me, since my pension here becomes immediate life annuity, income annuity for my wife if I die, that starts, I think, within 30 days of my death. So those are my questions regarding that. Good questions both. When you get your pension statements, probably annually, what type of information is on those?

What do they write on there about the information, and how do they change year by year? You have, obviously, your years of service that you have, the vesting schedule. I'll go beyond that. But then you have an estimated projection based upon your current years of service, what your annual retirement income would be if you quit, like today, but waited until you're like 65 or whatever to collect.

So you kind of have – it's not accurate. I've already been told it's not accurate. Because it's backward – it's not accurate because it's backward looking and it's not factoring in your working there for another 15 years? Is that what you're saying? Well, it's not accurate in that it's the lowest possible number you could have based upon your compensation amount.

It doesn't factor in overtime. Basically, what they tell us is when it's time for you to collect the pension, they're going to calculate your highest 1825 consecutive days of pay to come up with a number to begin the formula. So that's why they tell us you look at the number and it gives you an estimate, but it's on the low side, especially for a period of time during a career you worked a lot of overtime, a lot of bonuses, that sort of thing.

So it's just based upon your base compensation level. Not including those – it's not going to be factoring in the overtime? Correct. Okay. And what percentage of your income is it scheduled to replace? What percentage of those 1825 days? They say it's about 40%. Okay. That's the idea. All right.

It's fully funded. We don't have to contribute to that. We have a separate 401(k) for all that, too. And is your question for valuing it just simply how much do I put on my net worth statement or is it I'm trying to do retirement calculations and figure out when I can afford to retire and so I need to be able to figure it out from that?

What are you going to use the number for? Well, both of those would be nice. But primarily for retirement's sake, down the road, because they don't give you a total amount of what it's worth, obviously. It's just the promise to pay down the road, deferred compensation. Obviously it costs me a lot of income now that they're deferring for me later.

So I'm trying to figure out is there a way to figure out what it's worth or how I can plan on that in retirement for retirement projections down the road. Okay. So let's tackle question number one first, which is how to calculate what it's worth. And it'll be kind of the same.

It'll be a little bit different if you just want to put it on the net worth statement versus something else. Let's do the simple one first. If I were going to put it on a net worth statement, I would – where on the internet could you get this information?

If you've got a buddy – here's how I would do it. Start with a buddy who sells annuities. Find somebody who's in the insurance business. Just say, "Hey, I need a favor. Can you just calculate for me how much I would have to do to buy a fixed annuity that's going to pay out this amount?" And let's say that you're looking at that statement and they're saying it's $3,000 a month, that that's what they're going to pay you at retirement.

You know that's a little bit low, but it's $3,000 a month. What I would do is either call a friend and say, "How much cash lump sum would I need to give you today for you to give me a life annuity starting at 65 of $3,000 a month?" Or just for the sake of comparison, just pick a percentage.

And so the useful percentage would be something – well, let's start with 4% rule is always useful. Then you said, "Okay, if I had to replace this with stocks and $3,000 per month, take 3,000, multiply it times 300, that's about a $900,000 asset." Because if you had $900,000 of investments, of stocks, that were spitting off 4% per year and you're taking 4% of that portfolio, which statistically is designed where it would last you longer than that over a 30-year period, that would be about $36,000 a year.

4% of $900,000 is $36,000 a year, and that would be $3,000 a month. So you can take a monthly number of $3,000, multiply that times 300, that'll give you the inverse of the 4% rule, and you could value that at $900,000. If you're working with an annual number, you can just multiply it times 25.

So if you had $30,000 per year, multiply that times 25, that would be $750,000 asset. However, a defined benefit annuity that is guaranteed and is a life annuity and is not subject to fluctuations would actually be significantly more valuable than that. I don't know how much more valuable. It would depend on current annuity rates being offered by commercial annuity companies.

But I would at least be comfortable with your saying something like 3%. And so if you said, "Okay, if I had $1.2 million and I was getting a 3% -- let's see, $1.2 million -- and I were getting 3% of that, that would be $3,000 a month," then I would be comfortable with that.

So somewhere in that range of 3% to 4% would be probably a very reasonable way to value it just for your own personal net worth statement. That way, when you're making your net worth statement, "Hey, I've got a pension which is worth in a lump sum value today about a million bucks," very conservatively a million bucks.

That would be the first thing that I would do. Second thing that I would do -- and I've got to make sure to remember to answer your life insurance question. Okay, that's the second question. Second thing I would do is with regard to retirement planning. Now, if you're doing your own retirement planning, the simplest thing to do is to just figure this out.

And when I say doing your own, I mean you're not using professional financial planner software. We'll get to that in a moment. If you're just doing this yourself, the simplest thing to do is just to use that monthly number and use the monthly number of -- well, two monthly numbers.

And what I'm trying to do is give you simple calculations that you don't have to account for inflation. If you know the number that's on there is low, and if the reason it's low is simply because you don't yet have the full years of service, you can't use the number.

Meaning that if they say after 30 years of service, then you get this 40 percent of your highest 1825 days payout. Well, you've only got 15 years of service, and so you're not at the full amount yet, then you can't use the number that's on the paper. But if the number that's on the paper is just low because it's pretending that you're fully vested in it, and it's low because you don't have your later salary, you can use the number on the paper.

So if my statement says I'm making $10,000 a month, and my statement says that I've got a benefit that after 30 years I'm going to be fully vested in it, it's going to be 40 percent, then what I'll just do is I'll just use that 40 percent number. I'll just use the $4,000 a month number.

And I'll look at my retirement planning and say, "In retirement, will I need more than $4,000 a month?" There's no need to get super technical for retirement planning in the early years. It's only when you're in that last five or ten year transition where you've actually got to live on the income that you need to start to get more precise.

But for now, you look and say, "Well, am I planning to be here? Is my house going to be paid off, et cetera? What are my expenses going to be?" And you just figure that your expenses are going to be what they are now, or figure out what's going to change, and use that $4,000 number.

There's no reason not to use the number that is on there if it's calculating the fulfillment of your service. Does that make sense so far? Yes, it does. Okay. Now, if the number that's on there is not calculating the fulfillment of your service, then you need to take your income and just simply use your current income and use the formula.

So I'm making $10,000 a month, but the number that's on the paper isn't right, but I'm actually just using it. I'm just calculating 40% of that, so I know it's going to be $4,000. So depending on what the number indicates, that's how you do it. What I'm trying to get you away from is having to calculate the inflation-adjusted amount, because you can calculate the inflation-adjusted amount based upon your income, but you're also going to have inflation that's affecting your expenses.

So you can safely, for big-picture planning, you can safely ignore inflation for something like this, because yeah, the benefit's going to be higher, but the inflation's not going to be higher. The difference would be if you're seeing your income rise substantially over time. So let me give you the final way to calculate it.

If you're looking at your income today and you're saying, "Okay, I'm making $10,000 per month, but this formula is only reflecting that $10,000 a month number, and I've got another 15 years in my career, and I know that my income is actually increasing at a higher amount, a higher percentage rate than just the general rate of inflation, and I think this benefit's going to be a lot more valuable, because after all, I've got this pension because I'm doing this work and I'm doing good work, and I'm exponentially growing my work, so this is going to be a lot more valuable," then take your income today and increase it based upon what you think is going to be the increase of your pay.

So 1,825 days, depending, is that 1,825 working days, so you probably work about 250 days a year is probably what you're calculated for, so that's 7.3 years. So go forward to about 7 years from retirement and calculate what your income would be increasing to. So if you had $10,000 per month, let's just do $120,000 per year, and you're going to inflate that, and you're saying, "I've got 17 years until I retire, so I want to know what this number is 10 years from now," then put that into a financial calculator.

Let's do present value is $120,000. Let's do 10 years out. It's going to be our N. We know that we're increasing our income at 6% compounded, so let's use 6%, no payments, and we calculate the future value. We now know that our income then is $214,000 per year. And then what you can do is just divide that into monthly.

That's 17,908, so that's about 18,000. Let's just use 18,000 to round up. So we got 18,000, and you take 40% of that, and you've got now a pension of $7,200 per month. So what I did was I adjusted there for an income that's increasing faster than the rate of inflation, and then I just stopped it at 7 years before I retire, recognizing that it's probably going to be higher, but here I'm just taking the conservative number.

So now I know I'm going to have a pension of $7,200 a month, and that's great, because if you've got a pension, you should be looking at ways to maximize that, which is when it's based upon a formula, you want to maximize your income as much as possible. And that'll be actually a really good investment, especially if the pension is driven off of a formula.

It's going to be a really good investment to max that out as much as possible. So you're looking at your business unit, you're looking at the area of operations you have control for and saying, "How can I get my rates of increase of income up significantly higher than the prevailing numbers?" Now, if you're actually doing technical financial planning, then it's simpler, and a financial planner will just simply use usually a set of software.

You can do it by a calculator, but all of the calculator work is going to be kind of this rough stuff that I'm doing for you now. If you actually have financial planning software, then you just put it in. You put in the assumptions. Here's what the amount of income is.

A lot of the good financial planning software gives you an ability to put in the formula, so you can say it's the highest of the average of the last number of years, and then they'll do the projections, and they'll put in the questions of, "Does that benefit increase with inflation?

Does it not?" And they can calculate that. And that brings me to the answer to question number two, which is, "How does it work in life insurance?" It's an amount of cash flow that you don't need to cover with life insurance in retirement. So if I had a pension like you're describing, and I knew that it was going to be paid out under my current way, and I'm planning for my wife, what I'm going to do is I'm going to say, "When I die, there's going to be a certain amount of lump sum cash needed," whether that's pay off the house, give my wife money to go and travel around the world while she's grieving for me, or pay for my funeral, etc., pay off my debts.

I'm going to give a lump sum of cash, and then I'm going to give a cash flow need for the rest of her life. And so I'm going to say, "Well, she's got a 70-year life expectancy, and I want to provide $6,000 a month." So I just take that $6,000 a month, and I increase it over time.

But then in the financial planning software, I just put in there that there's going to be a payment now of $3,000 a month that's coming in in the form of a life annuity for her. And so the amount of life insurance needed is just calculated based upon the present value of $3,000 a month and is not calculated based upon the present value of the $6,000 a month.

So it just goes in as a cash flow into the software system because it is an asset. And it's an asset that, if guaranteed by the company in the event of your death, then it's an asset that you don't need to plan for with life insurance. Where some people have to be careful, and I don't think this applies to you, Jason, but where some people have to be careful would be people who have a benefit that only applies in certain circumstances.

So, example, firefighter. If a firefighter generally, with most municipalities, if a firefighter dies while on duty, then their errors in their spouse is going to be qualified for a payout from that because of the fact that they died in the line of duty. But that doesn't mean that they're automatically going to be qualified if they die not in the line of duty.

And a firefighter has the same statistical probability of dying in a car accident on their way to work as any of the rest of us do. They just have the additional risk of dying while fighting a fire. And so you have to, if you're one of these people who has a payment for your family if you die, you need to understand what the terms of that payment are.

Because a firefighter still needs every bit as much life insurance in force if he dies on the way to work as he does if he dies in the fire. So the best way to plan for that is you get your couple million bucks of term life insurance, and then if you died fighting a fire, your family gets an extra million dollars from the fire department.

Gotcha. That helps. That helps a lot. Anything else with that? Does that clear it up enough for now or any other questions? I think that clears it up for now. I've been wondering about that for a couple years now. So you start getting a little long in the tooth and you're here in the company for a while, you're over the hill, you see the end, trying to figure out, "Hey, what have I been working all these years for?" Other than just numbers on the page.

Yeah. Well, look at it and see how to optimize that. So remember, with what we're doing in financial planning, we want to look at everything that we do and see is there a way to optimize it. And so when you have a pension, there may be something that you could do to optimize it.

You may not--let's say that your pension--I'm going to simplify the case, Jason, to apply to more people. Let's say that your pension is going to be calculated upon your final five years of service at your company. And you've been at this company for 25 years. You think you could do it another five years and you know then you're going to be fully vested in your pension.

Well, is there a promotion that you could get that is going to make a big difference on your base pay? Or are you working where you're getting a lot of overtime and commissions, but if you move to something else where your base salary would be affected by--your pension is going to be based upon your base salary, and so maybe job A has low base and lots of bonuses, but job B has a high base and less bonuses.

Well, maybe for the last five years you want to transition to job B with a high base and less bonuses to maximize your pension benefit. There could be jobs like this or listeners listening who might have something that they could do. Another practical example would be Social Security. Social Security--the way the Social Security formula works is that it's based upon your primary insurance amount, which is the number that drives all of the various benefits that you get.

It's your primary insurance amount. That's based upon your 30 highest years of earned income, of wages that are reported to Social Security. So if you don't understand that, if you don't look at your earnings record, what might happen is you might miss out on a substantial maximization of that Social Security benefit based upon a different work decision.

There are lots of moms who worked and reported earned wages early in their career before having children. Then they stayed at home, raised their children, and then went back to the workforce afterward and started recording wages that are calculating in the Social Security benefit again. And then maybe you get to 55 years old or something like that and you say, "Well, I could retire or 60.

When should I take Social Security?" But if you have 25 years of earnings and five years of zeros, those zeros are calculated in based upon that 30-year average. And so if you work for another five years and you replace five years of zeros with five years of $100,000 of income, not only are you replacing zeros, but that your later working years might be at a higher rate.

So this could apply if you have years of zeros. It could also apply if your career has been relatively low in the beginning in terms of your wages are low in the beginning and they're higher down the road. You started and you worked as an artist doing lots of volunteer work and making $30,000 per year.

But you're now in a situation where you're making $150,000 per year and your income is now exceeding the Social Security wage base, which is about $120,000. So you're getting credit there for $120,000 every year as you're working currently. Well, better for you to go ahead and work for five more years and knock off five years of $30,000 credits with five years of $120,000 credits.

And that could make a big difference in your number, in your primary insurance number. And if you are maybe you're short on retirement, that might be the best thing you could do. And so I've been able to use tools like that to get people to keep working for a few more years because I could see how we're going to be able to make a big benefit here in your guaranteed income from Social Security during these working years.

Of course, like any financial planning technique, it doesn't apply across the board. But it's the type of thing that you should look for and you should see, "Is there a way I can maximize my pension with a career move? Is there a way I can maximize my pension?" You may not be able to do the really stressful job for 20 years, but you might be willing to slip into that really stressful job for five years because it comes with a much higher income and you know that you've got your 25 years of service to vest you in the pension and five more years of benefits calculated upon the higher number are going to make a big difference for you.

So, Jason, thank you for the question and I appreciate your calling in. I know that there's a ton of ideas here and the idea with learning all of these things, you're not going to be able to take everything from a show like this and apply it to your situation.

But you should be taking the ideas that are coming in shows like this and looking to see what is applicable to my life. So, if we look at the questions we've covered today, we've covered cell phone houses, credit cards, and defined benefit plans. It's kind of a pretty sweet variety.

If you're just at the beginning phase of life, you're in college, you're a young person in your teens, you're in your middle 20s, and you're not rich yet, don't take what I said about an iPhone and use that as a license to go out and spend $1,000 on a phone when you don't have money.

Go get a cheap phone and buy a Chromebook and use the Chromebook for your computer. But at a different phase, you can do that. But be thinking in advance down the road and learn from somebody who's in a different situation. Learn from somebody who has six figures in cash and is figuring out how can I maximize my liquidity.

Learn from somebody who has a job with a defined benefit pension plan and see what you can apply to your situation. And then on the flip side, like Erica when she's talking about her iPhone, or Jim where he's talking about buying a house in California, recognize that you're probably going to reach a stage of life where some of those financial decisions that earlier and younger aren't a big deal.

You can buy a fancy phone because you like it. You can buy an expensive Mac because it's fun and you like it. Now Erica's using it, she said, but you can do it because it's fun and you like it. The problem comes when you try to live somewhere you're not before you're there.

So make sure that you're not trying to be somebody that you're not before you're there. And that's it for today's show. If you would like to get on a call like this show or would just like to support me in the work that I'm doing here, presenting things like this to you in a commercial-free manner, today's show, no commercials or no ads, please consider becoming a patron of the show.

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