Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in ten years or less. Today on the show we continue our theme of an analysis of expenses.

As we release this show in January, it's a convenient time to do an analysis of the 2017 financial data that I hope you've accumulated over the past year. And I want to focus on how expenses will relate to your plan for financial freedom. On yesterday's show I talked about the value of grossing up expenses, things that are monthly, for example, looking at them in terms of their annual cost.

In previous episodes of Radical Personal Finance I've talked about the value of converting annual costs to decade costs and considering them in different frames of mind. I also talked about the value of cutting those costs down and looking at them on a daily basis so you are clear on what your daily expenses are.

This can be very illuminating, either in a positive direction or a negative direction. Sometimes you look at your expenses and you're very satisfied with them that, "Hey, wow, I'm able to live on that small amount a day," or "I only spend this small amount per day on this category.

That's great." Sometimes it goes the other way and it's a little bit sobering to recognize, "I spend how much per day?" Both of those can be valuable and give you insight. But the next method of analysis that I want to encourage you to do is to order your expenses from most expensive to least expensive and look at them very carefully.

When we come to financial savings, when we come to the area of spending less money, there are various ways that you can approach this. And I think that different ways have different merit in different situations. I'm sure you're shocked by a statement like that. That's a very inclusive statement, but it really is true.

There are times at which learning how to cut back in a specific category, perhaps let's talk about the well-known latte factor, cutting back on your favorite cup of coffee has a measurable impact on your wealth. That can be very valuable. Some people are quick to dismiss that and say, "Well, why would I put myself through the ringer and cut out my favorite cup of coffee?

That just seems really bad. I'll just focus on the big stuff." Well, there's a measure of truth to that. But for many of us, cutting back on a daily latte, a daily four or five dollar coffee habit can have a tremendous impact on our net worth and on our savings.

If you calculate what you would need in terms of your overall wealth in order to fund a five dollar a day coffee habit, it's a huge number. Let's assume that you buy a five dollar coffee and something to go with it each day, five days a week over the course of a year.

If you do that over time, you would need to accumulate about $25,000 in an investment portfolio in order for you to support that habit in financial independence. So it's not insubstantial. It's a substantial number. But is that really the best place to start? It might be for some people.

Sometimes focusing on one small area of expenditure and making a change can be the catalyst to moving in a different direction, to changing your mindset and recognizing the value of thrift and frugality. But I don't necessarily recommend that you start with that. I think it's best to always start with the big picture changes.

In any area of analysis, we always want to keep firmly in mind the value of the 80/20 principle or the Pareto principle, whichever term you prefer. The idea is there are a small number of things, about 20% of things, that are going to result in a huge number of outcomes or going to impact the most.

20% of your actions will account for 80% of your results. And so one of the methods of improving is to focus in on what are those 20% of your actions that will result in 80% of your results. And when things come to it and you have to make a decision, the more you can focus on the most impactful actions, the better your results will be.

So think about your budget. What are those 20% of decisions that will have the most impact on your results? Well frankly it's not going to be your Starbucks habit. It's going to be the structural costs of your life. I want to talk about the difference in expenses and I want to use the example from the world of business accounting.

In business accounting, we generally separate expenses into two categories, fixed costs and variable costs. The names are illustrative of what they actually are. Fixed costs are expenses that are set and that aren't going to change month from accounting period – sorry, aren't going to change much from accounting period to accounting period.

On a monthly basis, they're going to be about the same. So an example of fixed costs in a business would be something like the rent that you pay for your facilities or the salaries that you pay for your workers. These are relatively fixed costs, especially if your workers are expected to work a standard work week and their payment is relatively flat.

These would be fixed costs. They're not going to change much, your overhead. Variable costs are expenses that will change based upon the value of the output of your business. So an example of variable costs would be the cost of raw materials. If you make widgets in a factory, your bill for the supplies that you're purchasing from your suppliers will go up or down based upon the number of widgets that you produce.

In our analysis, it's important to keep in mind which aspect of the analysis we're looking at. Now if we were to apply that over to personal accounting, in your personal finances, you would quickly recognize that something like a Starbucks habit is a variable cost, and that's something that you can move up or move down.

That's good because it makes it easy to change, but it's probably not the variable expenses in your life that are making the biggest difference in your total monthly budgetary expenses. It's probably those fixed costs. Here's my recommendation to you. Make a spreadsheet, either on a computer program or write it down on a piece of paper, and order the categories of your expenses from the last year in order of their largest to smallest total value.

What was your annual total of one of your biggest categories of expenses? If your budget is like most people's budget, your biggest categories of expenses would usually be taxes of various types, housing, transportation. Housing of course would be a collection of different expenses that are all related to your house.

Here's my advice. If you can get those things structurally right, the little stuff falls into place much more simply than if those big expenses are structurally flawed. If your mortgage payment is a relatively small number as a component of your budget, the amount of lattes that you buy when you want to go out and have a coffee treat will have a very small impact on your wealth.

Focus on how you can get that number structurally right. Now what is right? Well, you'll have to decide that. You'll have to look at your area where you live, you'll have to look at your lifestyle, and you'll have to try to figure out what is an appropriate and right way for me to get what I need to get.

You have to take into account your needs. What are the needs of your family? What type of house do you need to live in? What type of house would you like to live in? What's the impact on the rest of your budget? What needs do you have with regard to transportation?

What wants do you have with regard to transportation? But if you'll just focus in on getting those first few category expenses structurally sound, taxes, housing, transportation, perhaps things like insurance, education costs for some people, if you'll get those structurally right, the rest of your budget will be relatively simple.

If you're looking for the single category that will make the biggest difference on your budget, I would bet you. I would basically guarantee you it's your choice of living arrangements because frankly that drives almost everything else in your budget. Your choice of where to live and how to live will affect every other area of your budget.

Doubt me? Let me explain. Taxes, your choice of where you live will dramatically affect your taxes. Property taxes are perhaps the most obvious example. If you own a home, you can own a house of the same value, let's just say a $300,000 house, and in some cities, some states, your annual property expenses on a $300,000 house will be $500 per year.

In some states, your annual property taxes on a $300,000 house will be $10,000 per year. Pure expense out of your pocket, driven by your house. Where you live, your state of domicile will dramatically affect your income taxes, especially with regard to your state income taxes. Some states that you live in will charge you no personal income taxes.

Some states will charge you some personal income taxes and some will charge you very high. That's a level of taxation that you are paying based upon where you live. The house that you choose to live in will affect the taxes that you pay on personal property. Some states have taxes on personal property, some states don't.

Some states are strict in their enforcement, some states aren't. But the impact of the house that you live in goes far beyond that. The type of neighborhood that you choose to live in will impact the type of house expenses that you have. If you live in a neighborhood where a backyard pool is normal and expected, that's going to add an additional expense to your budget.

You're going to pay more for the house. You're going to pay more for the care and maintenance of the pool. You're going to pay more to hire the pool guy to do it for you or to go and buy the chemicals. That will impact your cost. It goes far beyond that though.

The type of neighborhood that you live in will impact the type of landscaping that you have. What's acceptable, what's necessary, how much money should be spent on landscaping and improvement of your home. The type of neighborhood that you live in will affect the type of car that you drive.

Generally, neighbors drive cars that look about like each other's cars. And so if you move into a fancy, posh neighborhood, you're going to feel some pressure to drive a fancy and posh designer car. Make that choice intentionally as is right for you, but you're going to feel the pressure.

The type of neighborhood that you live in will impact your children's educational expenses. Some neighborhoods that you live in will have most of the children attending a private school and you may be putting yourself in a situation where you're stroking a check for private tuition. The type of neighborhood that you live in will impact the type of lifestyle that your children consider to be normal.

The types of clothes that their friends wear will impact the types of clothes that they want to wear and the pressure that they bring to bear on your budget for that. The types of clothes that – sorry, the types of toys that your friends have, your neighbors have, will impact the types of toys that your children will want to have.

What about insurance, one of the biggest impacts on people's budgets? Well, of course, the type of house that you live in and the type will be driven by the – will drive the cost of insurance. You can have the same four-bedroom, two or three-bath house and the insurance rates are very high in one place because a four-bedroom, three-bath house sells for $600,000 or $800,000 versus the same exact house plopped on a different piece of property could only be worth $100,000 in the local market.

That will affect your property insurance. Your property insurance will be driven by simple things like how close you are to the ocean. Where I live in southern Florida, it's a matter of which side of I-95 do you live on. There's a line. If you live on the east side of I-95, there's a marked increase in property insurance rates because of a higher likelihood of windstorm damage because of the proximity to the ocean versus on the west side of I-95.

The elevation at which you live will make a difference. Lower in a floodplain, now you're going to pay more. You're going to have a greater need for flood insurance. You're going to pay for that. Those rates will be reflected in your homeowner's insurance. The house where you park your car every night will dramatically affect the cost of your car insurance.

In Miami-Dade County, it's my understanding that the cost of car insurance is almost double what it is in Palm Beach County where I live. Palm Beach County is more expensive than north of me, farther up, farther into the state. Where you choose to park your car every night will have a dramatic impact on your property insurance rates.

By the way, those rates are driven partly by drivers, the number of drivers, the congestion, things like that, accident rates. But it's also driven by things like theft and crime. So where you choose to buy will have a big difference in the crime rates. I think earlier – well, every county is different.

So you need to look at your county and understand. Where you choose to live will have a difference on your energy costs, the costs of heating or cooling. In an extreme climate, you'll have higher costs for cooling your house or for warming your house. And you'll pay varying rates for that energy.

Some states have very high energy costs. Some states have very low energy costs. The place that you choose to live will have a dramatic impact on your grocery budget. What stores are available to you? How much do you pay for those stores? If you live in an inner city, downtown inner city, it's probably going to be a hassle for you to try to get out and go outside of the city.

Probably would also be a big expense for you to purchase things in bulk at lower prices. So you are more likely to be working with a local merchant who's selling things in small quantities at relatively high unit prices. You'll pay a higher amount for groceries. You'll pay, based upon where you live, a higher or lower amount for accessibility to stores.

If you live out in the country, 50 miles from the closest grocery store, there's going to be a significant expense for you in gasoline just to get to the grocery store. That's a different choice than when you live a block or two away from the grocery store and you can walk down there and pick up your groceries with your wagon or what I used to do is take my bike trailer down to the local grocery store and load up my bike trailer with groceries.

All of those things matter. Where you choose to live will drive your entertainment expenses. What is normal and customary in your circles? Sometimes if you live in an urban, high activity lifestyle, it's very normal for you to say, "Well, tonight we're going to go down to the theater. Tonight we're going to go down to the show.

Tonight we're going to go down to the concert. Tonight we're going to go down to the movies." And those things all have embedded costs. Now, of course, there can be benefits. I'm not painting everything as – I'm not trying to be one-sided in my analysis here. For example, there are many cities if you live in an urban environment, there's a lot of free entertainment, a lot of discounted things.

Wherever you live, you can find ways to change circumstances. You might live – for example, if you live in downtown Miami, Florida and your car insurance rates are very, very high, it's much more in your interest to not own a car, not to drive and to use other forms of transportation in order to offset that cost.

So please don't hear me being one-sided or hypercritical, but I'm trying to challenge your thinking. Back to entertainment, for example, if you live out in the country, perhaps your normal form of entertainment is put a bonfire in the backyard and invite your friends over. It's all a matter of lifestyle.

What are you going for? Where you live will have a dramatic impact on the cost of your medical insurance and possibly on the cost of your medical care. Consider and calculate carefully. It's funny. I'm just sitting here and looking at my own expenses for 2017 as I do this show.

Where you live will have a dramatic impact even on small things like your dog expenses. I shared on yesterday's show that a frustration for me has been how expensive one of my dogs has been over the last couple of years. It's because he has allergies to something in – at least where I live in Florida.

The only way to control it, it leads to a dermatological condition for him. The only way to control his allergies is with – at the moment, with a very expensive medication but an effective medication that he's on. And yet that's probably a regional thing. In terms of talking with a dermatologist, it's probably throughout the southeast.

But there may be other places in the country that would have a dramatically cheaper place. If I lived in a different place with my dog, it would probably have saved me about $1,500 last year from vet bills because of his allergies. So that's enough of the examples. I hope I've made my point.

The place that you choose to live is probably the cornerstone choice that will affect every other area of your life. Now you'll notice thus far I haven't discussed income. It would be negligent for me to not discuss income because there is a strong correlation between location and income levels.

There has to be and this makes sense. If you live in a large urban environment, on average, the incomes will be higher than if you live out in the country. It's much more normal to find somebody working and living on $15,000 per year out in a small rural town than it is to find somebody working and living on $15,000 per year in downtown San Francisco or downtown New York City, downtown Chicago, downtown Dallas, Texas, downtown Miami, Florida.

After all, that's one of the major reasons why people move to an urban environment is for economic opportunity. That would be one of the stronger reasons to choose to live somewhere where you're going to have a higher cost of living would be so that you can earn the higher rate of income.

But count the cost carefully in that decision. I'm convinced that probably about 20% of the people who live in a high cost of living place for the purposes of earning a high income are actually earning a high income. But about 80% of the people probably aren't. What I mean is there are ways to build a high income in almost any place that you live.

Years ago when I sold life insurance for a living, I did a lot of reading and I would spend a lot of time thinking about where I lived. One of the values of living where I lived was – is the fact that it's an urban environment. In an urban environment, you have more prospective customers.

Your prospective customers have higher incomes. Higher incomes lead to potentially larger sales. They have more income they need to protect. It's much easier to sell a $5 million life insurance policy to somebody who earns a couple of hundred thousand dollars a year than it is to somebody who earns $20,000 per year.

So the idea is that if you live in an urban environment, there are lots of prospects for your products. You'll frequently see this. There are large life insurance producers who often live and work in very affluent areas, whether that's Aventura, Florida or downtown New York City or downtown Los Angeles because the prospect pool of wealthy and high income earning clients is very, very concentrated.

But that's not the only way to build a business. When I was first starting to study the business, I quickly came across the story and history of a man named Ben Feldman who for a time – and I'm sure many would still consider him the same today – was the greatest life insurance salesman in history.

He worked for New York Life and he just set sales record after sales record after sales record over the course of a 50-year career selling insurance. That was just huge, absolutely huge. He took every ceiling for decades and basically broke through every ceiling of what people thought was possible in the life insurance sales business.

One of the remarkable things to me though was that he made his career and built his career in a little rural town called East Liverpool in Ohio near the borders of Ohio, Pennsylvania and West Virginia with a tiny little population. Most of his career was spent within about a 50-mile geographic area in East Liverpool, Ohio.

He built one of the greatest, if not the greatest, life insurance sales businesses of all time. I would often think about that because it was a good example of challenging paradigms. Often you can take what you're doing in a high cost of living place and you can do it in a lower cost of living place.

Don't be scared to challenge your own considerations. Don't be scared to challenge your own choices. Final part of today's show and by way of reminder, the first thing that we discussed was order your expenses from biggest to smallest and focus on changing the biggest ones first because that'll have a bigger impact on your overall lifestyle than all your little decisions.

So look at the big expenses and try to focus on the big structural changes. If you have a $500 a month car payment, that's a total of $6,000 per year. If you dump the car and dump the car payment and buy something for cash that's cheap, at the end of next year if you save that money, that'll be $6,000 in your pocket.

$5 a day lattes will certainly dent that $6,000. If you do five bucks a day, 20 bucks a week, 50 weeks a year, that's $1,200 at the end of the year that you're spending on $5 lattes or again, latte is a metaphor. So that'll dent that $6,000. But better for you to just sell the truck, sell the car, get something cheap and then pocket the $4,800 difference if you want to keep on doing the latte.

Your best course of action of course is to do both. Cut out the lattes and cut out the car payment and then you got $7,200 in your pocket at the end of the year. But that was point number one. Point number one, biggest to littlest, focus on the big ones first.

Point number two was if there is a key factor in your budget, most likely it's your choice of housing. That's the cornerstone expense that drives just about everything else. So do a careful analysis of your situation. Now number three, back to that fixed versus variable expenses. To me, one of the most valuable things that can be done in a personal budget is to move things off of the fixed expense category and move them over to variable expenses.

I have a pretty deep allergy towards fixed expenses and it's only getting deeper. Now perhaps this is due to a little bit of my background and my history. As a financial advisor, I've seen so many people make changes in their lives and I've watched them go from prosperity to disaster very quickly.

Just like a physician has the benefit of seeing people go from health to illness and from illness to health, just like a physician has that benefit, a financial advisor has the benefit of knowing the intimate details of people's lives and I've seen how quickly lives change due to no expectation – with no previous expectation of the person.

I've seen people go from earning $300,000 a year to being unemployed for years and not being able to find a job. I've seen fortunes lost. I've seen businesses turned upside down by changes in legislation or changes in – somebody lost a lawsuit or something like that. It happens. When you see that again and again, it puts a deep defensive – it has put a deep defensiveness into me of just watching those patterns.

I'm also allergic to it probably from my own experience. Having lived on a highly variable income for the last decade of my life, I've learned to be wary of committing myself in advance. I've learned to be wary of having high structural expenses because there have been months where my income is huge and there have been months where my income has gone along and I've earned nothing or I've owed money.

Those experiences change your outlook. They have for me. So I've developed a pretty deep allergy and aversion to fixed expenses. I think that one of the most valuable things you can do is seek whenever possible to move fixed expenses and transform them into variable expenses. How do you do that?

The first obvious way to do it is by paying things off. If you have a $400 a month or $500 a month car payment and you pay the car off, then you eliminate the $500 a month car payment. Now, do you eliminate the expense of the car? No, you don't.

You still have the steady decrease in value. You have the steady depreciation of the vehicle and you have that expense whether you have a car payment or whether you don't. But you eliminate the fixed expense to your budget. Similar thing would occur if you own a home and you pay it off.

If you have a paid off house, that brings you tremendous flexibility because now you don't have to make a payment every month. So if your income goes down or if your circumstances change, you're not stuck having to come up with payments. Method number one, pay things off. Method number two, whenever possible, choose a non-contracted option.

There's a bit of a mixture here between paying things off but here would be a simple example. For years, many of us purchased phones, cell phones from companies with the use of a contract. The basic methodology of the past and it still exists today was that a large phone carrier would offer a phone to you and they would give you a discount on the phone, give you a free phone or give you a discount on it in exchange for your signing a contract with that company.

I did this several times over the years and one of the challenges though was that you were locked into a certain provider. You had to fulfill the terms of the contract. That's annoying from a value perspective because perhaps that provider is not providing the value that you want and it's also annoying from the perspective of having to make that payment every month.

What happens if your income is low? What happens if you lose your job? How do you keep on going with that payment? And having your phone number locked in with them was even worse because for a long time, that phone number was a really valuable thing. How do I make sure that I don't lose that phone number?

Well, for a number of years, I've quit doing business with those companies and I was very glad to get rid of them after years of frustration with the fact that the companies always seem to treat the new customers better than the old customers just because they would just try to lock people into a contract to give them discounts.

Finally, I said, "I'm done with you all." So for years, I've used various prepaid options for the phone. Now, I maintain service on the phone but I love the fact that I don't have to. I love the mental freedom from knowing, "You know what? If I'm not going to use my phone for a while, I could just skip it.

I don't have to have a phone." And because I've moved my services around so that my cell phone number is no longer a number that I care about, rather I have all of my points of contact in ways that don't require monthly expenses, it frees me up mentally to know that at any point in time, I could just dump the phone cost.

That's powerful. You know, that wasn't possible a decade ago. You always needed to have that continuity of that phone information, that phone line. But today, we live in a better world and today, you can do that. Now, I don't think it's possible to do that with all things. It's certainly not.

But anywhere you have the choice to not sign a contract or you have the choice to take things little by little, calculate that and consider going for it. It brings freedom and flexibility to your budget. And the third point I would give on this point of how do you make fixed expenses, variable expenses is with personal skill in spending and personal resilience in attitude.

I spoke yesterday about my annoyance with our grocery budget over the last year. The good thing about that though is even though I've been annoyed with it, the reason that we spent the money that we spent on groceries throughout 2017 was because we were making many luxury choices, luxury choices such as choosing the higher quality of food versus the lower quality of food that would simply deliver calories and basic nutrients instead of what might be a little bit cleaner, luxury choices in choosing convenience foods over foods that require more manual preparation, luxury choices in terms of choosing foods that are richer and simply tastier and more fun to eat than things that are nutritious and satisfying.

But the great thing is I know that if we had to, if we had to based upon skill, I could feed my family on $200 a month. Now would that be luxury? No, it wouldn't. Should I do that? Well, depends on how bad I need the money. I think there are important considerations with something as important as food, which fuels your life and contributes measurably to your lifestyle, that the ultimate cheapest is not always the best.

But with skill, which I do have and I know how to acquire, I could do that if necessary. And there are many other areas in which this is also the case. With skill, you can learn to repair your car. With skill, you can learn to groom your own dog.

With skill, you can learn to have lots of fun entertainment for free. With skill, you can learn how to fix your clothes. With skill, you can learn how to cut your own hair. With skill, you can learn how to cut your own lawn. So skill acquisition is very important.

And even if you don't actively practice the skills every day, at least being aware of them is helpful. That's why I try so hard to share with you ideas on skills that you can develop. You may not want to live on $200 a month even as I don't – of food, even as I don't particularly want to do that.

But knowing how to live on $200 a month, knowing how to have your children's stomachs full so they're not crying and to have enough nutritional value so that you're not going to stunt their growth or cause problems down the road, knowing how to do that is very valuable and it makes you resilient.

Personal resiliency is the other aspect of the equation. Are you willing and able to endure change with a good attitude? Are you willing and able to endure discomfort with a good attitude? Are you willing and able to embrace adversity and gain from it rather than complain about it? Are your relationships with your husband, wife, children, family members, are they strong so that those relationships will carry through times of adversity?

Is your sense of self-confidence and self-worth, are they strong and able to carry you through times of challenge, times of failure? Everybody fails. Everybody faces adversity. All of us at some point are going to lose a job or have a business failure or fail on something. I've had my share and I'm even having my share right now.

But your mindset is what carries you through and your personal resiliency, your personal strength will make a big impact in your interpretation of events. Your attitude and your mindset will determine the results that you get. Two people with two different mindsets can walk through the same circumstances. One of them comes out frustrated at life, deeply depressed, angry at everything.

The other person comes out of it scarred but with new skills and deeper scar tissue. Personal resilience is something that can be cultivated and I recommend to you it's something that should be cultivated. It should be cultivated in yourself. It should be cultivated in your children. And resilience will have an impact on your personal expenses.

Are you strong and resilient enough to turn off the air conditioning in your house for a month, to save $120 on your cooling bill so that you can meet an unexpected challenge in life? Could your children be able to handle that without complaining all the time? I'm amazed when I see my own flabbiness with regard to personal resiliency and things like air conditioning.

I grew up in a house without air conditioning and it was hot, yeah, but that's what sweating is for and that's what fans are for. And the house was designed differently than a modern house as well. But I often challenge myself, "Joshua, are you committed and addicted to comfort or are you able to be resilient?" Could you handle – could your family, the bonds and the ties of your family handle a disaster and needing to move from your large and comfortable house into a small and uncomfortable apartment?

I was impressed three or four years ago. I forget the name of the boat, the writer or their blog, but three or four years ago there was a story about a sailboat which had been sunk – which sank out in the Pacific Ocean. And the story was of a young family, husband, wife, two younger children who had saved and worked diligently for many years to save – to buy their sailboat.

They purchased a sailboat and they had lived on the sailboat and they'd saved their money in order to go on a multiyear round-the-world cruise. They were living in Mexico and Southern California docking there and they set out from there to cross the Pacific. While they were out there, unfortunately they ran into problems with the boat.

The husband was an experienced captain and I don't believe that there was any major negligence on their part. They just ran into problems with the boat and they wound up needing to be rescued very dramatically, thousands of miles from shore, rescued and the boat was sunk. And after years of working toward their dream, they were now without their boat, which was of course a huge financial catastrophe where they had a lot of money tied up in that boat.

And so some of the interviews after the fact were focused on, "Well, what now? What's going to be the next area of impact? What are you going to do?" Well, the family wasn't giving up. They were focused again on pursuing their dream. They had moved into a small apartment and they said, "We're going to embrace for now this small apartment lifestyle and we're going to save and work towards that." I don't know if they've gotten their boat again today, but I bet they will if they haven't yet because they had a plan.

And what I admired about them was their attitude. And I've seen this again and again with sailors. I admire sailors because sailors have to develop skills and resilience in their personal experience. When you're out on the ocean and it's just you and the boat, you've got to develop the skills to fix the thing.

And that requires a knowledge of the wind and the weather, a knowledge of mechanics to get the engine going again, a knowledge of electrical systems to figure out why the inverter is not working and why the batteries aren't taking the charge, requires generalized knowledge and skills that most sailors learn little by little.

But it also requires a sense of resilience. Sailboats are hot and yet frequently a sailor looks at that and says, "Yeah, but I get to live on a boat. So during the hot heat of the day, I'm going to go in the water or go on shore where I can be cool or figure out a way to just deal with it." And that attitude, that sense of resilience carries over in other parts of life.

So this particular couple, I remember them, they moved into a tiny studio or a one-bedroom apartment, and they had to persuade the landlord vigorously that it was okay. They were used to living on a tiny sailboat. So even though they were a family of four, they could still move into this tiny little studio.

And then they had constructed some clever small beds in a way that would give the children a place to sleep but really wasn't that much room. And they had gone into it and figured out how can we frugally decorate it and make it a homey and happy and cheery place even though it's small and inexpensive.

To me, it was a beautiful example of resiliency. Cultivate a sense of resilience in yourself and in your children. Fortunately, it's actually relatively easy to cultivate a sense of resiliency. Unfortunately, it's not so fun. How do you do it? Set challenges for yourself. Either embrace them when they come along by circumstances or set them for yourself.

Make your life uncomfortable and learn how to have a good attitude through it. Make your children's lives uncomfortable and teach them how to have a good attitude through it. It'll make all the difference in the world. As I close today's show, I want to challenge you. Do you have a clearly defined goal for your money?

Do you have a vision of what you're working towards? The family with the sailboat did. They had worked for years and saved for their boat. Then they were starting the process all over again, working and saving for the boat. I need to go check to see if they've gotten their new one yet.

There's no doubt that they will because they have a clear goal. The clarity of your goals dramatically impacts the ease with which you will roll up your sleeves and get into the actual plans. The family who wants to live on a sailboat will embrace moving into a cheap studio apartment because it's preparation for the sailboat.

Do you have a clear goal and are you aligning the things in your life with those goals? If not, just work on it. Don't expect perfection. Don't expect to figure it all out right away. Just work on it systematically over time. This show is part of the Radical Life Media network of podcasts and resources.

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