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Today on Radical Personal Finance, it's live Q&A. Welcome to Radical Personal Finance, a 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 10 years or less. Today on the show, it's live Q&A.

Open phone lines for any member of the audience to call in. Ask me any question, make any comment, discuss anything you want. That's what we do here on live Q&A shows. We go to an open phone line here today. I've got three callers waiting on the line, and we will go and see what we have going on.

First up today, we've got Daniel in Texas. Daniel, welcome to Radical Personal Finance. How can I serve you today, sir? I am about to leave my current job, and I'm fully vested in my 401k. I've got about $20,000 in it at this point. It's currently in about, I think it's like a 55-year retirement plan.

Standard, I'll be 30 here in a couple years. So, kind of standard plan on that. I am curious if you have any thoughts on what I should maybe transition that to, if I should just kind of leave it there and not mess with it, or if there's some other way I should transition that as I leave this current job.

Are you going to another job? Yes, I'm going to another job. Does the other job have a 401k? They do have a 401k. There is no matching with it at this point. They are a younger company. They're about 10 years old, so they offer a 401k, but there's no matching.

My plan is that I'll be taking a pay cut for the first year, and then hopefully make more money in my second year. But unless they institute that matching, my thought would be more than likely. Anyway, anything I do put into some sort of retirement fund, I'll probably put into a Roth IRA so that I do have access to those original funds if I need them for some reason.

And is the plan at this existing job a good one? Is there low fees, good investment options, etc.? Sorry, say that again? The funds that are currently held at your existing job, are they held in a plan that is a strong and good plan? Does the plan have good investment options?

Does it have low fees? What's the quality of the 401k plan where you are right now? It seems decent. From what I can tell, it's got relatively low fees. I don't remember that. I looked about a year ago, and I don't remember. From what I could tell, it had fairly low fees.

Investment options were decent. It does have a money market option. It does have a few different options in there. So, I don't really mess with it a ton, and I haven't because it's not something I've put a ton of thought into. So I've been happy with it. I haven't had any issues with it so far, at least.

And are you a resident and citizen of the state of Texas? Yes. Okay. Well, in general, the way that you look at it is, are there benefits to staying put when you have investment dollars? You say, are there benefits to keeping those investment dollars where they are? And are there benefits to rolling those investment dollars out to another location?

Usually, you'll have a better option of investments, fees, etc. in the open market when you're not just doing business with your company's 401k plan provider. So usually, it's better to roll the money out. Because with your 401k plan provider, your employer has contracted with a third-party administrator to manage that plan.

They've selected a menu of investment options. And the key to that menu of investment options is to offer a broad enough array of investments so that the plan fiduciaries won't be suable in court for not providing good investments. But to offer, keep those plan options boring enough that the fiduciaries won't be sued in court for providing risky and bad investment options.

And so most 401k's, you're going to have access to just the general vanilla mutual fund options. And they'll develop a menu of 20, 30, 40, 50, whatever is available in your plan. Now those can work fine. And some companies have great plans, low fees, low expenses, etc. But many times, if you take it out to the open market, you can have access to a much broader array of investments and a much broader array of options.

Usually in the open market, if you just custodian an IRA with a low-cost provider, especially if you're holding mutual funds, you may be able to have it just simply less expensive, cheaper in terms of the overall fees. You can also do many more interesting things with it. You can do interesting things from a financial planning perspective, like you're talking about, where you roll the money over into a Roth IRA or pursue something else.

You can also do interesting things with regard to the investment choices. You can invest IRA assets in all kinds of interesting things if you're into that. So usually it's best to roll it out. Now the only, the strongest reasons to not roll it out involve asset protection. So both bankruptcy and somebody suing you.

And the reason is your 401k is extremely safe. The money in a 401k is protected from the claims of creditors. It's exempt under the federal bankruptcy regulations. My understanding in the state of Texas, IRAs and Roth IRAs are also protected, but not being an expert on Texas law, I don't know if that protection is codified.

I don't know to what extent that protection is applied to IRAs and Roth IRAs. If you were facing some kind of legal problem or you are aware of something, I would move very carefully and I wouldn't take that risk. But in absence of any circumstances that you're aware of why you would have some unique risk, yeah, I think I would roll it out and try to save money and get better investments.

I don't see any reason not to. Okay, thank you. Yeah, as from when your show when you're talking about IRAs, I went look, far as I can tell, obviously I would need to talk to a lawyer to know for sure, but deeper, but it looked like there is code that says IRAs are both Roth and regular are fully protected from the claims of creditors.

Which do you think it would be? I'm in a, I mean, because I have my children and I have three kids, so with the child tax credit and where I fall, especially this coming year since I'll be making less money than I even think now, doing it would potentially be worthwhile to, if it's possible, to roll out my 401k into a Roth IRA so I have those funds and pay the penalties or would I just have to do the math on it?

Well, I would try to pay the penalties from, I would try to pay any necessary penalties from my other savings and not use IRA dollars first, if at all possible. And the reason is since you only have a limited, since you have a limitation on how much money you can actually get into an account, you want to keep as much money in there as possible.

And since you have the choice of paying taxes elsewhere, use the money in your savings or your checking account or whatever in your other financial resources to pay the taxes so that you can keep the maximum amount of money working in that growth deferred account. It would be foolish to try to roll it over to a Roth IRA and use the investment dollars in the IRA to pay the taxes unless you were absolutely certain that tax brackets or your tax rates are going up and you're gonna go up into a higher bracket.

So use money that's in your account to do that. Yes, if your income is down, you should go ahead and do the IRA if you have the money from other resources to go ahead and pay the tax. And that is a good plan and I do think it is, it's a good move.

What you'll do is you'll roll the money out of the 401k into a traditional IRA with your custodian of choice and then with that custodian you'll go ahead and make the conversion there. So that way the 401k provider doesn't withhold any taxes from you and so you can actually just put it directly into a traditional IRA and then do the conversion.

On the asset protection standpoint, good for you for researching the state of Texas. In general, unless you can, and again, I would defer here to an attorney, but here's my non-attorney understanding of the law, unless you can prove that the state of the state that's the jurisdiction that you're dealing with the law in is absolutely makes IRAs and Roth IRAs sacrosanct and unless you were confident that you weren't actually going to be moving states, you would still rather, if you were facing a creditor situation or potential legal risk of some kind, you would still rather have it in a 401k.

And let me explain why. The reason why a 401k is protected from the claims of creditors is because all of the money is mingled and it's designed to be for the protection of the person. So a 401k account is protected from the claims of the company's creditors. It's held in a separate trust for the claim and so it's insulated from the claims of a company's creditors, your employer's creditors, and then because it's a fairly normal pension account that's covered by the ERISA law, then it has the most ironclad protection.

The challenge with an IRA is it's a much easier legal argument to make to somebody to say, "Hey, listen, we're gonna invade this account and it's only gonna hurt this person." And then you run the risk of what if you move from the state of Texas to the state of, you know, whatever, that doesn't have that same protection.

So I agree with you. I don't think it's necessary to be that paranoid if you are happy being a Texas resident, but I just want to point out that if you thought something were going to change, then the 401k is superior. Any follow-up questions, Daniel, or should I go on to the next caller?

Is that enough for now? Choose based upon your investment strategy. So if you are going to invest in index funds, well, pick whoever offers the cheapest index funds because you're dealing with an index fund. If you want to invest in you know, tax tax liens, then you're gonna need a checkbook LLC by somebody who does that.

If you want to buy gold coins, then you'll need somebody who will help you to arrange that. If you're gonna do offshore real estate, if you're gonna trade stocks, you know, if you're gonna trade individual stocks, then you should custodian your account with somebody who is providing the platform on which you can make your trades.

So think through your investment plans and then based upon your investment plans, choose your custodian. Okay, thank you very much. I appreciate it. My pleasure. We go now to the state of Minnesota. Welcome to the call. Tell me your name, please. Corey. Corey, welcome to the show. How can I serve you today, Corey?

Yeah, hi, yeah, I wanted to thank you for all your great content. I'm helping my parents in kind of the initial stages of their estate planning and I went back and listened to your shows like 260, I think about trust and some of the documents that are helpful and just trying to get kind of a sense of their plan to meet with the estate planner in the coming weeks or months here and they wanted me to try and do some research and trying to get a better understanding of what are the different options out there.

Just from a little bit of financial background, my parents, I think their assets, you know, combination of real assets and equities and things, probably around two or three million and my grandfather, who was also successful in business, set up some form of trust in the state that my parents have described to me that sort of passes the income to the grandchildren, but gives the income to the parents to use during their lifetime.

So there's some of those assets out there as well. We're just trying to hear any thoughts or recommendations on how to kind of approach the overall estate planning process, things to maybe think about to ask at the visit with an estate planner or any other recommendations you might have.

What type of assets do they primarily hold? Mutual funds, IRAs, real estate, etc.? Yeah, probably primarily real estate and mutual funds and maybe individual equities as well. So with estate planning, obviously it's an extremely broad question. So let me give you just a couple of specific suggestions, which are about all I can do in this context, and then a couple of broader comments that might help you.

The best thing that you can do for them to have a productive meeting with their estate planner, are they going to an estate planning attorney? Is that who their meeting is with? I'm not entirely sure. It's an estate planning attorney or it's probably part of a larger firm that has those services.

They're the same firm that kind of worked with my father, my grandfather. Okay, so it's likely a law firm and they're meeting with an estate planning attorney. The most useful thing in preparing for the meeting with the attorney is to have a complete balance sheet prepared that has the information on each particular asset class.

So they'll get the best bang for their legal buck if they don't have to waste a lot of the attorney's time coming up with the details. So if they are owning, let's say real estate, they should come in with a balance sheet, a net worth statement, that says a list of the properties.

So if they're individual properties, I would have on that list of paper, I would say one, two, three, Maple Street. On that you need to have the value of the property. This one is worth two hundred thousand dollars. Put the tax basis or an estimate of the tax basis.

The tax basis in this property is $100,000 and then make sure any ownership information is listed on that property. So if it's individually owned, if it's held in an LLC, whatever the ownership information is listed. And then any of course indebtedness as well should be associated with that. So if they can come in with a complete list of all assets owned, all investment accounts, any investment account that is a retirement account, it should be listed there.

That investment account listed beneficiaries, contingent beneficiaries, a list of any same thing with stocks, if they own stocks or mutual funds that are outside of retirement accounts, they should list those accounts and make sure to list their estimate of the tax basis in those stocks. And they should make a complete list of all of their property.

If they have physical property that's significant, personal property, they should make something of a list of that and just come in with a complete balance sheet. If you come in with a complete balance sheet, that will help the estate planning attorney to have the data that they need to talk through any recommended strategies.

Additionally, they should think and talk about what they would like to have happen. What's important to them? Is it important to them to provide money to their children and to their grandchildren? Is it important to them to provide education accounts? Is it important to them to fund a certain charity?

What's in etc. And then if they have information from their financial advisor and/or if they can prepare themselves, they should come in with some kind of an estimate of what their assets, what's expected to happen with their assets during their retirement years. If they are, how old are your parents?

Mid-60s. Okay, so if they're in their mid-60s and they're planning to retire and they're going in to sit with the estate planning attorney and their financial projections for retirement show that they've got two or three million bucks, but this is probably going to be drained down to nothing by the time they die at 95 years old, then that's one direction of the planning to go.

If on the other hand they're living on the income from their parents trust and they've got two or three million dollars set aside here and that two or three million dollars is just going to be invested purely for the long-term benefit of the children, that's a very different scenario because if they aren't spending two million dollars, they're just starting with two million dollars.

If they've got a 30-year investment time horizon and let's say they could earn 8% on their money, then very conceivably that investment could, that two million dollars over the next 30 years could grow into 20 million dollars. And so the numbers in estate planning can get very big very quickly.

So they need to have an estimate of where things, sorry, a balance sheet, an estimate or some kind of projection from their financial plan in terms of their retirement distribution plans and an idea of what they would like to happen with the money. Then in the conversation with the estate planning attorney, they'll walk through those things and then they'll recommend appropriate strategies based upon what your parents are trying to do.

So that's probably just a simple answer that of what you can do and what they can do to prepare for the meeting. Is that good enough? That's great, thank you very much. My pleasure. We go on now to Daniel in Florida. Daniel, welcome to Radical Personal Finance. How can I serve you today, sir?

Hey, Joshua, thank you for taking my call. My pleasure. I've got a question for you with no answer, which is a tricky one. What I'm looking for is I'm trying to get an idea of what your particular paradigm might be for luxury purchases as opposed to investing. So I'm getting a little bit of a late start and recently re-listened to your episode on catch-up investing.

It was the doubling penny episode. And I'm trying to figure out how I structure my investment plan going forward with luxury purchases in the current day. So what's a useful paradigm to think about? You know, should I buy this new car or should I route this money into retirement and you know, make do with my current car for another five years, that sort of thing.

So I know that the answer to that is, well, you know, it depends on you as a specific individual, but do you have a particular paradigm that you would be comfortable sharing? Sure. How you think about that? Sure. The first thing I think it's important to look at is the actual situation and circumstances of your life.

For example, let's talk about a luxury like a house, right? A house can be a luxury expense. But it's also there's a measure of that house that is just necessary. You need to live in a certain place. But it's, in my opinion, undeniable that there's a component of a house that is a luxury expense.

Usually when most of us go and start looking at real estate, we start looking around and we like the places that are nicer. In my opinion, it's not wrong to buy something that's luxury if it's not going to cause many other harm, many other problems or harms to your, you know, something important and/or it's going to make a major benefit.

So in my situation, my wife is just caring for all our children, right? She's at home all day every day. I think it's entirely appropriate for us to have a more luxurious place for her to be with the children so that she has adequate space, so that she has adequate amenities, things like that that are going to be helpful for her because that'll make a dramatic difference in her experience of life.

And so I think it's important to prioritize that because it helps something that's very important to us, the integrity of our family. I would view that very differently if it were just me and I'm talking about, you know, is it wise for me to buy a luxury house that's just going to sit empty while I'm away every day?

And the reason what I'm driving at here is who's going to benefit? It's very nice for me to have as a single man, it's very nice for me to have a hot tub, a big pool right on the intercoastal, a nice boat to park behind that. But I think it's really foolish because if I'm working, I'm going to spend most of my time working and it just doesn't seem smart to me to do that when I can just rent a five-star hotel on Miami Beach whenever I want to go and do that and I can rent a boat whenever I need to do that and I'll rent the captain with it.

So the luxury of a larger house is at this stage of my life a more helpful thing because it's fitting something that's actually really important. And yes, I could, you know, we could stay living in a tiny little travel trailer. We could do it if we had to but I'm not willing to do that.

I have enough money that I can afford the luxury. So practically speaking, I would say what benefit am I going to get from this? So now to your car example. Let's say I have a perfectly adequate intelligent car. It's a perfectly reasonable car and I've decided that I'm going to, I'm thinking about upgrading it.

Well, I would say why am I thinking about upgrading it? What benefit am I going to get for having a newer car? If the older car is pretty safe and pretty reliable and pretty functional, but I just want a newer one because I'm tired of this one, to me that doesn't seem particularly useful.

But if there's some other benefit of the car, perhaps it's going to be, it's going to be better for our children. We're going to have space. Perhaps it's going to be safer. Perhaps there's a safety feature on the car and I have the money. I think that's appropriate. I had a family member recently who just bought a new car.

They bought a new Prius and one of the reasons they bought it was, of course, Prius is the second, the smartest choice for anybody that can't get away with a minivan. A vehicle. But one of the reasons they bought it was because of the upgraded and improved safety features, the anti-collision features and things like that.

And because his family member was getting older, they thought that that was a useful thing. They had the money. Is it kind of a luxury purchase? Kind of. But there's a benefit there. That's a really legitimate benefit in terms of those advanced safety features, the anti-collision features. That's very helpful to an older person.

So I look at it and say, is there actually a benefit? Now, it's your money. So if there's, you weigh the benefits based on their own basis, because in life, maximization of net worth is not the ultimate goal. The winner is not the one who dies with the biggest trust.

There's other components to life. And so even if you just say, I want to get another luxury expense because I just want it, I'm okay with that, as long as you can afford it and you're thinking about it. And there my tool is to say, what does this mean for me in the future in terms of the alternative use of the dollar?

Let's say today I go and make a $50,000 expenditure. Well, if I don't make that $50,000 expenditure, what else would I do with the money? Would I invest it? And if so, how much would that $50,000 be worth to me in the future? And here, I think, is how we bring things into a matter of timing.

When you're 20 years old and you're thinking about going and buying a luxury sports car, let me just do some quick math here. Let's say you're saying, I have the money. I'm gonna buy a $100,000 luxury sports car at 20 years old. So we'll start with that. And fast forward, you can imagine yourself being 65 years old.

So you've got a 45-year investment time horizon. Let's say you're investing your money at 8%. Well, that $100,000, if you could invest the $100,000 today instead of buying the luxury sports car, that's $3,192,000 that you could expect to have at the age of 65. Now, in this situation, that's probably a really compelling feature.

And it's really good for that 20-year-old to say, I'm gonna wait on this sports car until later, and I'm gonna build towards that $3.1 million. Now, fast forward to the same person at 60 years old. They have $3.1 million. Then that $3.1 million is gonna grow. They have a business that they're doing fine at.

Now, they do exactly the same calculation and say, well, how much would this $100,000 be worth at retirement? Well, the answer now is that $100,000 would be worth $146,000. And now they look at it and say, would I rather have this $100,000 luxury car or $146,000 in five years?

And there's a decent chance that they're gonna say, I'll go ahead and get the car. So you have to bring in the time value of money, and you have to bring in the opportunity cost. What are you giving up by having the opportunity cost, and what are you getting in the time value of money?

You should think carefully about the opportunity cost and consider the costs for other people. For example, I've bought lots of nice things. I've bought lots of fancy things. What I have learned about myself is that my number one priority is financial freedom in terms of money. I don't ever want to be in a position where I have to make a decision I don't want to make because of money.

So I don't want to live somewhere that I have to live because of money. I don't want to say something or not say something that I want to say because of money. I want to be in a situation where at any point in time I can do what I want to do.

I can live how I want to live, and I can say what I want to say without worrying about money. And for me, the magic key to that is frugality. Back to a long time ago, I did a show where it was talking about lentils. And I can't, it was a short little one that I did.

Basically, the parable where one philosopher said to another, you know, if you... I'm gonna mess it up. He said, you know, if you would say nicer things to the king, you wouldn't have to eat lentils. And then the other one replied, I eat lentils. So I can... The point is, by having frugal, by being able to eat lentils in that case of the silly story, the philosopher didn't have to suck up to the king.

And so for me, I'm gonna weigh a luxury purchase and say, does this mean I'm gonna have to suck up to the king? Does this mean that I'm gonna have to pretend that I think something I don't think? And if so, I'm gonna walk away from it. Now, other people don't have that.

So I think with that time value of money, are there actually benefits? And in terms of your own opportunity cost, what would you be giving up by making the luxury purchase? When you weigh it that way, then you can wind up at a fairly rational analysis to decide if that luxury purchase is right for you or not.

Okay, that makes a great deal of sense. And I do have a quick follow-up question if you have a second. Go ahead. It may be a way of restating the previous question. But given the history of what you talked about on the show, I guess you probably wouldn't be offended by being described as an economic doom and gloomer in the long run.

And I am 100% there with you. Does that inform your investment decisions with regard to current luxury purchases? My investment plans have always involved the presupposition of a 7% real return. And over the years, I've become very, very, very uncomfortable with that presupposition. And it would drastically change my investment life going forward if I were to adjust that to, you know, say a 3% or a 4%.

At what point do you, whether in your personal life or whether, you know, giving me advice, at what point do you say, "Hey, enough is enough"? Where do you draw the line at, "Let's be reasonable"? I don't know if that's a question that makes any sense to you. It does.

Or if that's just a restatement of the previous. So I'll answer it. Before that, while you were speaking, I looked up the lentils anecdote that I butchered, and here it is. The philosopher Diogenes was eating bread and lentils for supper. He was seen by the philosopher Aristippus, who lived comfortably by flattering the king.

Said Aristippus, "If you would learn to be subservient to the king, you would not have to live on lentils." Said Diogenes, "Learn to live on lentils, and you will not have to be subservient to the king." And that particular version of the old parable is from The Song of the Bird by Anthony DeMello.

Episode 525 was dedicated to that particular parable. And so that is what I was grasping for in my previous answer. So first, to correct the record, I don't see myself as a doom and gloomer. I'm not somebody who, in fact, I'm extremely optimistic. But what I try to do is I try to temper that kind of optimism with realism, so to speak.

To me, it seems irrational to be pessimistic, to always see things as worse than they are. But it's also irrational to basically screw up your courage and say, "Well, it's always going to be great." Because the answer is no, it's not always great. This always bothered me when I was a professional financial advisor, when I managed money.

Because there is a component of that business where you always have to say, "It's always going to be great." And you do that because you're trying to influence your customers in a certain direction. But you also do it sometimes because you're trying to influence them to purchase something that you have.

And so you always say, "Oh, it's going to be great." And this always bothered me because I could defend that to some degree rationally. But I think there is a point in which you say, "No, it's a good chance things aren't going to be great or they're not going to be great for this particular time." So I am deeply optimistic about my life, etc.

But I look around at circumstances and I say, "The things of the past are not always going to continue as they are." So the United States, for example, is not going to always be great just because it's the United States of America. This is a perspective that many US Americans hold.

"We're the best." Well, first of all, you're not the best. You have to look and say, "Well, are we the best in anything? What is the basis?" Because there are lots of countries that are better than us on almost anything. And then you have to look and say, "Well, what caused somebody to be in that situation?

And what was it that they did that led them there?" And that's to me what I say, especially when I look at the United States. I do have a whole lot of doom and gloom in the future of the United States because as far as I'm concerned, the things that caused the United States to be great in many areas are no longer the case.

So just a slight correction. Now, to your point about interest rates and rates of return. First, it is impossible that on the whole of everything, real interest rates on investment classes could be 7% or 8% forever. It's not possible. And the reason is because if you look at the time value of money and the compounding of money, once that interest starts going forever, once that snowball just keeps picking up and picking up, eventually it consumes the whole world.

Compound interest calculations become absurd because if they're at a high rate, you basically consume all the resources of the world. You can do an example and you can say, "Let's start with a molecule of air." And you start doubling that molecule of air or giving it a 7% return or whatever.

And very quickly, you get to the point where every molecule of air in the entire universe is consumed. And so the same thing can happen with investment predictions. So can you have an invest at real rates of return across the entire economy at 7% into perpetuity? My answer is no, you can't because of the compounding of that.

So it just can't work. And it hasn't worked throughout all of human history. But does that mean that you can't get 7%? I'm more skeptical there because in every market, there are going to be winners, there are going to be losers, there are going to be different markets. And I think you as an individual could manage your money in such a way that you would be able to find yourself that real rate of return that you need.

And so the key is not to look at markets in general, but to say, "How can I do it?" There is a paradox in investing. Your highest rate of return of your personal activities can come at your earliest, smallest stages of wealth. It's very easy for a poor person or someone with low income to invest at a much higher rate of return than 7%.

Very, very easy. And so if you are at that stage of wealth, you can invest at 7%. We can bring anybody up and just through simple frugality, I'll give you an example. One of the things I noticed a lot, and I'll include this when I do more shows on what I learned RVing, but I was bemused to see how much money I could save on fuel by planning ahead with my fuel purchases.

What I do is when traveling, I use GasBuddy to find out where the cheapest fuel is. And I would try, when I knew where I was going, I would try to time out my fuel stops with the range of my truck in order to save money on fuel. Because I could save very frequently through using GasBuddy.

I could very frequently save in excess of 50 cents a gallon. Now, 50 cents a gallon savings doesn't sound like much until you put it out over a 37-gallon fuel tank and over 10 miles per gallon, and all of a sudden, 50 cents a gallon can add up quickly.

So just simple frugality of knowing what station in your town has the cheapest fuel can be very powerful. I'm amazed when I see people sitting at the expensive gas stations that aren't particularly convenient filling up their vehicles. I think, don't you know that two miles over and one mile to the side, you can save 50 cents a gallon if you just use GasBuddy and get there.

A poor person who's living week to week and just has just enough money, that $15 savings can be a big, big deal and gives them a massive rate of return. But to a rich person, that 50 cents per gallon issue is meaningless. So what I say is, go for the highest rate of return you can, recognize that at the beginning of life, you can get a much higher rate of return by redirecting your energy and attention, and then keep yourself nimble.

And so this is one of the reasons why I've basically walked away from large publicly traded securities markets. I don't see any reason why I should put my lot in with everybody else when I can go and invest at higher rates of return on my own. They exist, the markets exist, I can find the inefficiencies, I've worked hard at it, I'm going to continue to work hard at it, but I can do a whole lot better than 3%, I can do a whole lot better than 7% if I put in the work.

Now if I'm a multi-billionaire, it'll be tough for me to be involved in those markets, but I'm not a multi-billionaire, so I can get a higher return. So not doom and gloomer, I just say, focus on what does work and invest where you can make the higher rate of return.

And unless you're super rich and managing a really large portfolio, which is tough, I think you can, for yourself, make those higher returns. And in the aggregate, in the macro economy, in time things will shake out. There's always going to be an interesting corner that you can go and pursue if you keep yourself nimble in your investment approach.

Awesome, that makes a great deal of sense. Thank you. Play where you can, don't compete with people you can't compete with, compete where you can compete well. If you're big, don't go be a jockey. If you're little, don't go play football. All right, we go now to the state of Oregon.

Welcome to the show. Tell me your name and how I can serve you today, please. Go ahead. Oh, hello, this is Grant. Grant, welcome. How can I serve you, Grant? Yeah, I just had a question about, so my wife and I have recently been married. We are just married a little bit.

We're also married in like seven, eight months. And I was just wondering, our age gap, though, is pretty big. Like there's about an eight-year gap between us. And I was just wondering what you had on advice for maybe like rental properties or maybe what type of insurance products you would recommend in case I die before planned, so to speak.

How old are you and how old is she? I'm 31 and she is 23. Well, at that age, there's not going to be a lot in this way. So there are two major issues, I think, that come into play when doing financial planning for a married couple. The first issue is going to be more philosophical with regard to having children.

So given that she is younger, if you guys desire to have children, that will be a better solution because a 23-year-old is far more able to have children easily, safely, comfortably, et cetera, than is a 43-year-old. And so in your financial planning, if you desire to have children, she has a good number of years where she can still have children.

And so in that case, things are really good. And even financially, anything that's of interest regarding to children is going to be cheaper at this point in time. They actually use a term in motherhood, they call it geriatric. They used to do this. I don't think they came up with a euphemism for it, but they would call it a geriatric pregnancy if a woman, I think, is in her middle to late 30s.

So one component would be think about the phase when, if you guys desire to have children, when you desire to have children, et cetera, and recognize that earlier is better. From her perspective, she is in the time of her life now where it will be the easiest in her life physically to have children and the energy, et cetera, to have children.

Now the conflict there is with society because in general, the US American society doesn't look kindly on young people having children. And so there's an argument there with biology versus society that you and she would be well suited to discuss. But it's in her, your best interest as a couple if you want to have children to have children now at a young age versus waiting till later.

That may mean that you may need to reorient your finances around that. So if you need to adjust your living circumstances so that you can afford to live on your income while you have young children, that would be important, but that should fit into your financial plan. The good news is with your being older, in many ways, it is an ideal situation where at this point, you probably are more established in your career.

You're in a place of being more established in your personal maturity. And so you have enough income, enough maturity where you can support the household and have children at a young age. That's different than many people who are younger and get married younger and they're scrapping around at low wages and not being established in their career.

So that's one thing to talk through and to consider. The second thing then involves the end of life planning. So statistically, you will die before she does just simply because you are a male and she is a female. So that's always important to plan for. And because she is nine years your junior, eight years your junior, then there's a good chance that that will play out even longer.

So there's a good chance that she will be a widow for a longer period of time. Now, of course, you could die middle age, she could remarry, but if you live and grow old together and then you die at an expected time for a male and she dies at an expected time for a female, there's a very good chance that she will be a widow for an extended period of time.

And so you want to make sure that you plan ahead for that and make sure that she is prepared for that. So making sure that you have plenty of assets, making sure that you have plenty of life insurance money at this stage. As your assets grow, you have to plan for her to have a long life as a widow and then make sure that she develops the financial skills and has enough good financial advisors around her where if she is left as a widow for an extended period of time that she knows how to handle the money.

One of the major challenges in many relationships is most often the husband is drawn to managing the money and if the husband dies and leaves behind his wife a widow, but she's not prepared to handle money, to understand what the family's investment plans are, to understand all of those details, then that can be very difficult where she's caught unprepared.

And so make sure that she's prepared for that circumstance. Is that helpful at all? Any other follow up questions? Is that kind of what you're thinking? Yeah. You know, I mean right now we, my wife is pregnant and so yeah. Congratulations. That's good. Congratulations. Yeah. You know, so we are definitely talking about that and you know, I just didn't know if you recommended say like whole life insurance, you know, as a result of our age gap.

Right now I have a 20 year policy with, for a million dollars, but I just thought because of our age gap, like you said, she could be widowed for a significant period of time. Does it make sense for that? Maybe I mean part of my financial plan is to kind of pursue rental real estate as you know, a way to kind of help carry her over for that period of the time that she could be, you know, widowed for a long period.

I just didn't know if there was one that you said, Oh, that, that seems like a better fit maybe. Not necessarily at this point. And let me ask you, tell me about just very briefly about your career, how much money you have and how much money you're earning. So I am an accountant and I have our, we are currently debt free and we have probably I think $27,000 in net assets and I make $78,000 a year.

Great. So to answer your question about insurance, the only change that I would suggest that you consider is in addition to your 20 year level term insurance, I'd love to see you with some annual renewable term insurance. And the reason I say that if your wife is 23, then if her body functions according to the normal pattern, it's conceivable that you guys could have children anywhere along the lines over the next 17 years.

And so up until about age 40 would be the normal age at which you would, you would stop conceiving children naturally. So that would be the normal process in terms of biology. Fast forward and also in terms of you would have to consider, you know, do you want children, how many children, et cetera, all those things.

But if you fast forward 10 years down the road, if your wife is now 33, you'd be perfectly reasonable for you to have more children in her early to mid 30s. There would not be any kind of, you know, difficult thing medically. If you're in good health, she's in good health, that could be very normal.

Now in your 20 year life insurance policy, that means that 10 years from now, you would only have 10 years left on that policy. And if 10 years from now you have another child or 15 years from now you have another child, then now you only have five or 10 years left on your 20 year term policy, which means that unless you are financially independent and able to self-insure because of your assets, now you're going to be, you might have a problem.

Now most likely everything would be fine. You would just go ahead and apply for another 20 year term policy. You're healthy, nothing's happened. You could just get it. That's what happens for most people. But I don't like those risks. So what I'd rather you do is have an annual renewable term policy that you can keep for a very long time.

There are companies in the market that sell it. You can keep it as term life insurance up until you're 60, 70, 80, depending on the company, and the premiums are adjusted to your age and they just go up a little bit each year. All of the term life insurance that I own for myself being in a similar situation as you is all term life insurance.

Sorry, annual renewable term life insurance. I don't anticipate keeping those policies as annual renewable term life insurance until my policies can be enforced until the age of 80. Technically, the premiums are miserable when you start to get into your 60s and 70s, but technically I could keep them until I was 80.

I don't intend to keep them that long. But what I will do is I will have them until our situation starts to be more apparent, our financial situation 10 years, 15 years, 20 years from now, and the progress of our family and our children. So if things have happened that my wife and I have had children, we're not going to have any more children, our youngest is three or four years old, at that point in time I'd be happy to go ahead and drop my annual renewable term after having replaced it with a level term.

But at this stage of life where you're not quite sure about any of those details, I'd much rather you have annual renewable term insurance. That also gives you possibilities if over the long term you want to be in a situation where you might want whole life insurance. So all of my term life insurance policies can be converted to whole life insurance until the age of 60.

Now I'm not planning to convert the majority of my policies to whole life insurance policies. That would be too much if I converted all my term. That would be too much whole life insurance for me to have in terms of the usefulness of whole life insurance. But I like having it available as an option so that if I get sick, get hurt, get fat, you know, start racing cars, flying airplanes, scuba diving every other weekend, and jumping out of planes too so I can't get insurance anymore, I like having all that stuff locked up.

So if we are extremely financially successful, I'll just go ahead and I'll move my term life insurance policy into a life insurance trust. I'll have the trust convert the policy to a whole life policy, and then we'll keep the policies there. And so the annual renewable term is a far superior planning mechanism to give you all of those options.

To answer your question though, I don't think any significant amount of whole life insurance at this point in time would be appropriate. Be fine to get a little bit if you want some because you're younger, but at this point you need to build wealth. And whole life insurance is not a good primary plan for building wealth.

It's better for you to invest into something that's going to have a higher rate of return, and then just use whole life insurance as a place for some of your longer term safer dollars that you're not going to invest into more aggressive pursuits. And I think it would be inappropriate at this point in time for you to pursue much of anything.

Fine if you want to have some $25,000 policies, $50,000 policies, put a couple percent of your income into that, but I'd much rather have you get higher rates of return by investing aggressively if you want to do real estate or investing in your business, buying multiple practices, building up your tax business, selling more products, etc.

Getting your income from $78,000 a year to $178,000 to $278,000 to $578,000 to $1,000,000. That's what I would like to see you do. And then as your income rises, then feel free to revisit the whole life policy discussion down the road. However, your job is to leave assets behind for her.

You can do that. She can spend the money perfectly well if it comes in as a life insurance settlement or if it comes in as a giant real estate portfolio that she just steps in and takes over the trusteeship of. That's no problem. And I think it's premature for you to worry about that at this stage.

That's perfect. I really appreciate the advice. Congratulations on the baby. I hope that you enjoy the process and don't forget that it's a very special time. My encouragement to you, Grant, is this your first baby? Is that right? Yes, it is. Okay. Yes. So spend the money and enjoy however many months remain until the birth of the baby.

Spend the money and enjoy some of the special things together as a couple that are hard to do when you have young children. Young children are great. They also are going to dramatically change your lifestyle. So if there's anything on your list, on her list, if you want to go snow skiing or if you want to do anything that is crazy, go ahead and do those things now and spend the money now.

You can always make up that money later, but I think you and she both will appreciate that going down the road. We go now to Texas. Austin, Texas, welcome to the show. Tell me your name and how I can serve you today, please. Hey, Joshua. My name is Coulter and I am looking to sell my business in a couple of years and looking for your perspectives on whether it would be more financially wise to try to lean out expenses over the course of the next two years to show a higher net income, which is ultimately a function of what the business is going to be worth, or if I should focus on driving sales higher, which hopefully would lead to a higher profit margin.

Is there a reason why you wouldn't do both of those simultaneously? Did I lose you? I'm still here. Sorry about that, Coulter. Yeah, sorry about that, Coulter. I muted one of my mics. I need a cough switch on my recording setup. Is there a reason why you wouldn't do both of those things simultaneously?

Not necessarily. They don't have to be mutually exclusive. I just thought a little bit more detail. It's a roll-off dumpster business, so it's going to be a pretty asset-heavy business. We're currently doing about, I don't know, $700,000 in sales. Net income last year was about $180,000. So obviously, the more dumpsters that I purchase, provided that I can get them rented out, it's going to drive sales higher.

I've been a little debt-heavy. I've got about a $300,000 business loan over the course of the next couple of years. I anticipate getting that down probably to $150,000, $200,000. Just curious if you had any thoughts in regard to this whole situation. I do. It's an interesting area of consultancy, and I'm not qualified to give you a proper answer to the question.

But I had a friend of mine who I used to refer clients to, and I'd be happy to refer you to him separately for a conversation. I haven't spoken to him in a couple of years. I think he's still in the business. But I have a friend of mine who exclusively did this consulting.

He exclusively would consult with people who were thinking about selling their businesses in order to enhance them, in order to enhance the value. It always interested me to study. I have a couple of books saved in my library that I haven't read yet on the subject. I've always thought this would be something that I would really enjoy practicing in.

It's one of my backup consultancy business types of things that would appeal to me in terms of a niche to operate in. There is a huge cornucopia of options available to you to enhance that business. As you are rightly identifying, it's a big, big deal. It's a big deal how you ...

Whatever you do here is a big deal. It can make a big difference in terms of your savings. I don't know what the specifics are for your business. Here's how I would approach solving the problem. First, I would look for any books that are on the subject. I can't remember off the top of my head what those books are that are in my library.

I will try to look for them. I would go online and search for ... Start at Amazon, of course, and search for business valuation, search for selling my business. I would look for any search terms related to that. As you go through the process of searching those search terms, see what books come up, read the reviews and the categories and try to figure out what the process is as far as what terms are going to be used.

Amazon's recommendation engine is so good that that'll be your best place. They'll provide a couple of books for you, but go ahead and order a couple of books on it. Also, then go to the business press, companies like Nolo, see if they have anything. You should be able to find their titles in the Amazon search, but go to Nolo.com and search for business valuation there and see what they offer in terms of selling a business.

Start by ordering half a dozen or a dozen books on the subject and then work your way through them, the way that I handle things like that. Buy the books. It'll be less than a dozen. I don't know if it's a dozen, but it'll be less than a dozen that will have good ratings, be current, et cetera.

Order those half a dozen books and just go through them. At least get an idea of what the issues are. Read the relevant sections. You don't need to read them all cover to cover, but read the relevant sections so that you understand what those books talk about. Then I would use those books as a way of referring myself to the people who are writing them because those experts who've written the books are probably decent people for you to reach out to for a consultation and get their specific advice.

Also importantly, I want to say more importantly, but I don't know if it's more or just simply also importantly, you want to do some research in your personal industry. If you know anybody who has sold the business or if you know anybody in your industry or anybody who's bought a business, call them up and ask them for any information on that process.

If you know somebody that sold a business, I would go and see them. It's probably your best bet. You can call them and talk to them on the phone, but probably what I would do is I would go see them. Just book a plane ticket and go sit down and buy them lunch or if they'll give you the time and go see them and ask them questions about what worked well for them and get their information of what worked well, who did they sell to, how did that process go, were there brokers involved, what did they wish that they knew and interview them for the specifics of your business.

If they refer you to a business broker, somebody who is selling businesses that are in your industry, I would go see that business broker or have them come see you or at least talk to them and develop a relationship and get their input and information on how to actually position your business.

So they'll be the ones who can answer the specific question of should you invest in what's going to make the biggest difference in the negotiations. Would it be helpful to you to have more dumpsters out and more contracts or will it be helpful for you to have a higher net profit because your financing is eliminated, etc.

Those are the people who will answer that question for you and then follow their advice and then my only other comment is work to see if you can groom your own buyer. One of the mistakes that people make is they just take whatever buyer comes along and usually if you can groom your own buyer, you'll be in a better situation.

So if you think the ideal buyer is a big corporation, start making the contacts at that corporation. Start connecting with them, start meeting the people, do your research before your industry conference, whatever industry conference you go to, research who are the representatives of that industry who are going to be there, make personal friends with them, get the inside track so that those corporations, the large people that you've got the connections there.

If you think the best buyer for your business is a small local buyer, start looking around and seeing can you groom somebody, can you groom a team, can you groom an employee, etc. Because if you'll groom your own buyer, then you'll be able to profit from it in the, you're going to get the highest valuation that way.

And then finally I would say analyze the structure of the business to see if you can separate the component parts in some way that will help you in your overall long term financial plans. For example, if your business owns, and I don't know how this applies to yours, I just want to use it as an example.

Let's say that I am a physician and I own an office building that I do my practice in or any business really. The real estate is going to be separately valued from the business. And so of course you would own the real estate and the business separately because you would do good planning there.

But the point is for you as an individual, you're going to sell the actual business based upon the business valuation and you'll sell the real estate based upon the real estate valuation. But in your own planning, if you can separate the component parts, try to make it easy for yourself to sell the business but not the real estate.

And so in your personal business, if you haven't already separated the component parts, separate the component parts so that the business can be valued, so that the assets can be valued, and then you might want to hold the assets and lease them out or you might sell them, it's up to you.

But think about how you can structure all the components of everything you own so that it works best in terms of your long-term financial plan. Because if you can keep the assets and lease them back to the company, whether it's a real estate asset or the physical assets, maybe you own all the dumpsters outside of the operating entity and you say, "Well, I'm going to keep the dumpsters and I'll just lease them," or whatever it is, however you structure it, then if you can profit on each of the components the best, I think that's also something worth considering.

So that's the best advice I got for you. I don't know a specific question, but that's how I would go about researching it. And that's how you find the people who will answer those questions appropriately for you. Perfect. No, that's great. I really like the idea about grooming the buyer.

That's very sage advice. If you can do that, it's going to be your best win. Now, businesses, the individual business might be outside of one individual's ability to buy, but if you can bring in the buyer that you've developed, you might hold a note for that buyer or something like that, that'll be your best because you'll have a confidence in their ability to run the business, you can help somebody else and still profit really well from it.

So those are my recommendations. That's it for today's show. I hope you enjoyed the Q&A show and I will be back with you very soon. Stay tuned and thank you for subscribing. I guess the last thing I'll pitch here at the end, I'd love more reviews. Last time I checked, we were at 985 reviews for the show on iTunes.

I would be thrilled to get that number over 1,000. So if you'd do me a favor, if you've enjoyed today's show, grab whatever you're listening to me on, tune in, Spotify, iTunes, Google Podcasts, whatever you're listening to me on, grab your phone if that's where you're listening to me, click review, rate, and leave a comment.

10 words, one sentence, two sentences, perfect. And that would be super, super helpful to me. So thank you for doing that today. Be back with you soon. Struggling with your electric bill? Get an energy assist from SDG&E and SAFE. You may qualify for an 18% discount. Visit sdge.com/fera to find out more.