As a major research institution, Arizona State University offers the most online bachelor's degree programs, along with world-class faculty and dedicated support. Discover why ASU is ranked number one in innovation for nine consecutive years. Tap to learn more. 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.

My name is Joshua, I am your host, and today we host a live Q&A show. It's just like the radio, got open phone lines, callers waiting on the line, I open up the mic and we chat about any topic you desire. At the moment, I do not record these shows on a specific daily schedule.

For example, I don't record them on Friday at 8 o'clock in the morning or anything specific like that. But if you will watch your podcast feed and/or my Twitter account, Twitter of course is twitter.com/joshuasheats. If you will watch those two resources, I usually put them out. So of course, this particular show I have advertised on the podcast feed to listeners.

That's how these listeners got on the line. And I also work hard to do these shows regularly for patrons of the show. So of course, you can join at patreon.com, find Radical Personal Finance, and that's how you get access to these calls. But I would love it if you would call in to the next show.

I always enjoy fielding listener questions, taking listener comments. And so I hope that you enjoy these. I've always had good feedback from the audience that these shows are interesting and I love doing them. We go first to Dan in Calgary, Canada, Calgary, Alberta, Canada. Welcome Dan to the show.

How can I serve you today, sir? Hello, Joshua. Well, thanks for opening the Q&A session up to the public. I was really excited about that. But being from Canada, I didn't have a particular technical question to ask you that I thought you haven't already covered in some way for Americans.

So I decided to try to have a discussion with you. And I'd like to challenge your endorsement of capitalism. In the past, you've stated that you don't invest in publicly traded companies. You don't think they are an ethical place for your money. And you've also said that you don't support the current feminism movement because you believe it demonizes motherhood.

And so with regards to feminism, I would argue that it demonizes motherhood because we live in a very capitalist society that only values people on their income. So if we got rid of that value system, then feminism could focus on other things. So I guess, in summary, do you think capitalism has become too...

Okay, I guess another detail is that the current state of capitalism is very different from the kind of theoretical, like small business. I think small business capitalism is great. It provides lots of benefits to society. But I think maybe it's become too big and out of our control, where we're all just cogs in the global financial system.

And because we don't have a close eye on our money, we can't use it to act ethically. So has capitalism become too big? And is there a way to regain control of it? I love the question. Thank you for calling in with such an interesting question. One of the things when I've tried to trigger audience members to call in and talk about something interesting like this, and usually people want to talk about technical questions, which of course I love to talk about.

But I love these kinds of conversations. I think they're good questions. So first, for clarity, Dan, are you thinking about this abstractly? Or do you have a solution? For example, if not capitalism, are you an advocate for communism, for socialism? Are you advocating for a certain alternative economic theory?

Or is this just more you're thinking through the issues and wondering your way through? I do have some thoughts on replacements, but I don't think I can argue strongly for them. However, I think Europe, I've seen some very interesting things out of Europe. They have one policy of is a right to repair law.

So it tells Apple, if you want to sell products, you have to give consumers the opportunity to repair them, and not just be tied into continually buying new products. And that kind of fights the kind of free reign capitalism has. So I do believe in the free market, but I also think heavy regulation can be beneficial.

And then also in regards to the income tax, I was just listening to one of your shows where you believe in a flat rate tax. And again, in the context that the capitalism has changed from what we think of it as just like a business with people, it's changed to become this global system that just works to gain more money and not actually help people.

So yeah, I think heavy taxation. And so in terms of incentives, you would, I don't want to put words in your mouth, but I think you would say that people are incentivized to gain money when they work hard. But I would think that there's a limit to that. And that we don't need incomes over a hundred thousand or 200,000 that you can have other incentives than income if your basic needs are met.

And I believe people would pursue those other incentives. - Right, right. Yeah, so you've mentioned a hodgepodge of ideas, and I think I'll freely share my own personal opinions. I would say kind of as preamble, I don't think any of us really live in a purely capitalistic society. None of us live in a pure society.

And so when talking about capitalism or socialism or communism, in my observation, I think we're all dealing with just a mixed bag. For example, I really, you know, officially, China is officially communistic. And yet, if you're interested in free market business creation, it's one of the most exciting places in the world because the Chinese government has massively liberalized the ability of individuals to own the tools of production, which of course is the classic economical description of free market capitalism, who owns the tools of production.

And so although it's officially communistic, then, but yet there's a lot of free market opportunities there. Now, on the same hand, you know, the United States would like to be billed and advertised as the world's defender of free market capitalism. And yet, in my observation, at least the US economy is an extremely distorted and regulated market that has substituted free market capitalism for crony capitalism and has really substituted a lot of problems.

And so I would not call the US American system of enterprise a pure model of capitalism. So I think what would be most interesting is to talk on a few of the ethical issues that you raised. And in my mind, there is a common theme. Perhaps we would never approach the idealistic perfection.

If I could advocate for a strong position, I would happily advocate for a strong free market capitalist system without the intervention of government agents in the tools of production, in the ownership or the management of the tools of production. But I also think that some of the issues that you mentioned are not a perfect example of capitalism.

For example, you mentioned the right to repair laws. Ideologically, I'm in favor of those right to repair laws. And for the uninitiated, my understanding of the right to repair laws is this. Let's say that you purchase a piece of equipment. Usually here we're dealing with electronic equipment. And you buy a phone and the screen on a connector on your phone goes bad.

So you open up the phone, you take out the connector and you swap in another connector. Well, officially doing that, many of the companies, the electronic companies or electronics companies are adding stickers that says if the user repairs this device, it completely voids any kind of company warranty associated with it.

So then separately, you fix the connector, but then the screen goes bad and it's completely unrelated to the connector and you file a warranty claim. The company is in a situation where they're going to deny that claim because you opened up the phone. And it's evident that you opened the phone.

Well, I think that's wrong. It should not be that way. It's your device, you paid for it, you're allowed to work on it. And that's what my understanding of the right to repair laws are. And so I would advocate for that against whatever Apple would say or whatever Samsung would say or whatever these companies would say.

I support that. I'm in favor of that solution. But I see that as an extension of the ethics of private property, which is the basis of my understanding of a free market, my understanding of capitalism. Now, similarly, I think that there are interesting discussions that usually no one really cares about except weirdo political commentators.

But for example, recently I was thinking about intellectual property law. And I was listening to a presentation from a strongly libertarian attorney. And libertarianism would be where I would draw a lot of intellectual stimulation, a lot of intellectual arguments. Of course, I try to be a little bit more pragmatic than many libertarians.

But he was making a strong defense of why libertarians should oppose intellectual property laws. They should oppose the ability for you to trademark and copyright your inventions, etc. And I think in many ways I agree with that. I'm not fully persuaded one way or the other. In the past, I would have been a stronger advocate for intellectual property laws.

At this point, though, I've come to see them as pretty corrupt. And intellectual property laws really are not helping a lot of things. Now, I can't change that system. I'm not going to get on my high horse and start trying to convince people. But I see it all as flowing from basically an ethical root.

So what I think of as the ethical root in most of these things is based upon theft. It's my personal belief and ideology that all law flows from God's law. I see that as a unifying theme. Now, many people wouldn't see that as a unifying theme because they would have to appeal to some form of authority.

So some traditions would go to natural law, some traditions would go to other sources. But I would see it as flowing from God's law. And so one of the basic elements of God's law, what I would say is a controlling law for all mankind everywhere on the earth, is don't steal.

Thou shalt not steal. It's a fundamental law. Now, different people of different political persuasions support that or deny that in different ways. So for example, many of my friends who are secular libertarians would say, "Well, this is just a common practice. You can observe this in human history. It seems ethically sound through just ethical reasoning.

We can derive this application from a study of human history. It doesn't have to be rooted in God's law." That's fine, whatever. Most of us agree, thou shalt not steal. Well, if I think about a phrase like thou shalt not steal, there are two sides to that. There's the positive side of it, of don't steal, and then there's the other side of the converse, which means, well, that means that property rights are inherent and there's individual ownership of property rights.

And so that's the foundation, my theoretical philosophical foundation of something like property rights. So I just simply apply that, try to apply that principle consistently in every area. So what the government intervention then comes in is I see the vast majority of government intervention as a violation of the laws of theft.

So the basic useful and catchy phrase is that many people who would propose a governmental solution, propose the redistribution of wealth through government action, the action of government agents, they would say, "Well, thou shalt not steal except by majority vote." So if you can get everybody to agree that we should steal from that person and take that thing from that guy and give it to this person over here, then we can do it.

Then it's moral. So actions become moral based upon their outward consequences. And so many people would judge the morality of a nation. For example, this has become very common as here in the United States, and I don't follow Canadian politics much, so you'll have to comment on that. But here in the United States, of course, the progressive left has become increasingly vocal about the morality of wealth.

And there's a strong movement right now to declare the poor distribution of wealth to be basically an immoral system. So I don't buy that because of additional ethics that all flow out of my own personal Christian worldview as far as the responsibility that wealth brings, etc., and the responsibility for charity.

So let me just go back to a couple of your arguments, or to a couple of the points you raised. I agree with you that the systems that we face right now are troubling, as far as many things are troubling. I always like to start, and here we could just simply pursue an evidentialist argument and say, "Let's do a rational discussion of who is profiting the most and what underlying philosophies are profiting the most." So it's possible here we could create a fairly large tent.

Nobody has to agree with me in terms of my own presuppositions to the argument. We could just look and say, "Let's look at human history and let's try to understand where are people flourishing the most, where are people benefiting the most, at least as we can measure it by some markers, such as personal wealth, such as personal health, such as the ability to have the basics of life." Because this would again be, "On what basis would we do a moral comparison?

On what basis would we say one society is superior to another?" When I was in college, I spent some time studying under some extremely left-wing professors, and the basic argument was usually that you should measure the morality of a system based upon the results for the citizens. And so one of the most moral societies—there were two examples in the time that I was in college that were held up to be the most righteous and just and moral systems of governance and economic control.

And those two systems—I was in Latin America—but those two systems were Cuba and Venezuela. And the argument was, "Yes, well, Cuba is not doing very well, but at least they have a very low infant mortality rate, and at least they have universal literacy, and the source of all of Cuba's problems is the U.S.

problems with them, the U.S. control of their economy, etc." And then at that time, Venezuela was hailed as the paragon of human virtue and the way to govern an economy and a system, because, "Well, look, everybody's wealthy, everybody has money, everybody has all of their needs met." Well, fast forward less than—well, I guess a little bit more than a decade.

Right now, Venezuela, you can't drive a truckload of goods through Venezuela without getting robbed by the people that are starving in the streets. And the system is forcing—women are selling themselves and their children into prostitution just to eat. It's a totally corrupt system. And you see the evidence of that.

Cuba has all kinds of things that you also have to look at, because you have to look at violence and murder, etc., that also are associated with it. So I think there's a good, strong evidentialist argument that could be made that capitalism and systems of free markets have raised the most people in the history of the world out of poverty.

And I don't define that just in nominal terms, meaning I don't define that just in terms of the amount of money that they have. I'm defining it also in terms of quality of life that various people have, the ability to purchase the things that they need, the ability to have clean water, clean food, healthy food, etc.

So I think that's a good argument. I would say, however, that that doesn't mean that the current systems don't deserve a whole lot of scorn, a whole lot of correction. What I see, what frustrates me the most in the United States of America is crony capitalism, corrupt capitalism. The United States of America is one of the most corrupt societies on planet Earth.

And the reason has largely to do with the political systems. Now, most US Americans don't see their environment as corrupt. They don't see the society as corrupt, because external, obvious bribery, for example, I get pulled over by a police officer and he says, "I'm going to take your license, but $20 will get it back." That's the obvious forms of corruption that are present in many places that we travel.

Well, that doesn't really happen in the United States. The corruption that does happen like that is much more hidden. It's the contracts, the special dispensations that are given by the governors. But the major corruption is in the political system, where you basically buy the votes of politicians with the billions of dollars that are contributed to political campaigns.

Now, I don't know how you solve that, but I think it's good to acknowledge, first and foremost, that there is a huge amount of corruption. And I see that corruption at all levels. You can see it in the federal government, you can see it in the local government. So back to taxation, for example, one of the trends that really troubles me is the practice of local economies, local political governments, to give special tax considerations, special tax benefits, tax exemptions, to certain companies that will come in and do what they want.

That really troubles me. I don't believe that should exist. If you are going to tax, if it's right to tax, the system should be a level playing field. You shouldn't say, "Well, this company ABC has promised to come and create 100 jobs here, so we're then going to give them a 10-year tax exemption on their property taxes," or things like that.

So I can freely acknowledge and do acknowledge the deep corruption in those systems. And what I see happening in this argument is very few of us are competent to argue first principles and see the natural extension of those principles. So we usually feel threatened. So most Republicans in the United States would feel threatened if you attack crony capitalism, they think you're attacking capitalism.

And everything has basically become twisted and bastardized, etc. So for example, I'm opposed to free trade agreements. I'm opposed to any kind of free trade agreement between the United States and Canada and Mexico. Free trade agreements are the exact opposite of free trade. Free trade is when there's not an agreement saying that we're going to have a special trading block here and we're going to give these certain things.

That's the opposite of free trade. So I'm sympathetic to your arguments. I'm sympathetic that things are too big, things are too corrupt. I'm sympathetic to those discussions, but I don't see it as a problem with capitalism, but as a corruption of capitalism. Now, we have to be careful here because it's possible that I'm committing a logical fallacy, the no true Scotsman fallacy.

It's possible that I'm just redefining capitalism to say, well, it's not actually, this is just the wrong expression of it if we just had actual capitalism. And that's exactly the same thing that people from different political ideologies, we all have a tendency to do that. Well, the problem is not socialism, it's just that we haven't actually tried socialism.

So we all have to be careful. But I don't disagree with your critiques. I just see that the basic first principle has to be who has the right of property ownership and then what are the responsibilities of that property owner and what are the responsibilities then of governing authorities.

And on that basis, there has to be a coherent law that would govern and say, this is the realm of an individual and this is the realm of government. So those are just the comments. I'm sympathetic to your critiques. I don't disagree with them, but I don't have a problem defending the concept of capitalism in the middle of the mixed up systems that we all live in.

Okay. Yeah, that's a very interesting response. Yeah, trying to counter that. Well, and just, I guess, would you, to me, it's like, whatever government you have, if there is a company, so that has access to a certain amount of money, it's just inevitable that they can cause the corruption, in my opinion.

Because in the capitalist world, you're just pursuing money and so you throw aside all ethics. And once you get big enough, there's not people at the helm anymore who actually can see the big picture and see damage. It's just all about money here right now. So to me, if companies get big enough, it's just inevitable that they'll be unethical.

Let me interrupt you to count. Would you agree with that? Yeah, let me interrupt you to counter that argument. So first, we could argue about whether or not corporations should exist or be acknowledged. Now here, we should acknowledge, we have moved, we will be moving against about 500 years of developed common law.

And if we take the position that corporations should not exist, we're in the vast minority. Now, I have no problem in the minority on all kinds of issues. But that would be one line of argument. So you could advance the argument to defeat that. You wouldn't have to necessarily defeat capitalism, but you could just advance the argument that corporations, and the idea that a corporate entity different than a person could exist or have special rights, that that is a corrupting influence.

I don't buy that, but I don't want to argue that right now. I think that is a valid point that you could argue. In my mind, your bigger question would have to come back to what is the proper role of government? Because it is true that individuals can amass great wealth and great power through the use of corporations.

It is also true that individuals can amass great wealth and great power through the use of government. If you want to commit crimes and be allowed to go free in most modern, or the modern world, the best place to do that is as a government official. Because as a government official, you have massive leeway, and it's very, very hard for you to be prosecuted.

Just go and become an agent of the government. And so in political theory, I think you have to start at a more theoretical standpoint and say, which is what you've done, of capitals, who owns the systems of production, you have to say, well, what are the responsibilities of government?

So here would be an example. It's my opinion that the government should exist, that there is an important role of government. Now, my friends from the anarchism world, or minarchism, or anarcho-capitalists, they would disagree with that. They would tend and say, you know, the only good government is dead government, that there is not such a thing as government.

Because my thinking is bound by biblical principles, and because I begin from the presupposition that the Christian Bible is the revealed Word of God, which contains the outline, and because that same Bible affirms the role of government as being important, as a restraint on evil, then I can't become an anarchist.

Although I'm sympathetic to those arguments, I understand them, I can't get there because of those constraints on my personal ideology. But I do think there are different functions of government. So what I think is the most intelligent approach is to say, should there be, for example, should there even be something that exists called the executive state?

The problem that people have, and I'm not convinced there should be, and by the executive state I mean the U.S. government, the vast majority of the U.S. government, except for the judicial branch. I think the best role of government, where government is the best, is simply in the judiciary, to have a judge to preside over a dispute of two individuals.

The majority of things that people like me are frustrated about as they relate to government involve the executive state, and the executive state is where people derive their power. So it's not inevitable, in my opinion, that corruption of the system by people who generate wealth and control is inevitable.

That's only inevitable if you have a large and powerful executive state. Now, I don't know how to change that in the United States of America or in Canada. The trend is in the power of, is in the direction of a large and ever-increasing executive state. The average U.S. American, and I would dare say the average Canadian, cannot even conceive of what the absence of an executive state would be like.

But that's where I would like to live. I would like to live in a country that does not have, at the very least, a strong central government, and in the United States that was the tradition prior to primarily President Theodore Roosevelt ushering in the progressive era, and of course massive expansion under President Franklin Delano Roosevelt.

But prior to that, the function in the U.S. government was extremely small. There was an executive state set out in the U.S. Constitution, but its purpose and its role was extremely small, and people didn't have much contact with that. In the last century, everything in the U.S. system has been turned upside down, where now the central executive state is the primary focus of power, and thus it's the primary focus of money.

And so for the majority of its life, Washington, D.C. was perceived as a swamp, not because President Trump said we're going to drain the swamp, but because it was a literal swamp and nobody wanted to be there. But the U.S. government didn't actually do much in those days. There were just a few basic things that happened.

Today, the most bustling, thriving, vibrant economy involves the U.S. Capitol in Washington, D.C. And today, almost no company, almost no industry can afford to not have a lobbying presence there, and that just means it comes down to who can pay, who can buy the most money for their pet project.

And so on that, I can share you in your critique, I share with you in your critiques of that whole corrupt system, but I don't think, I don't agree that it's inevitable that you would have that corruption. It's inevitable that you would have that. It's only inevitable if you have a large, powerful executive state.

Because we have a large, powerful executive state, perhaps it is inevitable. I would like to see the executive state disappear. Unfortunately, most people don't. At this point in time, I'm not aware of, perhaps you could make an argument that Senator Rand Paul in the United States lobbies for that.

Perhaps there are a few Congress people, but I don't know of any political party that today is receiving any traction in arguing for the diminishment of government, the diminishment of government influence. Everything is just growing, growing, growing. So I don't see it. I'll let you, Dan, make a final comment, and then we'll get off of this political, although I could talk for hours on this, but what's happened is during our conversation, I've had about six callers join, and then they've all disappeared.

So I don't want my listeners to disappear as well, a few other callers. But Dan, go ahead and make your last word of whatever case you'd like to make. Well, I just want to say, yeah, thank you for your thoughts, and I hope to hear more of your views on topics like this in the future.

Well, thank you. You are, at least as far as my email inbox, you are in a minority of people who actually want my opinions on these types of topics, but I certainly do enjoy discussing them. My only comment would be, I think all of us are learning and are growing and changing, and I don't know that, so I don't think that my own opinions right now are necessarily going to be the same as they are a decade from now.

I still have a lot of questions on these topics, and it's my opinion that the only way to find truth on some of these topics is to have a robust and vigorous debate among fair-minded, honest people who can consider those topics. One of my greatest griefs and disappointments on the state of affairs, especially in the United States—perhaps it's better in Canada, but my time in Canada wouldn't say that if it's better, it's much better, but you'd have to be the judge of that.

In the United States, one of my biggest griefs, frankly, is it seems very difficult for people to have an honest debate over deeper principles or philosophical principles. Most of us are so entrenched in our tribalism where we feel threatened if somebody just disagrees with one certain thing, and we just can't conceive of anything else.

One quick funny story, Dan. I had a friend of mine who—I hadn't done much with them—I reached out to a friend of mine, and this friend, their daughter was a friend of mine, and I called him up, and the first thing that he said when he heard my name—I needed something from this guy—the first thing he said, he said, "Joshua, I heard that you're a Democrat." And I said, I laughed, I said, "You heard I'm a Democrat?

How on earth did you hear that?" He said, "I heard you're a Democrat." And I thought, he said, "My daughter told me you're a Democrat." And I thought about it. And it was funny to me because I'm not a Democrat. I've never voted for a Democratic politician in my life, but because I'm not also a Make America Great Again Republican, then I automatically got lumped in with the Democrats.

And so it was hilarious to me. We went on to have a discussion about borders, my opinions on immigration and borders were his biggest frustration, got to build a wall, etc. And because of that argument, we went on and basically he wound up hanging up the phone on me, and I had to laugh because the terms don't fit.

The label doesn't fit. I'm not a Democrat, but I'm not a Republican. I think we should be able to have this discussion. And it's the reason that I take the flack that I do for doing this on the show is because I want to foster this discussion among fair-minded people who can sit and talk and argue about things.

And it's that necessary debate that will ultimately lead to, in my opinion, the truth, or at least as close to the truth as we can get. And it's a great... I want to foment that debate and encourage it any way I can, which is why I even... I thank you for calling up and asking the question, Dan.

Mark in Michigan, welcome to the show. How can I serve you today, sir? Please don't ask me about communism next. I won't. No, this is more of a technical question. Great. I am interested in umbrella liability insurance. And I think it's a good idea for most people. I'm convinced of that.

But I've not been able to find much good information on how to figure out exactly how much you should get. Most of the information I see online just kind of stops at, "It's cheap, so get it." But I'm just wondering your opinion on what factors you should consider when thinking about liability insurance and figuring out how much coverage you should get.

Like, should you just cover up to your net worth? Or is there an argument to be made for going above that number? Is there such a thing as too much liability insurance? So I just wanted to get your thoughts on that. The reason that... So I have pondered this question.

I have been asked the question multiple times by clients of mine, and I don't know a good answer. I have asked... I've searched for somebody's... I've searched for arguments on the topic. I've searched for analyses. I have not found something that I have discovered to be satisfying as far as a way to approach that formulation.

In general, about the best I can find is, "Hey..." is exactly what you have found, which is, "Hey, liability insurance is a good thing. It's really cheap, and so you should buy a lot of it. Maybe you should buy as much that's equal to your net worth." But I haven't found any good formula that would defend that.

And I think there are a couple of reasons why. First, the risk is hard to quantify, meaning, how do we actually quantify the risk of a lawsuit, which is one of the primary areas where liability insurance is going to play a part? We can quantify that risk a little bit if we analyze the risk of a person.

For example, if you own six jet skis, and you have... if you own four jet skis, and you have quadruplet 14-year-olds, you face a higher risk because 14-year-old boys and four jet skis probably don't mix very safely. So you could say, "I have an increased risk there." And so the insurance company can quantify that in some ways.

But how do you quantify or figure out what your own personal risk of litigation is? How do you know if your friends are the ones who are going to slip and fall on your front steps, and which one's going to sue you and which one's not? How do you know that?

I've not found, in my searching, I've not found any arguments that would indicate how you would know that. And so we're all just basically guessing. We have a gut feeling about our situation. We say, "Well, I think these certain actions and activities expose me to liability. Perhaps I'm more of a prominent person.

Perhaps people know that I'm wealthier." But those are just guesses. Some of the court cases that do go through in civil litigation are things where the person would never guess they had any liability. And then you have another question to say, "Well, how do we know what my actual risk is in case there is litigation, in case I am held liable?" We can read some incredible, breathless headlines in the newspaper about so-and-so was just awarded $5 million in damages for a slip and fall.

But then we don't see the follow-up story where the judge said, "That was a ridiculous settlement, and it was changed, and this actual settlement was $413,000." So we don't know what our actual legal liability risk is, and we don't know how that risk would be found. There are times where you have an activist jury or an activist judge, and an award settlement seems to be completely out of the realm of reasonable, rational, monetary settlement.

But then there are times where it's very reasonable. Somebody sues, thinking they're going to get millions, and they get $200,000. So I think there's a lot of difficulty here in actually figuring out the answer, because the risk is hard to define. So in my searching and in my thinking about the problem, I have not come up with an answer to it.

Barring a good answer, the only thing I have to say is this. Number one, think about insuring your net worth. It makes sense to me that if you have a $5 million net worth, and if you can get a $5 million umbrella liability policy, in absence of any better argument, that seems pretty decent to me.

But I wouldn't say that you were wrong if you bought $3 million, and I wouldn't say you were wrong if you bought eight or ten. I don't know. I just say, "Meh, seems as good as anything else," as an idea. So I think insuring your net worth makes sense.

Number two, I think you should ask for and calculate the cost of the insurance in different quotes and see if there are any, for lack of a better word, breakpoints. The idea being, is $5 million of insurance twice as much as $2.5 million of liability insurance? My guess would be that it's not.

Now, I've had some clients calculate this, but I haven't calculated this recently, so you have to ask your insurance agent for the numbers. But usually it's not. And so if you're thinking about it, and $2.5 million of insurance is going to cost you $1,500 a year, and if $5 million is going to cost you $2,200 a year, I think that's reflective of reality, because there's a much lower risk that the insurance company is going to pay out $5 million than $2 million.

And so I think there are breakpoints in liability insurance, and I think it's worth it to you to exploit that. So why not go ahead and get $5 million, if you can qualify for it, and that meets your net worth, especially if there's a minor breakpoint, a decrease in cost for that additional amount of insurance.

And I think the third thing is, just do an assessment of your personal risk and your personal risk factors. Some of those things will be known to the insurance company, in terms of your behavior, your criminal record report, or whatever the situation is. But then some things will be known just to you, where you recognize that you might be doing something that brings you a higher risk.

And so because of that, you're going to go ahead and add a little bit more liability insurance. And then also, you should consider your other assets, and you should consider the other planning that you have done. Liability insurance should be a cornerstone of good defense planning, but you might adjust your amounts based upon how well-sheltered your other assets are, and how exempt they are from the claims of creditors.

So that was a fairly lengthy way of saying, I don't know either, but hopefully, by talking to your insurance agent, studying the numbers, and just kind of thinking about your personal risk factors, you'll arrive at a number that feels right. And I wish I had a better formula. If any listener has one, please email me, joshua@radicalpersonalfinance.com.

I have not yet found somebody who will advance an argument that makes sense to me beyond what I've just said. Okay. No, that's very helpful. I guess just one follow-up question. Do you feel like having a higher umbrella liability coverage amount would make you a target of a lawsuit in any significant way?

As in, is that a knowable piece of information for an attorney who may be representing someone that wants to sue you? Can they figure out how much insurance you have and target you that way? Or if that's not the case, then it seems like price being equal, more would be better.

I'm just wondering if there could be such a thing as having too much insurance. I am not certain about the answer to that question. In my studies of the subject, I don't know how somebody, prior to the initiation of a lawsuit, or the initiation of legal action, or of a claim, I don't know how somebody would know that.

And I don't think that if there is a mechanism for somebody to find that information, I don't know what it is. Now, I've studied a lot on the question of privacy. I've been super interested in the topic of financial privacy and trying to understand how it can be maintained.

And what I have learned is there are far more mechanisms for information sharing than ever before. Basically, every time that I have thought, "Well, that's not going to happen," I have been proven wrong in financial privacy and in other aspects of privacy. And I've learned all of my instincts in the past have been wrong.

Just a couple of simple examples. I used to think, "Oh, there's not that much of a risk of somebody being able to track your location by your cell phone signal." And then I started to find information where there was good location. And I was not surprised when, it was about a month ago now, maybe two months, when the big article in, I think it was Wired Magazine, came out where the reporter was able to hire a bounty hunter for, I think the price was just a few hundred dollars.

And the bounty hunter was able to identify the location of the individual's cell phone just simply based upon having the cell phone number. Now, I had previously come across good information that told me to expect that story, but that's a public story that you could find. That if anybody knows your cell phone number, yes, it is actually a tracker in your pocket.

Now, to finances, similar things with bank amounts and IRA amounts. I used to think, "Well, there's privacy about those things." I have since learned there is not. You cannot trust that privacy exists. So, in the past, all of my instincts have been wrong to say, "Oh, no, there's no way for someone to find out." Because of that, I'm very cautious in the answer.

So, it wouldn't surprise me if you did research and found out, yes, there is a way for someone to know the size of the policy. And just to be clear, the most obvious examples here is that a motivated adversary would do it, whether it's legal or not, just through the use of pretexting.

So, the most obvious way to do it would be, if I wanted to find out how much your liability insurance policy was, I would observe you. I would figure out who your insurance agent is or who the insurance company is that you likely work with. If I didn't know that for certain, I would do that by calling and pretexting, which is illegal now.

But I would do that by calling and pretexting your homeowner's insurance company, sorry, your mortgage company, which I can find on the deed for your house. I can find the mortgage company that has a lien against your property. I would call the mortgage company, which is probably handling your escrow payment.

Then I would call that same company, which is probably the same insurance agent that you use for your liability insurance. By pretexting that agent on the liability insurance, I would find out how much liability insurance you have. That's illegal, but it's doable by somebody who's skilled with good social engineering skills to do it.

So, it's at least possible that way. But if there's a simple way to do a web search or hire a financial private investigator to find out, I don't know what it is. Now, to the question of is more liability insurance a good thing or not a good thing, in general, the consensus seems to be among those who are experienced, the attorneys who are dealing in this, in my study of their work, it seems to be that yes, indeed, liability insurance is a good thing.

There could be exceptions to that. So, I have read several attorneys who have given a defense that if all of your other assets are completely protected and completely ironclad locked up, that going without insurance can actually be a legitimate strategy. But I think it's most legitimate for somebody who has a high profile, a high target.

The people who I have seen who have been advanced as a good case study of this are physicians. Physicians who have significant personal risk with their medical practice, and there are physicians who will choose to go without malpractice insurance, and they just simply say, "Listen, you can sue me.

You won't get a thing." And because their asset protection structures are ironclad, they're, "No, you will not get a dime out of me." And because in this case, because they can't go after the insurance company and expect to get a settlement from the insurance company, then in that case, it does minimize the risk of the lawsuit actually being put all the way through.

My understanding, even in the insurance business, there was a change. It used to be that the insurance companies would write policies, liability insurance, malpractice insurance, whatever the specific policy was, they would write the policy and keep it, and they would quickly settle. Well, that generated so many, so much losses for the insurance companies that they decided to change, and then they decided, "We're going to fight tooth and nail." Now, that made a change in the marketplace of litigation.

So I don't know the certain answer, but those are some thoughts on it. I think I would go at this point with the consensus viewpoint of people who can say more liability insurance is a good thing, and the only reason I would violate that would be if I specifically knew that my asset protection attorney is specifically advising me on my situation and giving me good arguments as to why I should forego the insurance.

I, Joshua, would not give you that advice. Okay, great. Thank you very much. My pleasure. Thank you for calling in. All right, we know now to the great state of Washington. Welcome. Welcome to the show. Tell me your name, please, and how I can serve you today. My name is Alex.

Alex, welcome. I had a question. I listened to Dave Ramsey, and I've just found you recently, so I've been listening to you guys. I want to get a house, but I'm also in the middle of paying off a bunch of debt. I have credit cards. I have my wife's car payment, my car payment.

So it's like, should I, is it worthwhile? Because I know Dave Ramsey says you got to save up 20% down, which 20% on a normal house is like $200,000, so that's like 40 grand. So not only do I have to go through the debt snowball, but then I have to save up 40 grand before I can get a house.

So I'm thinking, I spend $1,000 a month on rent right now. Should I maybe look into getting a house with very minimal down, or should I just keep working on the debt snowball and keep wasting money on rent? When did you start doing the Dave Ramsey plan? Like, I don't know, last year.

Okay. And are you making progress? How much debt have you paid off in the last year? Well, we started with, I think in the middle of last year, we started with $118,000. Right now, we're at like $74,000. Congratulations. That's awesome. So short answer would be this. My advice would be follow the Dave Ramsey plan, get out of debt, and know you're not throwing away money by renting your house.

One of the biggest misconceptions is the idea that renting is throwing away money. In the majority of markets, your cost of renting and your cost of ownership will be very similar. But you should not buy a house until you are very financially stable and you're very convinced that buying a house is going to be a better move for you.

If we actually go through the numbers and went through the numbers, I could persuade you of that numerically. But buying houses, houses are never as cheap as you think that they're going to be. And so if you can rent for $1,000 a month, and if you can get great traction on your debt snowball and pay off tens of thousands of dollars of debt, I would encourage you keep doing exactly what you're doing.

Get completely out of debt. And when you are completely out of debt, you have a fully funded emergency fund. Then at that point in time, lift your head up and look around and rethink through the house question. But I listened to a podcast. And so this is like I was it's not that I was expecting that.

But that's that's that's my thinking. That's my thought process, too. I'm like, yeah, let's let's keep paying off. Let's not like jump into anything new, because who knows, we might want to move. I just listened to your thing about RVs. It's like, heck, yeah, dude, I would laugh. I would much rather instead of having a house to live in an RV.

But my wife wouldn't want to do that. So that may be my my like rebuttal or challenge to that is I lost my train of thought. The that you should buy a house and it would lower your costs or something like that. Well, no, like, oh, yes, you talked about how eventually the Democrats will take will take office, right?

The next president will be a Democrat. And let's say they start like, obviously, this is more or less like, oh, well, hypothetically, if they start to, you know, the Medicare for all, if they start all these other things, inflation will start to kick in. And you will you and your podcast, I believe you mentioned having a mortgage is one of the best like methods of like wealth distribution, because your loan stays the same, but the value of your house increases astronomically.

And so I'm thinking like, yeah, maybe it'll be difficult right now. But at least I'll have something so that if Trump loses in 2020, which who knows, depending on who they go with, who the Democrats go with, if he loses, they're going to start doing crazy things like that, you know, all this stuff like, and eventually, they're just gonna start printing uncontrollably, which is like, well, dang it, that means I'm gonna miss out on that wealth distribution.

Well, so I understand. Yeah, I think it is flawed thinking. And I want to deal with a couple of the arguments that you said, but let me just step back for a moment and give you the reason why I answered your question the way that I did. When I hear when I'm hearing your talk, you talk and hearing you ask a question, I'm trying to discern to discern where you are in your financial journey, and where you are in your level of financial sophistication.

And when I say that, that's not a an unkind term. For example, I'm not I'm not trying to say that you're unsophisticated, I'm trying to discern where you are in your personal level of financial education and in the clarity of your plan. So that's what I'm listening for. It's not so much about the specific deal.

I'm listening to you're trying to say, hey, what's the clarity of your plan? So let me tell you what I'm thinking as an advisor, when you call me and you say, I've had $118,000 of debt, and I'm making progress paying it down. And although I didn't go through and create a complete list of what all those debts were, you listed a few minutes ago, you basically said it was on a bunch of things.

And so the normal pattern of somebody who's in your situation, where they have a bunch of things, the normal pattern is when you've accumulated a significant amount of debt that spread out across cars and credit cards and student loans or whatever else, that that's usually due to the fact that you didn't have a clear financial plan, you didn't have a clear income plan, you didn't have a clear spending plan with your money.

And so you were somewhat haphazard in your expenditures, and that led to you accumulating debt. Now, let me pause. Do you think that's accurate in your situation regarding your past actions and past behaviors that led to the accumulation of the debt? Or was there some other reason why you accumulated the debt?

No, that's like, yeah, that's like the nail on the head, right? That's like, that's exactly right. It was just like, I didn't know what I was getting. I'm only 26 now. So it's like, shoot, you know, it's like, yeah, I was pretty, pretty stupid earlier. Good, good. Okay. Yeah, that's right.

Perfect. So congratulations for changing. I want to firmly wholeheartedly if I could reach through the phone and grab your hand and pump it up and down, I would I'd slap you on the back and I'd say awesome. Now, what is most important at the initial stages of wealth building is to develop new habits, especially habits of money management.

And that is what is so powerful about the Dave Ramsey program. Because Dave gives his followers a clear goal, get debt free. And because he talks about the way to do it, which is increase income, decrease expenses and manage the money so that it goes towards that debt. And because he is able to instill such a powerful motivation into people, the clarity of that goal will pull you towards it.

Once you and your wife decide, hey, this is what we want. It pulls you towards it, just like any goal, any goal that you set pulls you towards it. If it's a goal that is held deeply and important. And along that process, you're learning new lessons of money management.

You're learning to say no to your desires. You're learning to to plan out your expenditures. You're learning to focus on your money. You're developing some system of budgeting, some way of tracking your money. You're developing the practice of setting financial goals. Those goals are one big long-term goal of being debt free.

But then there are the micro goals. You're working through your debt snowball. And so you're learning how to say, I'm paying off this credit card, I'm paying off that car, etc. And then you're learning to communicate with your wife. You're learning to increase your income. You're learning to work more.

All of these things are working. You're paying off the debt. However, it's still fairly new. And that was why I asked you, and I'm just trying to show you how I'm thinking as an advisor. That was why I asked you how long you've been doing this. If you had told me you've been doing this for two years, and if you weren't making progress, then I would have said, we need something, something different.

And I would have started exploring strategies to say, is there a way that you could, maybe you should buy a house, and rent it out, or maybe you should move into an RV or something. But because you said, it's been relatively new, and because you're making great progress, I think your best move at this point in time is to keep making progress systematically and pour everything onto it.

So that was why I answered in that way. It sounded to me like you were a new convert, and you were newly changing your behavior, and it takes time for those things to become entrenched habits. Now, to deal with your arguments. So that was why I answered. I answered the way I did on a behavioral standpoint.

Now, to deal with your arguments. I'm very concerned about anybody trying to predict anything in the future and to make plans based upon that. So for example, is it likely that President Trump would be elected in 2020? How do I know? Very few people. I didn't think he would be elected in 2018 or '16.

So I think very few people would know that. If you're a political junkie, Ronald Reagan, wasn't it Ronald Reagan who had the lowest approval score two years before election and then won by a landslide? I mean, there are tons of examples of things changing, and the US-American electorate is a fickle beast.

So I'm not going to make any predictions of short-term predictions. So I'm not going to make any plan of mine that relies on whether President Trump wins re-election or whether President so-and-so is elected. And I'm not going to make any plans based upon whether a Republican is in office or a Democrat is in office.

The reality is, thankfully, that the US government is dysfunctional. And so in general, that means gridlock. And as far as I'm concerned, that's about the best that we can get. If they're just in gridlock, then nothing gets passed, nothing happens, and then they can't stick their noses into more of my business.

So the biggest danger is if you have a strongly—if you have a Republican House of Representatives, a Republican Senate, and a Republican president, that's dangerous. If you have a Democratic House, a Democratic Senate, a Democratic president, that's dangerous. So it's my understanding of the electoral situation in the United States that even if a Democrat were to be elected in 2020, and even if the House of Representatives were to maintain and perhaps develop an even stronger majority, it's very unlikely to have a democratically controlled Senate.

And so I think—I don't see any reason for you to freak out about anything politically. And even if there were a reason for you to freak out about anything politically, you're not yet in a place where you can afford to freak out. Because no matter what, no matter who is elected, no matter what government programs are passed, you still need to pay off your debt.

You still need to develop those money habits. You still need to continue to practice living frugally. You need to continue to practice earning a lot of money. You need to practice managing the money. And those skills will apply no matter what the systems are two years, three years, four years from now.

So that was the reason for it there. Now, one more comment and then I'll let you respond, Alex. I'm not—I personally would not be 100% opposed to your changing your living situation. There are many people who, in the middle of paying off their debt, have made a change and moved from renting a house to owning a house, and that change has helped them to pay off debt faster.

For example, if you and your wife are currently renting a house for $1,000 a month—and by the way, do you and she have children? Yeah, we have one daughter. Okay, how old is your daughter? She is four. Okay. She'll be five later this year. Okay, so fairly young. If you and your wife, for example, were renting a house for $1,000 a month, but the house next door to you is up for a sale, and it's a three-story house.

It has two stories and a basement, and it's got six bedrooms, and it has a mother-in-law shack out back, and it's $240,000. And you look at it and you say, "Listen, there is a college right around the corner. This is a heavy rental market, and I think I could rent out all six of those bedrooms for $500 a month, and my wife and I could live in the mother-in-law shack out back.

And by the way, this house is being sold by somebody who has to sell quickly, or maybe it was left as an estate sale or something like that. And so I think this house here would make me a lot of money, and I think I could do it. And yeah, I'm still in debt, but I think if I buy this house, I'll wind up making $1,000 a month." And I'm using, of course, an extreme example.

But if you had some scenario like that, where there was a clear plan to making money with the house, you and your wife and your daughter are going to live in the 300-square-foot mother-in-law shack in the back, while meanwhile making thousands of dollars per month with thousands of dollars per month, then in that situation, I would consider it.

I would move in the direction of actually purchasing the house. But at this stage in your life, just to say, "I'm tired of money throwing away renting and moving to a house," I think that's a bad plan. Okay. Okay. So if there was no income potential, it wouldn't make sense to buy a house right now, essentially, right?

Yeah, generally, no. Because the pure costs of buying a house, the pure costs, by the time you total up all of the costs, specifically the cost of insurance, the cost of taxes, and the cost of interest, plus the costs of an appropriate down payment, plus all of the additional expenses of a house, the washing machine breaks, you have to replace it, all the stuff, the roof fixes, et cetera.

In general, the cost of buying a house is probably going to be more than the cost of a -- it's probably going to be more than the cost of renting. And the problem is, renting is certain. You can plan your finances certainly. And because previously you haven't demonstrated competence with planning finances, that's why you're in debt.

So you didn't previously demonstrate competence with planning ahead, saving money, escrowing the money that's going to be needed for repainting the house, et cetera. Because those skills were not previously demonstrated, you need to first develop those skills before moving into the ownership of a house. Once you demonstrate those skills by getting out of debt, saving money, et cetera, and once you have fewer expenses, which means you have more wiggle room in your budget, then if you want to buy a house, then it'll be a blessing to you and not a curse.

That's my answer. Right. Yeah. That's great. I appreciate that. But if we tried to go get a house, we just applied just for fun. And they told us like, "Oh, if you just sell your car and pay off the debt, we can get you approved." And so right now, because that was like, it's a goal of ours, obviously, to have a house, we are looking now into getting out of one car loan.

And so maybe it's just too soon. Maybe it's like we're six to eight months roughly too early, which we'll be looking into this. And who knows? But I appreciate the response. I appreciate the time. By far, your podcast is just going through every episode. I appreciate it so much, man.

Thank you. I appreciate all that you do. I know it's no joke. It's a lot of work you're putting into it, man. I know for sure. It's my pleasure. And I'm glad that you found it. Frankly, Alex, I'm thrilled that you found my show because the majority of the listeners of my show are already wealthy.

They're already doing well, and they enjoy the technical content. But when I started the show, my goal was to reach you. My goal was to reach people who are interested in making a change. And so I'm thrilled that you found it and that you made it here. And that would be, so thank you.

And keep up the good work. Here would be my two comments in closing. Comment number one, everything in personal financial management is skill. The reason I use the word skill is skill can be developed. It's not a matter of natural talent. It's skill. Skill can be developed. And so what you are doing is developing new skills.

And what you need to teach your daughter is skills, skills that relate to financial planning, financial management, financial behavior, et cetera. This is all skills. And skills can be learned, which means that any person can dramatically change their life if they have an idea, if they have a desire, if they're willing to go and study and learn and practice the skills until they become a part of them.

So one comment, you're doing the right thing in developing skills. Comment number two, only other comment on the house. If your question on the house is a financial question, in my opinion, the answer is clear. Keep renting. Because the financial calculation of the house versus renting, renting versus buying, is less a matter of, it's fairly clear.

And you're probably getting a better deal renting. But there could be other factors. Now you haven't listed any of those other factors, but I want to make it clear for any of the listeners. There could be other factors why you would actually need a house. So factors related to your wife, to your daughter, to other children, to certain circumstances.

There could be other factors. But because none of those things have appeared, I would encourage you, stop shopping for houses even. Keep something coming so you're aware of the prices. In most markets, this is not a good time to buy a house if you don't need one. Wait. Stockpile your money.

Stop shopping so you're not feeding that. And keep the goal, the goal of your paying off debt, keep that center. Keep everything focused on that. Because once you're out of debt, you will experience a freedom that you have never in your life before, that you've never experienced. You'll experience a freedom of choice.

And when you go shopping for a house right now, you're shopping based upon what the mortgage company says they'll approve. But when you're debt free, and you've been debt free for a few months, and you go shopping then, you'll be shopping based upon what you actually want. And it'll take time for that freedom to settle in.

You might not even live in Washington. You might move to Mexico. And so don't encumber yourself with a house. Focus on getting out of debt. Enjoy that freedom. And then if you want to shop for houses, go for it. So Alex, thank you for listening. I'm glad you're here.

Thank you so much, Chad. And with that, we close out today's Q&A show. Thank you all for listening. I really love doing these shows. And that was the kind of diversity that I enjoy. Talk a little bit of political theory, talk a little bit of financial practice, and talk a little bit about paying off debt and owning a house.

I hope you also enjoy that diversity. If you do, I applaud you for it. You're an unusual person who is actually able to work through these things. So take these concepts. My closing plea, I used to put this at the very end of every show. I just want to close with this because I haven't said it in a while.

Take something useful from this show and go and teach it to somebody else. Take something that I've commented on and think about it. And if you agree or disagree, go have a conversation with somebody else. Go and dig into something. If you think I'm wrong on something, fine, feel free to reach out to me.

But more importantly, go and study something, go and look into something. And if we do that and we continue these types of productive conversations, then we can build a better world. Just remind me, I don't love trite poems, but I think they have their place. Reminds me of that little ditty that I heard years ago.

God said, "Your task is to build a better world." I answered, "How? The world is such a large, vast place, so complicated. I'm so small with all my weaknesses, there's nothing I can do." God smiled and replied, "Just build a better you." Now, we'll all have a wink at the simplicity of it, but I think there's a truth in that.

And back to even how we opened today's Q&A show, if you consider what some political ideologies do, they de-emphasize the individual and the responsibility of the individual. And in my opinion, that's one of those things that I find most problematic with collectivist ways of thinking. The individual becomes unimportant.

The individual is extremely important, and it's your behavior and my behavior that makes a difference. And when you're part of collectivism, you don't worry about your behavior, you just worry about the collective. But you have a responsibility to whom much is given, much is required. We all have that responsibility, and it's individualism.

The individual responsibility that you and I share, that in my opinion, leads to change. When you take what you've been given, and you bear the responsibility you have properly, and you use that to build your own skills, build yourself up, build your character, develop yourself, etc., and then share that around you, as individuals do that, and as individuals are empowered, that reflects on the community around us.

Hopefully that wasn't trite. Wish you all a great day, and I'll be back with you very soon. Thank you for listening. The LA Kings Holiday Pack is back! The perfect gift for the hockey fan in your life. A three-game pack starts at just $159 and includes a holiday blanket.

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