It's Friday and that means live Q&A. Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement that you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. I didn't get it out in one breath.

I'm losing my skill. Today it's Friday and that means live Q&A, just like talk radio. Any Friday that I can, which has not been as many as I wanted to, we do live Q&A. I open these shows up to any of the patrons of the show, which are people who sign up to support Radical Personal Finance on Patreon.

If you would like to do that, you can go to patreon.com/radicalpersonalfinance. If you sign up on patreon.com/radicalpersonalfinance to support the show, then you get access to these call-in shows. It works just like call-in talk radio, where any listener can call in and we chat about whatever the listener wants.

It can be comments on the show, it can be specific questions, it can be ideas, et cetera. We begin with Andy in Indiana. Andy, welcome to Radical Personal Finance. How can I serve you today, sir? Hi, Joshua. Thanks for taking my call. I am curious how you would encourage building career confidence when you don't have a lot of time to spend building a successful side job and/or don't want to make the costly decision of lowering your income by switching to a near career field that I'm not qualified in yet.

You are in a career currently. You are gainfully employed, but in your current career, you don't feel like there's much potential? What's the problem you're facing? I get the impression from you and other people that I feel like you feel as though you could lose everything, walk out and in a year be making the same money you're making now and very confident that you have marketable skills that you could use in lots of different places and always be able to earn an income doing what you're doing.

My job, I make good money. I'm in a union, so I feel like probably making more than my skills and services are necessarily worth. I would like to not feel that way and have more backup plans and confidence that I could get a good job anywhere making the kind of money I would like to make.

I don't want to just quit my job and go cut my income in half and do that to my family. I also don't want to get two jobs and work 90 hours a week and never see my family. Right. Yeah. Okay. I understand a little bit more. I think one of the differences would be the kind of skills that one person has versus another.

So it sounds like your primary work is in kind of a skilled trade. Is that right? Yes. I kind of on the less skilled end of the skilled trade, but yes. Okay. So that's a big difference versus the kind of skills that I usually think of that come from my personal skill set.

So I've always been interested in business. And the thing about business in and of itself is that every business works about the same. There's just different kinds of products or different kinds of services that's actually being sold. But at its core, Google is exactly the same as Hewlett Packard is exactly the same as a big steel company.

In the fact that there's a product that's being sold to a customer for a profit. And then there are various business functions that can be applied along the way. A business is in terms of its definition, a business is a repeatable process that creates and delivers something of value that other people want or need at a price they're willing to pay in a way that satisfies the customer's needs and expectations so that the business brings in sufficient profit to make it worthwhile for the owners to continue operation.

Credit to Josh Kaufman for his excellent definition of business that I have just told to you. So that's the definition of a business. I'll repeat, a business is a repeatable process that creates and delivers something of value that other people want or need at a price they're willing to pay in a way that satisfies the customer's needs and expectations so that the business brings in sufficient profit to make it worthwhile for the owners to continue operation.

So I consider myself to be competent in business. And when I think about skills, I immediately go to those different aspects of the marketplace. And so, and just to kind of continue Kaufman's way of analyzing it, he defines those as being the five basic parts of a business. There's value creation, which is discovering what people need, want, or could be encouraged to want, and then creating it.

That's the process of value creation. Again, discovering what people need, want, or could be encouraged to want, and then creating it. The second function is marketing. Marketing is attracting attention and building demand for what you've created. Then the third function of business is sales, turning prospective customers into paying customers by completing a transaction.

The fourth function is value delivery, which is giving your customers what you've promised and then ensuring they're satisfied with the transaction. And then the fifth function is finance. And finance is making sure that a business is bringing in enough money to keep it going and then to make the effort worthwhile.

It's got to be profitable enough for the owners to want to actually continue being involved in the business. So if you understand those five basic functions of every single business, then you now have a blueprint to drive on. And so one of the things that I teach when I'm teaching career planning is I teach that you want to develop economically valuable skills.

So economically valuable skills are going to be skills that are tightly related to one of those five areas of a business, most likely. And so when you develop those skill sets and you understand how a business operates, then it gives you the personal confidence to be able to move out of one business and move into another business.

Simple example from my story. One of the reasons I went into insurance and investment product sales was I wanted to learn how to sell. Because once you know how to sell and you understand the process and the dynamics and the tools and the techniques of selling, that's now a skill set that can be applied to any business.

So today, since once I learned how to sell, once I learned how to deal with the emotions of being a salesman, once I learned how to deal with how the funnel works and how you develop leads, how you solve needs, the core functions of selling, which are really well defined at this point in time, that's a skill set that I could take from selling life insurance and I could move it to selling property and casualty insurance.

Or I could move it to selling mutual funds, or I can move it to selling real estate, or I can move it to selling yachts, or I could move it to selling rural farmland, or I could move it to selling high-end watches, or I could move it to selling anything, you know, giant 747s, they don't make those, 787s for Boeing.

It's all sales and it's the same basic process, you just have a slightly different marketplace. And so once you learn those skills in one place, you can now go and take those to another place. Now, one of the things that I have done over the last few years is I've been building digital sales skills, which are every bit as translatable, if not more so than those other sales skills.

And so if you break down the sales process of a digital business, an internet business like I'm engaged in right now, you can break it down into attracting an audience, building products and services, developing sales funnels. It's broken down into specific tangible skills, such as copywriting or media production.

And that can be as technical as how to edit an audio file, or how to create a website, or how to edit a video file, or it can be on the sales side, how to develop marketing copy and sales speech that effectively conveys the point. Or it can be research, how to research what people want to buy so that you can create what people want to buy.

So these are, as I consider the basic skills of business. So I could, in fact, I have tons of domain names of other brands. I think constantly, okay, if radical personal finance fails, or if I don't want to do it anymore, what would be the other brand that I would develop?

And where would I, how would I, what else would I sell? And what other market would I work in? And why? What are the benefits of those other markets? So the reason why I have that confidence and why many people have that self, that confidence is because those skills are more skills in the area of business where they can be picked up and plunked from one place to another.

Now when you're dealing with manual skills, instead of those business skills, and you are a craftsman at the high end, or you're a laborer at the entry level, it's much more limited because it's not as transferable. So the first, your career path is different. It has to look different than because it's not as immediately translatable over.

So your first goal is to go from a commodity to a specialty. If you had no skills whatsoever on the job site, you just simply had your physical strength, right? Well, that in and of itself is a skill that some people don't have, but you have physical strength, you have good health, you can show up on the job site at 7 a.m., you can work till 5 and you can give an honest day's work.

Well that's good and it can be directed, but there are lots of people who have that. So the first thing that you've got to work for is to develop specialized skills, and that's what starts to take you up the wage marketplace. Once you develop specialized skills, you'll have more career resiliency and more confidence that you could transfer.

Andy, are you willing to share with me what industry you work in, in general or specific? Yeah, so I'm a certified diesel test technician, so I do engine testing. And so I guess I would be relatively confident, I mean, there's, I don't know, probably five or six places in the country that do what I do and I could probably move to one of those places in another state and get another union job making similar to what I do.

But if I were to want to stay in the same area, I would basically either have to work for the company I work for now or go to work as a shop tech, which would be probably a 50% pay cut, even with the certifications and skills that I have now.

And I probably could never max out making what I make today in that career, unless I own my own shop or something. And so the reason for that in your career is simply the skill that you've developed is very specialized, but there's only a small handful of places where you could get that job.

There's a half a dozen places across the United States. Now if you compare that from what I just talked about with regard to business skills, business skills are transferable. There are 100,000 businesses right within a 10 mile radius of your house. And business skills can be applied to any one of those businesses.

And so the problem is that you don't have a big enough market for your diesel engine test and certification skills, because there's only six companies that are doing that in the United States. So if you're going to build career resilience and you're going to build that confidence, the first thing you're going to have to do is you're going to have to move into a market where there's more opportunity, if you care, right?

Some people, it's fine to have six companies, and if you'd be willing to move, et cetera. But if you were to compare your personal expertise versus being a heavy diesel engine mechanic, wouldn't you think that there'd be a lot more confidence if you were working as a heavy diesel engine mechanic and a lot more opportunity right in your local area than what you're doing right now?

Yes, probably. Right. So in that context, if you move to just simply being a heavy diesel engine mechanic, and that was the field that you were working in, you could translate that, whether it's working on big Caterpillar front end, big bulldozers, or working on combines, or working on diesel pickup trucks, or working on diesel tugboat engines, there's tremendous applicability of that.

And so in your situation, further specialization with a piece of equipment is probably unwarranted. And rather, you should probably go back to generalize, something that's going to have a broader application for you to build that resiliency. And what I would be doing if I were you is I would at least be understanding how to do that in case you did get fired.

Just because you get fired doesn't mean you want to go across the country. So excuse me, I've been talking too much today. What I would do is I would lay out a career path. So let's say you lost your job or wanted to leave your job. Maybe you take a job as an entry level grunt, but I would very quickly line myself up with how I would move into a higher end position as a highly qualified diesel, heavy diesel engine mechanic, and lay out the education path at the very minimum.

And then even better would be to at least start the process of gaining the knowledge or the certification. So you could move quickly into a career that has a broader range of draw. That's how I would develop more confidence. >>Jeremy: And I guess part of that, I'm not super wedded to my career.

I don't think I really want to do this long term. So I would be totally open to learning business skills or another trade or all sorts of other things. And then I guess it seems like I can think of lots of ways to do that, but they're all relatively costly in the sense of lost income and my current job by switching or significant time investment.

So I'm curious if you had any sort of, I hesitate to say quick and easy, but like simple things that I could be doing beyond just, well, this is what I would do if I got fired. >>Trey: Right. Doable. Well, I like the word doable. Do you have some ideas that are doable?

Not quick and easy, but doable. So you're working 40 hours a week and are you single, married, have children? >>Jeremy: So I actually, I have just transitioned to pretty much an ideal work and situation. I work 36 hours a week, three 12 hour shifts, weekend nights, and then I'm free during the week.

But I have a wife and a couple young children, similar age to yours, and we're trying to just develop, like we've bought a large piece of property and want to have animals and that's kind of what the family lifestyle goal is, which is in and of itself somewhat time consuming.

>>Trey: Right. Right. Yeah. So you can kind of think through what you're trying to do. So if you're looking for business skills, business skills are present in every business where you're not, and you can learn them at any business where you're not solely a technician. So if you've just bought land and you want to raise animals, build your side business with land.

How much land do you have? >>Jeremy: 26 acres. >>Trey: So with 26 acres in your market, you can start doing pastured poultry, selling chickens. I don't know what area of interest you're most interested in, but you could start, again, pastured poultry is probably your fastest solution. You start building out fruit crops, perennial crops.

You might do a little bit of truck farming if there's a market in your local area for that. You start putting some hogs on the back 10 acres, maybe get a couple of cows. You think through the market, I don't know, raise tilapia, raise micro greens, whatever the particular area of interest is.

If you have young children, you're trying to build that with something like you're describing where you're only working three days per week, but in 12 hour shifts, that's probably your best solution. And it will allow you to put into practice your, allow you to use the resources that you have, the labor of your children.

It'll allow you to do it in a way that won't be harmful to other components of your life because you can be at home, you can be working on the farm. That'll be really, really valuable. And it can be highly profitable as a source of extra income, but also highly profitable as a way to develop skills.

So I'm going to riff on, are you familiar with Joel Salatin's pastured poultry systems? So let's riff on pastured poultry. Pastured poultry, and for the uninitiated, is basically the idea of bringing in and raising very high quality pastured meat chickens on your property. And the benefits of pastured poultry is it's very, it can sell in a local area.

It can sell for a very high price. You get maybe 15 to $20 for a dressed out chicken instead of three or $4 for a conventional Tyson chicken at the supermarket. It can be done very quickly because the type of bird that is used for this, I'm blanking on the name, the fat ones, the big fat ones.

- Cornish cross. - There we go, Cornish cross, yeah. And basically all they do is they sit around and eat. And so what you do is you take them out and you put them on pasture. You build a very simple infrastructure. You don't need a barn. You don't need anything except some very simple cages that get moved across the pasture.

And they eat grass and then supplemental feed. They get pretty fat pretty quick. I don't remember, three months or so, 12 weeks-ish. And then you butcher them and sell them. So in and of itself, you have a micro business. And all you need for that is a place to put the birds.

You don't actually have to own land. You can just borrow land, rent land, use whatever land you can get your hands across. But you do need some land to put them on a pasture. But in that business, if you start that, what you actually have is in microcosm the need to develop all of the basic functions of business.

So the constraint in a pasture poultry operation is not with the ability to raise chickens. It's pretty simple. You put some chicken wire and you build some cages and you drag them across the pasture every day. The constraint is in the ability to develop a market. So then you have to figure out, well, who wants my stuff and how do I reach those people with my advertising message?

And how do I reach out to those people? So now you move into the world of learning something like social media marketing or internet marketing. How do you get discovered as the high quality meat producer in your area? How do you get people to be interested in what you're doing so that they search you out and follow you so they're willing to come out to your farm on butchering day and pay you $15 or $20 per bird?

And so something like that in and of itself starts to put you in the situation where you're developing those basic skills. Value creation. You're discovering what people need or want or could be encouraged to want. We're going with a concept, pastured poultry. Some people want it, but the number of people who currently want it versus the number of people who could want it is very small.

So you learn how to articulate the benefits of buying pastured chickens for $20 a chicken instead of Tyson chicken for $3 a chicken. And then you create it. So there's a basic skill of running the actual business. Then the marketing. How do you build demand? And where those types of businesses fall down is where they don't build enough demand for their product.

And so they can't get beyond making $100 a week of profit to making $1,000 a week of profit because they can't build demand. So as you figure out how do I build demand, how do I bring in more customers, how do I convert those interested customers through sales, turn those prospective customers into paying customers by completing a transaction?

Then value delivery. How do I make sure that they're satisfied? Then you look at on the back end as you're studying the finance, managing the books, handling all the details there. Then you look on the back end and you learn about back end value creation. So once somebody comes out to buy the $20 chicken, how do I make sure that instead of just them bringing $20 out, that when they leave they've actually put $60 in my pocket?

And you learn the back end creation. And so you can learn those business skills with a tiny little business that you do with your children starting with pastured poultry. And then those business skills are now transferable. And so you start by transferring them from poultry to duck eggs or from poultry to a rabbitry or to raising some beef cattle or milk cattle or whatever you do.

And you keep transitioning. And all along the way you're practicing those business skills. Now if you did that for a few years, you would now have the confidence from having done it that you could be plucked up from the middle of Indiana and plop down in the middle of Wisconsin and do exactly the same thing because you've done it once.

And then you could have the confidence that you could be plucked up out of a food operation and you could be put into an artisan handicrafts operation or a bee operation or anything because those skills are now generalized business skills that every business has. So that would be my thought, Andy, is that since you're already on this path, just while you're doing it, study it intentionally and pay attention to how you're doing it.

And learn those lessons and you'll develop incredible resilience in your career. I know you really like blogs as a way to kind of show your qualifications. Do you think that would be the most, I mean, because I picture if I get laid off as a diesel technician, I want to go become a salesperson, at least at the large company I work for, I have trouble walking and saying like I should, you know, qualify for this good salary job because I sold $5,000 a year worth of chickens.

Would a blog kind of demonstrating that, do you think there's a better way to sort of demonstrate that value for potential employers? Maybe that one's hard because if you're trying to prepare yourself for a career change that you're not actively moving into or that you're not currently working in, it's a little bit harder to build that kind of thing, especially to make it worth the time.

So I think everybody needs a career website that's related to themselves, their career and their business. The trick is with a career website, it should be related to either what you're doing or what you actively want to do. So do you actually want to transition out of your technician role to a sales role?

I don't know if I want to transition to a sales role, but I do eventually want to transition out of the technician role. Okay. So the way that I would see a blog or a career website, because a blog is just one function of it, fitting into that, is you develop a website for the particular career that you want to pursue.

You develop it for that specific thing, and then you market your way into that career with that website. But it should be done, you know, you don't have to commit to a specific time, but if you're going to start doing that work and laying the groundwork for it, you should have a specific goal of a specific career or a specific company that you want to work for.

And then you need to make sure that you're actually working towards it. It might take you a year, it might take you two years to make that transition, but it needs to be something that you are actually pursuing, not just, "Well, maybe someday I might want this." Okay. That makes sense.

Yeah. I'm going to just, I could, of course, go on. I have a whole section in my career and income course on a career website, and I'm actually redoing that one and re-releasing that as we speak. So check that out at some point in case it solves a problem.

I would just say that probably you're at a phase of your life where it makes sense for you to focus on the things that are going to be connected with your children and then working there. Because if I were in your situation, you probably have much more opportunity with an on-property business than you do with trying to just move into a sales job.

There's no reason why you couldn't make $50, $100, $150,000 per year with the property that you have bought. There are so many ways that you could do that, that I think it makes a lot more sense for you to focus on that first before you start trying to transition to something else in the corporate world.

Good to go, Andy? Okay. So that would be, your suggestion would be more look for resiliency in the property we own and having a family business to fall back on. Yeah. That's what I would do if I were in your shoes. Because I think it'll make a better fit for your family, for the phase of life that you're at.

And the great thing about sales jobs is this, sales skills are transferable, even if you don't have a website. Because they don't usually pay sales people unless they actually produce, you can go and you can get sales jobs. So I'm not worried about your ability to get a sales job.

I would focus on building the lifestyle job first, which is probably related to the big property that you bought. And there should be enough profit there that you could learn the lessons and then apply those elsewhere. We move to Colorado Springs, Colorado. David, welcome to Radical Personal Finance. How can I serve you today, sir?

Hi there. So I'd like to ask about, I've had a change in status this year, recently married. And because of that, we've been making some rough contributions on our own individually. But I think combined, our income is going to exceed the IRS limitation. So I guess part of my question is, my initial thought was to do a backdoor Roth, kind of recategorize it into a traditional IRA, I believe, and then move it back over into a Roth.

But I thought I'd ask, so one, I'd like to ask either, is that the best option or should I look into something else? And then B, if it's the best option, is it just mechanically that, just having a traditional IRA and moving it into there and then moving it back over into the Roth, kind of get some of the details ironed out in my head about actually how to execute that?

Or should I just see a CPA or something? You don't necessarily need a CPA. How much is your annual income for this year? I don't exactly know where I'm tracking that. It's probably close to right about a hundred thousand. And your wife's annual income for this year? She's going to be tracking around $130,000.

So the first thing that you would look at is, if this would be your first year married, you always have the choice to file married filing jointly or married filing separately. Now married filing separately destroys your ability to contribute to a Roth. If you, I just think this is kind of a technical question, not sure if I can do it off the top of my head.

Let's keep it simple. So you can always contribute to an IRA, you just may or may not be able to contribute to a Roth. And should you do the backdoor? Should you not? I'm flat footed because I don't know. That is a question for a CPA. My guess, what I don't, what I wonder if, is there, is there some, when did you get married?

What date? In October. October. Yeah. I don't know. You stumped me. I'm wondering if there's some way to change status in the year. And my answer is I don't think there is. My brain is going down married filing jointly. And because if you're married filing jointly, income is, the range is less than $193,000.

You contribute over $203,000. You can't contribute. But with $230,000, you're over that. Married filing separately, you can't contribute anything if you make more than $10,000. So that doesn't work. Singled, if you did not live with your spouse at any time of the year, you stumped me. So I get, my best guess is I would talk with a CPA and see, or you're an accountant, and that would be a good, good, a good question for a tax specialist.

But my guess to your answer is you can't do a Roth IRA. So could you do a backdoor, a backdoor Roth? Yeah, you could do a backdoor Roth, where you just simply contribute to a non-deductible IRA and then convert it to a Roth IRA. Is that worth your time and worth the hassle with $230,000 of income?

You be the one who decides on that, depending on the opportunities you have with your money. But I think that based upon your income, you're not going to be able to, because you're probably gonna be married filing jointly, you're not going to be able to contribute. The only thing I, what I don't know, since I'm not a tax preparer, I don't know if there's some way that you could do like a partial year return or something like that.

I don't think there is. I've never heard of that, but I wonder if there's some bit of data that I don't have. But it's a good question. You stumped me. Okay. Thanks. Yeah, I'll definitely reach out, maybe find someone that I can trust and see about what the best steps are.

It's a simple question for a tax preparer. Right, right. It should be pretty straightforward. I just don't want to run into any crazy, hairy stuff when I start preparing taxes. So I want to get it done. Well, thanks for that. And then I know I've heard you talk a little bit about this stuff in the past.

In addition to getting married, decided to buy a house and sort of thinking long-term. Remind me again, some of your thoughts. I mean, I'm not going to, I think either way I've decided I don't want to use extra cash to just put in the home equity. But I have considered the idea of just slimming some of my maybe contributions to 401k, maybe IRA a little bit, maybe not completely eliminating it, but try to save up aggressively as possible to have a big lump sum to pay off the house as soon as possible to free up some options later on in the future.

Whether it be one of us stay home with kids or however that maybe works out for us. What are your thoughts on that? I don't necessarily think that like mathematically might not be the most wise thing, but I think it has a lot of advantages. And so I'd like to get your opinion on that.

How old are you and how old is your wife? I'm in about 37. She's in her younger 30s, 32. So you guys are, you're giving me all kinds of difficult things today. You guys are in that kind of like middle phase of maturity perspective. You're older, she's younger. You're kind of in that middle phase.

Have either of you been homeowners previously? No. Okay. So just Joshua's quick list for buying a house, things that I think are wise to do first. I don't think you should buy houses with people you're not married to. When you are married, I think you should consider buying houses, but you should move slow.

I think that there are a couple of reasons for it. Number one, when someone is newly married, I think your focus should be on enjoying your first year or years of marriage. Now this is a little bit strange in our culture where a lot of people get married, but nothing has changed because they lived together for many years prior to marriage.

And so in that situation, the marriage ceremony, it doesn't really, it's kind of a legal formality. But when my wife and I married, we had both lived separately. And so when you first come together with somebody and you start taking up residence together, you start living together, you start being together constantly, it's a time of tremendous opportunity.

It's really fun when you go from being separate to being together all the time, but it's also can be a time of challenge. And I've always liked the principle in the Mosaic Law in the Old Testament in the Bible, there was a law that when a man was newly married, he wasn't allowed to be sent away to war for the first year of his marriage, but he was to stay at home and learn how to please his wife.

And I love that principle. And my wife and I did a lot of that. Looking back, I wish we had spent more time. So I don't, you know, my first year of marriage, I don't want to be starting a business. I don't want to be moving. I don't want to, I just want to be enjoying together.

We treasure the time that we spent in those, in that first year of marriage. I'm really grateful for what we did. If I were to do it over again, I would spend even more time just with my wife. I wouldn't be working all the time. I wouldn't be dealing with all that hassle.

Do the minimum and enjoy that flourishing of relationship. So that's the first thing. Another practical reason is it takes time to learn how to communicate with one another with regard to goals. And it takes time to try different things to see what you like and what you want. Now when people are older and or when people have owned houses before, they have a, generally have a tendency to have a greater understanding of what they like and what they don't like in houses.

But houses, the way that most people buy and sell them are very expensive things to buy and sell. They're very illiquid. There's tremendous costs to get in, tremendous costs to get out. And because of all that friction, you want to minimize that as much as possible. And if it's an investment, it's a great investment, that's one thing.

But if it's just a place to live, you want to live there as seamlessly as possible and as frugally as possible. So for most people, it makes sense just to buy a few houses and to try to take a lot of time buying the right houses so you're not constantly moving and changing and dealing with all the costs and the friction of those transactions.

Well it takes time to learn what you want. Your wife, when she's getting, when she's first setting up her first house by herself as a married woman, does she want a one level house or a two level house? Or what kind of view does she want out of the front window?

Or do you want to be in the suburbs or in the middle of the city? And those things are hard to figure out. It takes time and you probably don't even get it right the first time. You learn. I remember when we bought our first house, how I had thought excruciatingly, in a detailed, excruciatingly detailed way about everything that I thought we wanted.

And I thought we bought the perfect house because Joshua is the king of over analysis and I thought we bought the perfect house. Well, turns out we didn't buy the perfect house and today, redoing that situation, there were a lot of things that I would do differently. Now we bought a better house than a lot of other people did because of that analysis, but it takes time to do that.

So there's no rush. There's no hurry. You're going to buy a house that you're going to be for a long time. So take time. Enjoy being married. Go look through tours of houses. Go look at houses. Look at magazines. Make your dream list of the things that you want.

Dream about your lifestyle. Get clear. Do you want to live a downtown lifestyle? Do you want to live out in the country? All that stuff. Make lists, et cetera. Then when you do buy a house, you're most likely to make a good decision. You're least likely to lose money and you can get there.

Now, with regard to financing, I love being debt free. I love it when people can just pay cash. And if you're willing to buy a less house than most people of your income bracket would buy, you could pay cash. And I think that would be awesome. With a couple coming together with a $230,000 household income, if you guys just simply bought a $200,000 house and paid cash, I think that would be great.

The challenge is that most people with a $230,000 income don't buy a $200,000 house. Most people with a $200,000 income buy a $600,000 house. I don't know whether most people don't know what your goals are, whether you want to live in a fancy house, whether you want to save more money.

You guys got to work that out. But if you can see the way to, with the money that you have saved and the income that you have, if you can see the way to pay cash, I say go for it. Because when you own your house and you can completely, you have no mortgage, completely debt free, you get with that tremendous stability in life.

And it gives you tremendous options. Because then if you want to quit your job and start a business, let's do it. We don't have any bills. If your wife wants to quit a job and start a business, let's do it. We don't have any bills. If we're going to have eight kids and your wife wants to stay at home and be a full time homeschooling mom, let's do it.

We don't have any bills. Whereas meanwhile, if you bought a $700,000 house and you got a mortgage payment of $3,800 a month, all of a sudden those decisions are pulled from you. So I love it when you want to pay cash for a house. I love it when you want to be completely debt free.

I think that's awesome. Now if you're going to put a mortgage on a house, my question is what's the most sensible way to put a mortgage on the house? And my answer to that is from a safety perspective. You are very, very safe if you have a mortgage balance of $0.

Because you have no monthly payment required. You just have to make your taxes and your insurance. But beyond that, you have no monthly payment required. So thus you have great safety of having a debt free house. But what if you buy a $300,000 house and you put down $100,000 and you have a $200,000 mortgage?

Do you have a lot of safety? Well, my answer is no. And in fact, you actually have a lot of risk. Now incidentally, that was what I did when I bought my first house. And I came to regret it because I was stuck with a lot of equity in my house that I could only pull out with an additional home equity line of credit, which wasn't the most efficient way to borrow money out, nor did I really want to take out a home equity line of credit.

But I had to make a mortgage payment every month. So I didn't have any safety. And what I came to the conclusion was, if I weren't going to pay cash for a house, I was going to put a mortgage on it, that the next time I bought a house, if I were buying a house with a $300,000 purchase price, I would put as close to a $300,000 mortgage on that property as I could get with a good interest rate.

And I would keep all the rest of the money in a separate bank account. Because if I had $100,000 to put down, and instead of putting it all down and being left with no money, I just put down $30,000 and I had $70,000 set aside. If my monthly mortgage payment were $1,500 per month, but I had $70,000 set aside, then in that situation, I had, what, almost five years of payments, right?

I think $70,000, $1,500 is 46 months divided by 12, sorry, almost four years of payments. Now I'm very safe because now if I lose my job, or now if I want to start a business, I've got four years of mortgage payments in the bank. Nobody's going to come and take my house away from me.

Whereas if I had all that money in equity, the only way I'd be able to get it out would be to refinance the house, new costs, et cetera. So that was basically the conclusion I came to. When I buy a house, either I pay cash, which is awesome, or I finance as much as possible and keep the money set aside for safety until I can get within striking range of paying cash or paying it off, in which case I'm going to pay the thing off.

And with mortgage prices, the cheapest mortgage, the cheapest debt rates you ever get are on a primary mortgage on your house that you live in. And so when you're looking at all the different things you're going to finance, if you're going to buy rental properties, if you're going to do any kind of financing, use any kind of debt, it makes a lot of sense to maximize the debt that's on your house and minimize debt that's in other places.

In addition, you get the strongest debtor laws that are going to apply to your personal house. If you wind up in a disaster, much rather have the mortgage on my personal house and be able to take advantage of the debtor laws there versus having the debt on something else.

So those are basically my arguments. I would love it if you paid cash for a house. I think that's great. Just don't make the mistake of thinking that by putting 50% down, you're safer. You're not. You're safer to put 10% down, keep the other 40% in cash, and then wait until you can pay it off 100%, then make the payments and pay it off 100%.

Okay, thank you. My pleasure. Hope that made sense. Joshua's speech on home ownership. We go now to Portland, Oregon. Welcome to Radical Personal Finance. How can I serve you today? Oh, hi. Am I on? You're on. Tell me your name and let's go. Oh, hi. Oh, hi, Joshua. This is Chris from Portland.

I'm a huge fan. My question is pertaining to my 401(k) that I'm participating with my employer. And basically I'm rather concerned about the economy. And so I thought I was going to be clever and try to take some money off the table. My plan was to try to put all my funds in a money market account while it's still within the 401(k).

And I just realized that their only option or their equivalent to a money market account was a, I'm guessing it's a Wells Fargo stable fund fee. And it seems like it's considered a bond investment. And I'm wondering if I pretty much have sabotaged myself. Is it in treasury bonds, corporate bonds?

What kind of bond portfolio? It seems like it's a mix, but it's definitely under the category of a bond investment. And honestly, even when I've talked to representatives of this financial institution, even the representatives didn't have a very clear idea as to what exactly is all in that fund, which made me really nervous.

I was going to say, doesn't that make you feel good? Yeah. And so I'm wondering if I was better off just kind of just being in the market versus now being stuck in the bond, which bond investment, which I think might even be a lot more riskier than the normal equities.

Did you read the prospectus for the fund? I did not. It was one of those where I felt that if I had something equivalent to a money market, I thought that was going to be safer. And so now I'm trying to do more research and trust you, I might have to backtrack.

Right. So short answer is the first thing you do is read the prospectus. Believe it or not, all the mutual fund companies actually had to put all kinds of detail to information in the prospectus and they're actually quite illuminating. They put many people to sleep, but if you want an answer, you go to the prospectus.

If I'm answering this question specifically to the specific fund, all I do is I go to the prospectus and I read the prospectus and I say, and you just read the summary, the first few pages and you probably have your answer, but read the prospectus, see what it says and that will answer your question.

Now if this is the fund that your 401k administrator is offering to you, which is supposed to provide for you the ability to have safe money, if this is what they're saying is the safe money, then it is probably not a long-term corporate bond fund. It's probably a short-term treasury bill fund of some kind and it's probably designed for the stability of money.

Now the prospectus is going to tell you, but let's talk through what some of these words mean and how they would be affected by volatility. So if I'm understanding your line of thought, you are concerned about potential volatility in the broader stock market, ups and downs, and you want to protect the money that you've saved in your 401k from the potential downs from that volatility.

And so you're trying to find a more stable place to park the cash. If you could park the money in cash, you would be happy, but now you've got a fund. So you say, well, it's bonds. And you know that bonds, just because something is made a bond, doesn't mean that there's not volatility.

And because you're concerned about volatility, you understand that bond prices are influenced by interest rates in an inverse way. So if interest rates were to fall on a bond fund, then the value of the bonds would increase. Whereas if interest rates were to rise, then the value of your current bond portfolio would decrease.

And you know that in a bond mutual fund, this effect is especially pronounced because the duration of a bond mutual fund never reaches zero. So bond mutual funds experience significant volatility when interest rates go up and interest rates go down. In addition, then, I don't mean this to sound patronizing, I'm just trying to tell the story so that other listeners can follow through.

So forgive me, this is not meant to sound patronizing. But you know that in a bond mutual fund, your duration never reaches zero. And so you're infinitely exposed to the ups and downs of the value of the bond based upon the interest rate environment. Additionally, you're looking around at interest rates and you're saying, in the span of history of recorded interest rates, all things considered, we're in a fairly low interest rate environment.

And we've been in a low interest rate environment for a long time. And because of that, you're concerned that interest rates could rise, they could rise substantially. And if interest rates were to rise and rise substantially, that could lead to a major decrease in the value of your bond portfolio.

So here are the factors that you need to identify. The first thing you need to identify is what kind of bonds are present in your portfolio. Is it government debt? Is it treasuries? Or is it corporate debt? Is it municipal debt, et cetera? Because the word bond doesn't give us enough information.

So you want to read about that. And my guess would be that if this is what you were steered to, there's probably government debt in it, possibly just treasuries. The second thing that you need to read the prospectus and find out is the technical word is duration. What's the duration of the portfolio?

There will be a calculation. If you just do a web search for the ticker symbol for this portfolio, you'll be able to find the duration listed. Morningstar or something will list the duration calculation of the bond portfolio. And duration is simply a measurement of when do these bonds come due.

And that'll tell you if this is a short-term bond fund or a long-term bond fund. The prospectus itself will also tell you are we investing in short-term bonds or longer-term bonds. And the difference here is, let's use the perspective of government debt. If you said, Joshua, I've got a million dollars and I want to just put this million dollars aside and have it be absolutely stable, if you put that in T-bills, which are 30-day treasuries, you've got no risk whatsoever.

Your portfolio values are going to be totally stable. But if you put it into 30-year treasuries, you've got major problems because the value of those treasuries are going to go massively up and down based upon interest rates. So my guess is you probably don't have anything to worry about because I think your portfolio is probably made up of short-term government treasuries.

And in that situation, it'll probably be fairly stable. It won't be subject to significant amounts of interest rate risk. And that's probably the safest option that they've got that'll give you stability in your 401(k) because every 401(k) administrator is going to have some kind of stable value fund. So if this is what you were pointed to, I think that's the story that you're going to find when you read the prospectus.

But don't take my word for it. Read the prospectus and get your own answer. >>Joshua: Great. Excellent. No, that's super helpful. Thank you. That makes me feel a little bit less stressier thinking I might have sabotaged myself there. >>Steve: No, you didn't sabotage yourself. Just, I mean, read the prospectus and find out.

But that's where your answers are. And what you're looking for is you're looking for short-term on the portfolio duration. And you're looking for high-quality government debt, which is as close to bulletproof, as close to risk-free as we have the ability to achieve. Now, another day we can talk about whether it's actually risk-free, but that's not for today.

>>Joshua: I gotcha. Do you have time for one more question? >>Steve: Go ahead. We'll do it quickly. >>Joshua: Oh, yes. So, I was considering taking, cashing out my Roth 401, I'm sorry, my Roth IRA just to have some, I guess, dry powder on the side. Just in general, I was wondering what your thoughts on that.

Because currently my cash flow is pretty low. So, I was thinking if I cash out the Roth IRA, I may have more resources for later if there is a turn in the economy. >>Steve: Right. So, when you use the term cash out your Roth IRA, do you mean you want to sell the stocks and move them to a cash account and leave them in the Roth IRA?

Or do you mean you want to sell the stocks, take the money out of the Roth IRA and put it into your personal checking account? >>Joshua: Yeah, I'd take it into my personal account. >>Steve: Yeah. So, I don't see any reason why you would ever do that if you didn't absolutely have to.

It's very hard to imagine why you would ever do that. If you're worried about volatility in your investments, sure, it's your money. Move it to a stable cash equivalent, a savings account, whatever you can find with your custodian. But there's no benefit of moving the money to your personal checking account.

And in fact, I would say there are major disadvantages. For example, one of my big pet peeves is when people do this, they often take the money out of an account that's protected by bankruptcy laws and move it into an account that's not protected by bankruptcy laws. And if you're worried about problems in the economy, the very first thing you do is you do bankruptcy planning.

That's always what you do, is you sit down and say, "What if I got forced into bankruptcy?" And I use that because most people who go bankrupt don't intend to be there. And there is this thing where in theory you can be, very rarely, but you can be forced into bankruptcy by a creditor.

So I think that's a good place to start. You say, "Let's pretend that I was forced into involuntary bankruptcy. What would happen with my money?" Well, if you've got $30,000 in your Roth IRA, read the laws of your state. I don't know what Oregon bankruptcy laws are, so let me just give you Florida laws because I know Florida laws.

If I have $30,000 in my Roth IRA in Florida, and then I get forced into bankruptcy because I lose my job, I get cancer, I wind up with $15 million of debt, and my creditors force me into bankruptcy, if that $30,000 were still in my Roth IRA, then at least on the other side of my bankruptcy proceedings, I would have that $30,000 available to build from, and all the rest of my debts would be discharged, and my creditors would get nothing, and I would have my $30,000 to start again with.

But if I had taken that $30,000 and put it in my checking account, then that $30,000 would all go to pay my $15 million debt to my creditors. I would go through bankruptcy court, my debts would be discharged, but now I got nothing to rebuild from. So I get very, very nervous about moving money out of 401(k)s, which are even better than Roth IRAs from a bankruptcy perspective, or moving them out of Roth IRAs.

I don't want that to happen unless it's intentional, and there's a very, very strong argument, just from a bankruptcy and a creditor protection perspective. So absolutely not. I also get very nervous about spending investments because you're worried about turmoil, because most of the time, if you will just simply go and work more, or build a higher income, you can survive economic crises pretty well.

No matter the crisis, almost any crisis can be solved by earning more money, by making money. So better for you, leave the money alone, and go and get well-employed, stay well-employed, have redundancy, resiliency in your income, build a side business, have a career plan, know what you would build if you did get fired, do all the stuff I've talked about extensively to prepare to keep your career, because as long as you can keep your income, you can weather almost any financial crisis well.

It's only if you lose your income that things fall apart. And now, if you lose your income, that's where we go back to bankruptcy protection. I still want the money stashed aside in an account until a time that I decide I want to take it out and expose it to the potential claims of creditors.

Make sense? That was fantastic. Thank you for your sound advice. My pleasure. Good questions. All right, two more callers on the line. We move to Fayetteville, Arkansas. Welcome to Radical Personal Finance. Tell me your name and how I can serve you today, please. Hi, Josh. This is Walter. Can you hear me okay?

Walter sounds good. Go with your question, please. Okay. And this might be something that is really brief. I'm interested in hearing a little bit more of your perspective on investing locally. I know in previous episodes, you talked about, of course, being involved in personal finance, joining the industry, leaving the industry.

And then I think at one point, maybe you had mentioned maybe pulling your investments out of the stock market. Right. And so I'm interested in hearing a little bit more about your perspective on that. And then this might be something best covered in a future episode that whatever you could provide today would be great.

I'll give you just a couple of big ideas to consider because this is a process that I'm still working through. And I've thought about it conceptually. I'm working on learning by experience everything that I can, but I still don't want to teach from it comprehensively. So at some point I'll do standalone episodes on it, I'm sure, but here I'll just give you the big picture.

So you're right. At the moment, I don't currently own any publicly traded stocks. And I'm not particularly, although I don't own any mutual funds, and I'm not opposed to some. So there are certain mutual fund companies that I could buy ethical funds from that I could feel good about.

There are some stocks that I could choose that I could feel good about. I really have a deep frustration, especially with the American stock market, I have a deep frustration with the intense corruption with the crony capitalism that the vast majority of the large publicly traded companies are engaged in.

And I don't have the interest in going and digging through small cap stocks to try to figure out where my play is there. That's not my interest. One of my biggest annoyances, one of the biggest values of stocks, publicly traded stocks especially, is you get access to professional management.

You get very low involvement investments. You get very, you know, the only true passive income that I think is actually truly passive is if you can live on the dividends from publicly traded companies. I think that's actually passive income. I don't think there's much passive income that's truly passive other than dividends from publicly traded companies.

But if you've got $10 million and you can sit back and you can just simply live on the dividends from those investments, then you truly can sit back and just enjoy that passive income. The problem is at this stage of my life, I don't need passive income. I want active income.

And because of that passive nature and because of the intense scrutiny that those markets get, I think that's probably some of the lowest returning investment possibilities. And so at my stage of wealth, I believe there are much bigger options and opportunities available to me. And I have experienced that, found that, etc.

There are much bigger options that are just so much more profitable. When you're dealing with smaller amounts of wealth, it's very feasible for you to double your capital on a single deal. I was talking about a deal with a friend of mine, an export-import deal. And he'd run the numbers.

He was thinking about this deal where if he bought in the United States a container load of something and then shipped it to a foreign country, that he could sell it for triple what he would buy it for in the United States. That was his investment idea. Now I don't know if it's true or not, but those kinds of deals are frequently available when you can do an export-import deal, or you can buy and sell something, you can flip something.

You know, with my children, I'll teach them, way back in the archives, I interviewed a guy, I forget the name now, it was a great blog, just blanking on it right now. But his deal was he built a business, he was deep in debt, he was a contractor, and he was deep in debt, and he got himself out of debt and accomplished financial independence by buying and selling stuff on Craigslist.

And it wound up being buying, primarily, buying old appliances, washers and dryers, fixing them up, painting them, fixing the motors, and then reselling them on Craigslist. And the profit margin in a business like that is absolutely massive. The challenge is it's hard to invest a million dollars into that, whereas $10,000, you can easily put $10,000 to work in a Craigslist flipping operation, buying stuff cheap on Facebook Marketplace and then marketing it again.

So the profit potential, at least with smaller amounts of money, is so much higher. And that profit potential, especially in the early phases of wealth building, is really, really important. What annoys me about the stock market, and the way that investment advice is often given, is people talk about the time value of money, right?

And I think you should, right? We need to teach our kids about the time value of money, starting at 15 years old. And look, what if you put your money in a Roth IRA, starting at 15 years old, and you leave it alone for 65 years? And you can do the classic chart.

Look, you put $2,000 in for 10 years, and then you don't put any more money in, and you have way more money down the road. And look, the stocks are great, and the market is great, and you get 7% interest, et cetera. That's powerful. It's really good. But what's always the case is the person who's teaching that doesn't present the full range of alternatives.

And what that's usually compared to is, well, you could put $2,000 in your Roth IRA, or you could spend the money. So we're trying to get you to not spend the money. We're trying to get you to save it. Yeah, that's true. But what if you took the $2,000, and you taught that same 15-year-old, instead of going and putting it in a Roth IRA, what if you teach them to go and buy a car that's wrecked at -- they buy the auction, that something's wrong with it, and they pay $2,000 for it.

They invest 30 hours of work fixing the things that are working, and they flip it for $5,000. And what if you teach them how to do that four times per year, starting with the same $2,000 of starting capital? And now they've turned their $2,000 into $20,000 by the end of the year.

And what if you teach them the next year how to take that $20,000 and to buy three broken down boats that they got from the side of the road, spruce them up, fix them up, modernize them, and flip them on Craigslist? And then what if the next year you taught them how to go and open a local car sales lot, and here they are at -- I forget my age -- 18 years old, and they've been able to accumulate $40,000, and they go and they turn that $40,000 into inventory of 10 or 15 inexpensive cars that they then flip for, and they double.

It's very reasonable in a used car business to double your sales price. So now, instead of dealing with a 7% market return, we are dealing with tremendously higher. And so where I feel gypped is when I was a kid, people told me about -- I read the books about investing in the stock market -- but I didn't have somebody come along and teach me how to put my money into flipping and flipping stuff.

And I was wrong. I wish I had flipped cars. I wish I had flipped websites. I wish I had flipped houses. And because the profit margins are so much higher. Because now, instead of an efficient market out there where you've got 58 bazillion mutual fund analysts who've got it done, I've got a very inefficient market.

I'm going to buy this Ford Fusion and repaint this thing or swap out this body panel. You get the point. So investing in the local market, especially with smaller amounts of money, has the potential to be much more profitable than investing in the big public and trade of stock market because of the additional work or expertise required, the specialized inside knowledge.

Now let's add on to that tax efficiency. When you're dealing in your local market, you're much more likely to be doing business in doing your work as an investor in the context of a business structure, which just dramatically transforms your tax efficiency. Where instead of dealing with the capital gains market and very modest ability to deduct expenses associated with your investment activities, you're now dealing in the business market, which has just a totally different tax code, many, many more options available in it.

And now add on number three, add on the ability to work in the local community. And one of the biggest constraints that I am under, due to my worldview, Jesus said, do not lay up for yourselves treasures on earth where moth and rust corrupt and where thieves break in and steal, but lay up for yourselves treasures in heaven where moth and rust do not corrupt and where thieves cannot break in and steal.

For where your treasure is there, your heart will be also. And I've pondered that verse for decades and I think about how do you lay up for yourselves treasures in heaven? Well, if you think about it, the only thing that exists in heaven are souls. That's it. People. You know, there's no rust because there's no physical objects in heaven.

But rather are dealing with the immaterial eternal souls of people. So if I'm going to invest and lay up for myself treasures in heaven, the only way I know how to actually do that is to invest into the souls of people. Now that can of course have all kinds of application, but one of the biggest opportunities I see with investments is the ability to invest into people.

And those of us who are skilled, those of us who are knowledgeable, those of us who are intelligent, those of us who are thoughtful, those of us who've been blessed with the character, the self-discipline, the intelligence, just the natural cognitive ability, et cetera, to accumulate wealth and make good investment decisions, I believe we have a responsibility to use that in a productive way.

And one of the things that always bothers me is if I see somebody in need and I don't have the ability to help them with anything except money, and so now we get into the world of jobs, right? I have friends who need work. And so let's say that I've got a million dollars.

Let's just change it. Let's say I've got $10,000 and I've got $10,000 that I own in mutual funds. I buy Vanguard Total Stock Market Index Fund. And now I see my neighbor boy in my neighborhood is really struggling and would like work, but he's being raised by a single mom, doesn't have, let's paint the story bad.

He's in a tough spot. Well, if I got $10,000 of the Vanguard Total Stock Market Index Fund, I'm a Roth IRA, great, big whoop. All I can do for the kid next door is maybe give him money, but what does he need? He needs work and he needs a job.

So now let's say I take that $10,000 and I go and I buy a $3,000 pickup truck and I buy $7,000 worth of lawn equipment. I buy a big commercial mower and some weed eaters, et cetera, and I print up some flyers and I go and start bringing on customers for that.

Well, now I go to the 16-year-old kid next door and I say, "Listen, come and work for me. Let's get a job. Let's work on Saturdays." And I give him a job. Now I have the opportunity to spend 10 hours with him on Saturday doing hard, heavy work and we can talk in the truck and I can step in and I can encourage him and I can love him and I can maybe be the father figure that he didn't have.

And every single bit of my $10,000 is a business write-off and now within that I can use our services and our labor and I can turn that into a bigger profit, which means that next weekend I can go out and I can hire two guys like that. Then I can hire three guys like that.

Now I see the guy on the side of the street who's begging for money, doesn't have any money, and I can say, "Listen, buddy, come and work with us today." Or I can see the illegal Guatemalan next door who's struggling because he can't get a job and I can say, "Listen, buddy, come and work for me for today." And I can now start to invest into the souls of people.

Well, $10,000 of lawn equipment has the ability to turn into eternal wealth in a way that $10,000 in the Vanguard Total Stock Market Index just simply can't do. So this is what I am now convinced of with regard to – this is what I'm convinced of. And so is that there's much higher financial profit available.

I sat in a hot tub with a guy one time who was a multimillionaire off of a simple lawn business because he had business acumen. And if the people – you got me going, good question, Walter – if the people who spend their time – so many people go into areas where they compete with the brightest people.

If I were to go and become a Wall Street guy, I have the most brutal of competition in the world. The smartest, the most driven, most motivated, most self-disciplined people who are willing to work 80 hours per week are my competition there. That's a tough business. I could do it.

I could do it. But if I take that same exact skill, knowledge, intelligence, analytical ability, and I go and I apply it to my local lawn business, I could probably just completely wipe away the competition because the average local lawn guy is a guy who just tosses a mower in the back of his truck.

And you see this in every single industry. So simply as a competitive strategy, you get higher returns, potentially, potentially higher returns because you get less competition. If the guy – I remember years ago when I was still a teenager, I read Stanley's book Millionaire Next Door and it convinced me that if the people who go and compete for law jobs or for doctor jobs, etc., would go and start businesses and deal in a blue-collar market, they could just sweep the floor with the competition.

And then now moving on to kind of the last phase, and I'll quit. When I think about my children and my goals for my children, I need work for my children to do. I need businesses that they can be involved in so that they learn the lessons of business in the same way that the 16-year-old fatherless troubled young man next door needs help.

My children need the same thing. And I want to create opportunities for them to learn. And so now when we can build up a family business, and the family business has the ability to make very nice profits and also to fund very nice lifestyles. The thing that drives me nuts, you got all these people, many people – let me not be hyperbolic here – many people who their idea of getting wealthy, they want to retire, right?

Going to retire. So my goal is to build enough wealth and put it all into mutual funds so I can retire and travel to London. The problem is then you're stuck with living on whatever the wealth is that your mutual funds can create, and you're living in everything in a post-tax world.

Meanwhile, why don't you just build a business that will send you to London, put you up in a hotel, make sure you're working while you're there – one, two, three, four, five hours per day. And if you're doing work that you're engaged with, now you have a legit business trip.

Now you can go to all the nicest things, you can move all your London things over to the meals and entertainment column, you can move your hotel over to the business credit card. You can do all of that, and it all becomes executive perks. Why would anybody give up a business just for the simple tax efficiency of owning a business?

Why would you ever give that up and go to the world where you just live on mutual funds? So I'm not trying to preach to other people about what they should do with mutual funds. I just, at this point in time, seeing the financial opportunities that are on every hand, and then especially given my worldview with the fact that I want to buy up treasures in heaven, which means investing in people, and I don't particularly care for how the decisions that many of the Fortune 100 make.

I don't particularly care for some of the ways that they treat their people. I don't particularly care for the bribery and the corruption that they're involved in. I don't care for the markets they're in. I don't care for their marketing. So how on earth, why should I ever put money with that when the opportunity is at hand where I can impact my community, where I can quadruple money and make way higher returns than the few percentage points that the great honored mutual fund investors are willing to pass out?

So you triggered me, Walter. That's where I'm at in it. Great. No, that's exactly what I wanted to hear. And I think there's a lot of interest in that. So as you have time and think about it, I'd love to hear even more about this on regular episodes. So just a suggestion for you.

No, thank you. I want to speak from a place of experience when I do that. And by the way, the thing I didn't even talk about was self-directing, self-directing your retirement accounts. I mean, there's no reason why I can't run that business that sends me to London and then simultaneously run a self-directed 401k that I use to do real estate investment businesses.

And I got to be careful. There's a bunch of rules, but I can run a self-directed 401k with a giant property portfolio in it. And as long as I am careful to follow the rules about me being involved in the work, and I can do it all ethically, but then all of a sudden now I can contract the services of other companies and other people in my community that make a difference.

And that's always how communities run, right? The good old boys network. It's not going away. It's important. And it's a major component of everything we do. So that's what I got. All right. We finally go stay in the South and we go to Alabama. Mr. Tim, welcome to the show.

How can I serve you today, sir? Hi. I have a question about financial planners. You said before that you don't know why people balk at paying 1%. And I was curious your thoughts about that. I'd always thought I was going to just put money into a total stock market index fund.

But my stepfather's a financial planner and says that, you know, he makes the argument about the behavioral economics. And I don't know that I buy that if you're disciplined. But I was curious if the benefit you see in that and what your thoughts are about whether you can do it yourself or if everyone needs a financial planner.

So I want to be careful. Did I actually state that in your understanding of my words, did I actually say I don't know why people balk at 1%? Was that actually what I said or was that just like I can't imagine myself saying that. But maybe I did. I talk a lot.

I thought in some episode you said that people balk at the 1% asset under management. Right. Right. I don't want to misremember you. No, you do. It's just that so I'm kind of stuck in the middle. And over the years, my loyalty to when I first left the financial services, the professional financial services, I think I was probably still in terms of my perspective, my objectivity was probably a little bit clouded by the fact that I wanted to defend everything that the financial services industry did.

I think we all have that natural tendency. Over the years, I don't have any ties with the financial services industry. And I probably am more objective today than I once was. So here's what my current opinions are on it. I don't think everybody needs a financial advisor who's managing their portfolio.

I don't. I think there are people who have the self-discipline and the knowledge and the skill and the expertise to manage their own portfolio and to do very well at it. And they have the skill to do it. What the percentage of people is that has that skill, I don't know.

But I don't think that everybody needs a financial advisor who's going to manage their portfolio. In many cases, the value proposition that some financial advisors offer is very thin. And in that situation, one wonders if it's really worth it. At this point in time, financial management is basically a commodity across most mainstream firms.

It's built on a set of industry expectations. And it's a fairly basic commodity. And this is where the argument of, listen, just take all the money out of the managed mutual fund portfolio, cut your expenses by 150 basis points by moving it to an index fund at whatever custodian you want.

It's a good argument. So in order for a financial advisor to be worth the money, they should be returning a lot more. Where are the customer's yachts? The customer should have more yachts than the financial advisor does. And unfortunately, that's not the reputation that the industry has. So where can a financial advisor offer value?

Well, the first place that a financial advisor might be able to offer value is in alpha, the outperformance of one investment portfolio versus another. And that's what all of the academic studies focus on. And that's the hardest proposition to make. Because alpha is not easy to achieve. And it's not easy to predict that I'm going to be able to achieve it in the future.

And delivering alpha doesn't really pay off in the retail financial advisor space. In the financial advice industry, when I used to work in it professionally, I was with clients. In the same way that I've been on this phone call for the last hour and 16 minutes, I have no idea what the market is doing.

And that was the same way that I was with clients. I was talking with clients constantly. And I had no ability to be confident about what was happening in the market. That wasn't my scenario. So me as an individual advisor in that scenario, I couldn't deliver alpha to a client.

There was no way in the world that I could say with a straight face, "Well, Mr. Client, I'm going to deliver alpha to you." So maybe there's a way in some firm, right? Some firms, boutique firms, or firms that are very focused on investment management, they have a theory and they want to say, "We can deliver alpha." Is it possible?

I believe alpha is possible. Do I know how to say to somebody, "Find it?" I don't. So alpha is the hardest value proposition to make. So where else can a financial advisor offer value? Well, generally the behavioral model, basically the behavioral sales pitch was what I settled on when I was in that business.

I came to the perspective and I said, "Listen, I may not be able to deliver alpha. I'm not promising you that I can. But what I can prove to you is the majority of investors underperform their own investments by about half because of bad behavioral decisions." Earlier we had, I can't remember if it was Chris, was talking in today's call.

He says, "I'm moving my money out of the investment and I moved it into a cash account to protect it." Now, I believe that that caller, if it was Chris or whoever it was, I believe that that caller should do that if that's what he thinks that he needs to do.

The data indicates that very likely Chris is going to get that wrong and very likely Chris is going to miss out on the growth of the market and very likely Chris is going to, he's probably selling at the wrong time. Now I don't think that Chris has to do that.

Chris might have studied his position. He might have really dug into it and he might be really confident. But the data would indicate that on the average, if we deal out 100 Chris's who said, "I'm going to do what Chris did," most of them are going to get it wrong.

So we know that the average investor, Dalbar I think is the person who used to do it, I'm not aware of it changing. But the average investor underperforms their own fund by about 50%. So if the average fund gets eight, the average investor gets four. So there's your first kind of discussion of value proposition.

Mr. Prospective Client, if I can do nothing else but keep you invested, and this math is a little bit fuzzy but it's driving the point home. If I can do nothing else but keep you invested and I can keep you in your own funds by preparing you or by through some mechanism and I can keep you invested through the good times and the bad, then at least I can keep you in those investments that are going to make you eight.

And then if you're charging one, you're going to get seven versus four. That's kind of the first volley. Now the investor I think could turn around and say, "Well, why do I need you to keep me in my investments? Can't I just buy the investments and put them in a vault and never look at them again and stay invested?" Yeah, you can.

Are most people going to do it? No. How do we get to the next function? How can I do that? Well, it's not necessarily just a matter of yelling at the advisor and saying, sorry, yelling at the client and saying, "You've got to stay invested." Hopefully there's some techniques that I can build in place.

What I relied on was financial planning. I believe that with the right financial plan, the right allocation of money into the right resources towards the right goals gives me the track to run on. So now if a client is in a situation and they say, "I've got to get out of this investment.

The market's just collapsing," I can look at them and say, "No, listen. Listen, we've planned for this. What I've done is we've worked over here. We've adjusted your outflow. You don't have any debt or we've adjusted your debt payment. So you don't actually have a lot of money to spend right now.

Look over here. We've set aside this cash. This cash will get you through the next two years. You're in good shape. You don't have to sell. Look, let's look at the market returns. When the market has gone down, it's often come back. We have good reason to believe that things are going to come back.

So let's just sit tight." Now, if you go back to a time like the fall of 2008 and when people are just falling apart, two years got people through a lot of things. So if you could, as an advisor, if you could just get your clients through two years, their portfolios could recover, etc.

I think that's worth money. Is it worth money for everybody? I don't know. I don't think so. But is it worth money for some people? Absolutely. Now let's move into the world of financial planning. Every day on this show in public, I do financial planning in public and I try to point out the efficiencies.

Just a moment ago, I made this long speech about business stuff. If a good financial advisor can come in and can start readjusting the assets, readjusting where the debts are, moving things over to the deductible side, moving things intelligently, there's a lot of benefit there from that as well.

And then maybe there's other things. So for example, I always, after I read Networking with the Affluent, my goal was always, "How can I bring my clients lots of money?" So in addition to working with me on their money management, they get other benefits, whether it's more business to them or jobs for their teenagers or whatever it is.

How can I be a connector? I've paid lots of money to people just to be connected to them. So why shouldn't I go ahead and bill my client's taxable account with their investment advice fees so now they can deduct those fees against their profits and that be the method of them transferring money from their pocket into mine for the comprehensive services that I offer?

So that's just kind of scratching the surface. And I think that there is enough value there that good advisors would be able to still make a good value proposition to their clients. Can all advisors do that? No. But can good advisors make it in that place? I think they can.

And I just say this. I would never work as a financial advisor. The big Ballyhoo thing these days is basically this. Well we recognize that there's a specialty of financial planning and advice that has value and maybe it's just technical knowledge or maybe it's a budget analysis, but it's certainly not investments.

So what you should always do is you should go and put all your money into index funds and then if you need an advisor, you should go and hire an hourly fee advisor. That's a common piece of advice. I've never hired one of those hourly fee advisors myself. I can't comment on the competence of those people.

I'm sure many of them are competent and many of them are incompetent. All I know is for me and for some of the good advisors that I know, I would never work in that business because with the skills that a good financial advisor has, if you don't have the profitability to make at least a few hundred thousand dollars a year if not half a million or a million bucks, it's just not worth it.

Why would I go and work for a flat fee of $200 an hour? I've constantly got to go and develop more clients. Why would I do that when I can go and serve people in other formats and in other ways? So that's the honest truth. It sounds probably a little bit crass, but at the end of the day, I'm convinced there will always be a market for good advisors and that those markets, those advisors should work really hard to make sure that they can actually deliver on their value proposition and it's up to individual advisors and individual clients to work it out.

I had clients, I had prospective clients that I was very good friends with that never hired me because they just said, "Joshua, I love working with you. I want to be friends with you, but I'm not going to pay you this." On the other hand, I had clients that did and they were very happy and cried when I left.

But that's the best I can get to with kind of having an honest, objective discussion of the different scenarios and all I know to do is to leave it up to the individuals to say, "It's my money. Nobody cares about your money more than you do. I'm going to make sure that I get value from an advisor if I'm going to hire one." That makes a lot of sense.

If you have time, do you have any suggestions on finding that quality advisor? I have no idea. You know, I've had an advisor- Interviewing people? Interviewing people? Yeah, I had an advisor for a long time, which I hate it when my brain stops working. Sometimes that happens after I do Q&A for a long time.

I can't remember the name of my own advertiser. The planning network that I used to advertise for on the show all the time was the best that I got. I struggled with- Oh, Paladin? Yeah, Paladin. Paladin, that was who it was. Paladin, yeah, yeah. I didn't have any kind of falling out with them.

I had a lot of good stories. I would say the clients who went to them and hired one of their advisors or met with one of their advisors, about 80% of the time I got a great story. There were a handful of kind of, "Eh, this was okay." I didn't ever get any disastrous stories of, "Oh, this was terrible," but I got a few bits of feedback with people just saying, "Well, it was okay.

It was fine, but it wasn't anything special." That was the best that I could come up with for a while on ways to refer it. The problem is, I think my guess is right now, I think Garrett Gunderson, who runs The Wealth Factory, is probably doing a good job.

I have not met Garrett. I have not talked to him. All I know is when I see his media that he's creating, he's doing the right job of focusing on the right factors. The big thing is he's working with entrepreneurs primarily. Again, when I come down to it, I think delivering on alpha is the hardest sales proposition, but yet there's tremendous opportunity to deliver on, first of all, to deliver beta is one possibility.

Then with behavioral management, with personal finance management, with good financial planning, with good asset protection planning, et cetera, I think the value proposition there for wealthy people is huge. I've wrestled with this because one of the things I've thought about, I want to serve this market because I'm convinced that, and I try to prove it in public every day, I'm convinced that I could give me the average six-figure earner.

I'm convinced that I could deliver, I don't know how to put the right numbers on it, I can deliver millions of dollars of value if you give me the right circumstances and you give me the ability to work with somebody for a period of time. What the right way to do that is, is hard to figure out.

I've thought, "Well, maybe I should go ahead and start a financial planning firm." When I originally started Radical Personal Finance, I started a firm and then I shattered it before it got approved by FINRA. At this point in time, I never want to be involved with FINRA again. In the United States, the money management business has gotten so regulated that basically, as I see it in terms of legally and otherwise, you can't do anything at all interesting.

If you're going to do business in the United States, basically you become an unpaid spy for the federal government. I have no interest in wasting my time as an unpaid spy. That's not my interest. I'm not interested in that business and I think it's utterly wrong what the United States is doing to people.

Many financial advisor commentators, all they want to do is keep on cheerleading. At this point, although if I went broke, I would probably go back to that business just because I don't know of a place where I could make more money faster than going back to what I know and doing that and feel good about it.

In the middle of that, there are lots of ethical, competent advisors who are willing to work in that market and they can do what's best for their clients in the constraints of that. But I don't ever have any interest in going back to the United States and going into that kind of market.

I see nothing but doom for that. You see it reflected. You see that the advisors are so scared and all the firms, the lawyers run the firms. Because of that, you have almost no ability to do something that actually interests people. I used to push the boundaries, but I never pushed the boundaries as much as I do now.

I never pushed them legally or ethically, but what I mean by push the boundaries is you push the boundaries in terms of the things that you tell your clients to do. But why am I going to sit around? If I know that I can't make any difference in this client's life by delivering alpha and I know that that's a lost proposition, why am I not going to spend time consulting with them on the marketing their business?

I know that if I bring my marketing skill to them, we can double their business and now all of a sudden it's really good, but that was where I was always stuck. I'm supposed to be a financial advisor. I'm supposed to talk about stocks. I don't care about stocks.

I care about doubling your business because if you double your business, double your income, even if you put the money in cash, you wind up wealthier than trying to figure out how to get another 23 basis points of alpha. I've given up on the wealth advisory business in the United States.

I have seriously considered starting some kind of formal firm offshore. I think that there's a possibility there. The problem is that that structure gives you more freedom as an advisor, I think, but most Americans, which is where the primary market that I would do in, are so scared of moving offshore and perhaps rightly so.

I don't know, but most Americans are so scared of moving offshore that that would be really a tough value proposition to make. Then finally, as a way of earning money, the friction of paying advisory fees, sorry, when you take fees off of the management of assets, it's a very low friction event for the client, which is why most people don't mind paying fees because it's low friction.

It has a low saliency. I know my advisor deducts the quarterly fees, but whatever. It's just coming off my portfolio. Now, when somebody looks at it and says, "Well, what would happen if you get 1% underperformance over the course of 40 years?" It's a big number, which is why you better be, if you're going to be doing that business, you better be confident that you're doing everything you can to deliver far bigger than that number, which is, for most people, for most advisors at least, probably a hard thing to answer.

But in terms of getting paid from a business owner perspective, there's no, I don't know of any lower friction way to get paid where your business model works other than managing assets. When you take the custodianship of assets away, you get very high salient fees, and now it becomes a much harder business to pursue.

For now, here's one of the complaints of the financial advisor business. People say, "I've got a net worth of, let's just say $5 million, wealthy guys. We're going to deal in the world of wealthy people. I got a net worth of $5 million, but $2 million of that is in real estate, $2 million is in my business, and $1 million of that is in my 401(k).

So Mr. Financial Advisor, here's $1 million." Well, financial advisor says, "All right, well, I'll charge you 150 basis points on that. So I'm going to get $15,000 off your million dollars." And now all of a sudden, you're in a situation where, wait, how much value are you adding on a million dollar portfolio for $15,000 a year?

Well, maybe some, maybe not some. So some advisors charge fees based upon a percentage of net worth. And they try to do this because they're trying to relieve the frustration that clients say have, "You always want to get me to buy more stocks, or you always want to get me to buy more insurance.

And should I go and pay off this debt over here that I have on my business of a million dollars, or should I invest another million dollars with you?" Well, the complaint is that due to conflict of interest, the advisor is just going to say, "Put a million dollars with me, because if you put a million dollars with me, then I'll make you more money, so don't pay off that debt." But I really think I should pay off the debt.

So some advisors charge their fees based upon, not based upon assets under management, but based upon net worth. I've not met many clients who like that. Even though the client might understand, "Well, maybe that's going to release a conflict of interest and smooth things out a little bit, I don't see what impact you're going to make on my $2 million of real estate.

That's not your deal. I don't see what impact you're going to make on my business, $2 million. I'm just going to pay you on the million dollars over here." And so advisors are constantly stuck. And then when you move into a world where you've got to pay, you're going to write me a check for $15,000 every year or $3,000 per quarter, it becomes more difficult.

So I think as an advisor, the business is broken. Because as an advisor, you've got to really believe in what you're doing in order to go that model instead of the model where the fees are less salient, the clients are easier, et cetera. And there are still enough people who are willing to pay those fees that that other model still works.

Now, will it not work 10 years from now? I don't know. All I know is that if you don't custodian assets, but you try to work with the wealthy, that's a tough scenario. So what I've basically done is I don't think I'll ever start a firm. Just because dealing with the offshore, I don't want to deal with the United States, but yet dealing with the offshore stigma is difficult.

Some people are doing it. Maybe you can do it if you start a bank or something. There are ways to do it. But I don't want to deal with the US government, and yet going offshore just seems too difficult. And it is a big significant thing. So what you see is that a lot of people do is they go to a combination of information and classes and education mixed with sometimes commissions or some other compensation model on investment placements, et cetera.

And the reason financial people do that is because it allows you to deliver the knowledge that's helpful. And as long as you get your product mix right, it allows you to earn enough money and to do it in a way that's efficient enough where you can make a lot of profit.

And then if you work out the deals on the back end and you do it properly, do it ethically, disclose it, et cetera, you can put together enough profit without dealing with the formal custodianship of assets. So that's why you kind of have these competing industries. You have the newsletter industry versus the money management industry.

There are some sweet spots. There are some sweet spots in trust services. There's perhaps a sweet spot in family office management. But just speaking very broadly, those are the models that I see and why I think the different models work. >>Steve: That's great. Thank you very much. Good questions, guys.

Anything else, Tim? Go ahead. Yeah, go ahead. >>Tim: Do you know anybody who's used Garrett Gunderson? Yeah, I agree with you. His model is very interesting. >>Steve: I don't know of anybody who's gone through it. And I need to, I've been meaning to, over the next year, I'm going to build a bunch more relationships with some of the guys I respect.

I had people ask me about him. That's when I started researching him. I had listeners wrote to me and said, "What do you think of what he's doing?" I need to reach out to him and go talk to him and see. Because probably, just for me, what I need to probably do is collaborate with guys that I respect, like what he's doing.

So I haven't met him. I don't know him, nor have I gone through any client services. All I know is that when you watch his free marketing materials, he's focusing on the right things, which is financial planning and behavior management. So he's focusing on the right things. And because he's focusing on the right things, I have a feeling that he's probably put in place the proper back end.

But he's not marketing Alpha. That's the key. He's not marketing Alpha. He's marketing the rest of it. I need to dig into his product mix and buy some of his stuff and see how he structures stuff. I haven't done it. I've been too busy. My own fault. But if any clients have gone through his stuff, or if any of you know Garrett, or Garrett if you're listening, reach out to me.

I'm sure radicalpersonalfinance.com because I like the free stuff that he's doing. I think he's doing a great job, and I want to learn more. Thank you very much. My pleasure. That is it for our Friday Q&A show. Today was an epic, but man, we got some good topics. Thank you so much for listening.

Thank you so much for calling in. If you would like to join me on next week's Friday Q&A show, as you can see from today, you can talk to me about anything in the world you want, and I don't hold back. So I'm not too great in the world of nuclear physics.

I hope it relates to money, but I don't hold back. So if you'd like to join me for next week's show, go to patreon.com/radicalpersonalfinance, sign up there, and you will get access to the calls. Until soon, I wish you well. Don't just dream about paradise. Live it with Fiji Airways.

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