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That's FijiAirways.com. From here to happy. Flying direct with Fiji Airways. Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less.

Today we continue our 7 Rings of Freedom series. We're on ring number 4, spending liberty. And in this series I'm talking to you about some specific things that you can do that will enhance your personal liberty. My goal is liberty, freedom, because when people start to pursue financial independence I'm convinced that a majority of the reasons why people are pursuing financial independence come down to some expression of freedom.

Perhaps freedom over time, perhaps freedom over association, perhaps freedom over purpose, over direction. And there are some things that you can do while you're on the path to financial independence, which of course is going to take time, many times years if not decades, that will lead you to a lifestyle of freedom so that you enjoy the process.

And today we're talking about spending liberty. Now this is part 2 of the show. In part 1 I talked about the value of being debt free. And today I want to talk about the value of having savings. And you would say, "Joshua, it's obvious, right? If having savings is valuable it's going to give you more freedom." But I want to point out to you that you can achieve freedom with less than a million dollars.

And I've spoken about this before but I want it to be in one particular show where I want to talk to you about how even a small amount of savings, but savings that you can get your hand on, can open up to you freedom. Now I want to make sure that you're debt free because being debt free will give you huge amounts of freedom.

But when I closed out the debt free show I made the statement that you also have to supplement being debt free with having a little bit of savings if you want personal freedom. I use this example. I said, "Let's assume that you have $10,000 of credit card debt and you have $10,000 of savings.

Now are you more free if you take the $10,000 of savings and pay off the credit card debt?" My answer is you're probably not more free or at least you're not more free if you can't quickly replenish some of that savings. The example would be this. You're working in a job.

The job is not a great fit for you but you get a job offer on the other side of the state in a place that you would enjoy living and it's a great job offer for you. You're renting an apartment and you need to move out of this apartment.

But if you take the $10,000 and you pay off your credit card debt and you have no cash you can't make that move and you can't take the job offer. You might have to break your contract which means you may not get your security deposit back. You may wind up owing your current landlord an early termination fee on your contract of some kind.

And now you're in a situation where you have no money to pay first, last and security on another apartment. So if you took your $10,000 and you paid off all your credit card debt, yeah, that's good and you're now debt free but that didn't actually get you much more freedom because now you can't move to take the new job offer.

So you wind up going back into credit card debt in order to have money. So in that situation having $10,000 in the bank and simply having the obligation to pay $100 a month on your credit card gives you more freedom because now you have freedom of choice. So being debt free is something that you should set as a goal and should pursue.

But along the way you're going to find that savings and having money saved is going to be extremely valuable for you. Now I can't tell you exactly the order that you should pursue this. If you're in a contented job, you feel like you're in a good living situation, etc.

and you're paying off debt, I say pay it off. Do Dave Ramsey's plan. Save $1,000 in the bank and put everything else extra on the debt. Pay it off fast. But recognize that savings are going to give you additional levels of freedom. One of the things I have observed is that most people don't ever experience the joy of actually having money.

There are surveys that are done and basically you'll find that about half of Americans can't put their hands on $1,000 if they needed to without borrowing money. Now what's silly is that that doesn't mean that half of Americans don't have a net worth of more than $1,000. It's that they can't put their hands on $1,000.

And one of the weird things that has happened in the modern American society is that a lot of our money is tucked away where we can't get a hold of it. We can't have it. In some ways that's a good thing. I found over the years that in order to help me control my spending, it's a lot of times good for me to put a little distance between me and my money.

That helps me to spend less money. There's a principle there that's really true. But when you don't ever have money, then you don't ever feel rich. You might have $100,000 in equity in your home, but that money's hard to access and hard to spend. You'll feel far richer as an individual and feel far more freedom about your future if you have $100,000 in your savings account and $0 of equity in your home than if you have $100,000 of equity in your home.

Because what'll happen is if you try to get the money, the $100,000 out in a home equity line of credit, which you could do, you'll feel like you're going into debt. Whereas if you have the money in your savings account, you'll have access to the money. Things like retirement accounts come into play as well here.

Where so many people have money in retirement accounts, but they don't think about it as part of their liquid assets. Is that a good thing? Yeah, I think so. Again, a lot of times you might have people who have problems with their spending and they put money in their 401k and that's good for them because otherwise they'd spend it all.

In one sense, you could say it's good to have a little distance between you and your money. But then you find people who have 30, 50, 100, 300, a million dollars in their 401k who are doing things like working a job they don't like or living in a house they don't like.

And you look at it and you say, "Why on earth do you have all this money saved up for retirement when you're living in a situation that you don't like?" Change your living situation. And many people don't stop to think about, "Hey, I could change this." That's silly. Is it good to save money for the future?

100%. But don't ignore the present either. Find a way to live a great life now in the present while also saving for the future. And don't sacrifice one excessively for the other. They're both important. What I've learned over the years is one of the best ways to feel rich is to have a little bit of money.

It's silly, but it's true. Let me add the next part of that sentence that makes a difference. What I've found over the years is that one of the best ways to feel rich is to have a little bit of money that I can touch. Some money close to hand.

Some money that's not locked away. And I want to encourage you to save some money. And not to save all of that money in a place where you can't get it, but to save it in a place where you can. In my opinion, there are three numbers that you should set as a savings target.

You can put this on your goal list. Many people can do it, but there are three numbers that you should set as a savings target. These are round numbers. I can't scientifically prove them, but I think they're right. You judge for yourself. The first number is $1,000. You should save $1,000.

If you are a young person just getting started, if you are only earning a low income, something you're in a difficult situation, what you will find is that having the ability to lay your hands on $1,000 will move you away from that base level of poverty. It will allow you to be insulated from a majority of those bad things that can just create a snowball wrecking effect in your life.

$1,000 will fix most car problems. If $1,000 won't fix your car problem, $1,000 will get you a new car. Things like that are a big deal in many people's lives. What happens is most of us, we start to earn a little bit more and the wealth, the net worth and the earning level of the radical personal finance audience is astoundingly high, but it's not all astoundingly high.

I just want to encourage you, for those of you who are not at a massive net worth or a very high income, set a goal to save $1,000 and make that a very high priority. Do whatever you have to do. Little bit of extra work, pick up an extra gig, decrease your expenses, be radically frugal for a time, do whatever you need to save $1,000 because $1,000 will be a useful buffer between most things that happen in life.

Again, some of the most important ones would be things like a medical bill. Many people get sick, go to an urgent care place, $1,000 will solve the problem generally. Not everything, obviously not, but a lot of things. Go sick, $80, $100, $200. Those are the kinds of expenses when someone is just getting started that if they don't have them, they wind up starting to be in debt.

They wind up owing medical debt. They wind up with credit card debt, and then they get behind in something else. Whereas having $1,000, always having $1,000 will start to save you hugely. $1,000 will allow you to live and to get by in most difficult situations. Let's say you only have $1,000, but you lose your job.

If you've got $1,000, we can work out a plan. You may have to move, may have to abandon the apartment, et cetera, but if you've got $1,000, you can make a plan. I could live, even as a father of four children, I could live on $1,000 in a month if I had to.

It'd be not so fun. It wouldn't be great. I may not be living in the house where I live in, but I could do it, and you could do it too. That $1,000 buys you time to get another job. What happens is often if you study people who are deeply in debt, who are stuck in poverty, there are little things that happen that a little bit of money would help them to avoid.

They lose a job. Because they don't have a job, because they don't have any money, they can't put gas in a car and go to another job. Then they wind up going to a high-interest loan shark of some kind, where they wind up owing debt, and they have a credit card.

They get behind, they get behind, and it starts to snowball. Because they have a bad credit score, then they can't rent a good apartment at a cheap rate, et cetera. It just goes on and on and on. I don't want to belabor the point too much, but simply to say that if you're just getting started, $1,000 should be your first goal.

In addition, because there's two sides to savings, number one is the emergency buffer, $1,000 solves many problems in life, but also $1,000 starts to open up opportunities for you. It starts to allow you to do things that other people can't do. These opportunities allow you to take advantage of opportunities in life.

Perhaps you're living in a place where you don't have a job, but yet you have a cousin or a friend who posts on Facebook. Maybe you just randomly come across on Facebook or on YouTube some video of a guy talking about how much money you can make in the Texas oil fields.

If you got $1,000, you can get yourself to Texas. $1,000 will rent you a minivan for a couple of weeks. You can live in the minivan, and $1,000 will give you gas to put in the minivan so you can drive from, I don't know, Pittsburgh, Pennsylvania to Houston, Texas.

If I were on the edge, that's exactly what I would do. I would go and I would rent a minivan, possibly buy one for $500, but maybe you need a little bit more than that. I would rent a minivan, and you can rent a minivan as long as you rent it in a place that's not a tourist destination.

You could rent a minivan for a couple of weeks for a few hundred dollars. I'd go to—if I were that broke, I wouldn't go buy an air mattress. I'm going to say go buy a $10 air mattress, but if I were that broke, I'd just get some cushions from a couch that somebody threw away on the side of the road, put the cushions in the back of the minivan, fold all the seats down, and I'd drive to Texas, pick up some cheap food along the way at the grocery store, grab a little stove with a little butane stove that I can cook on and a frying pan from Goodwill or something like that that I can cook on, and I'd go get myself a job in Texas in the oil fields.

A thousand dollars means you can always do that. Those are the kinds of things that when I think about it, especially as a father, I think, "Okay, what if I lost my job? What if I were out on the street?" I'd send my wife and children to go live with family.

I'd rent a minivan or I'd borrow a minivan or I'd buy a minivan. If I could find a $500 one and I'd drive to Texas and I'd go get a job in the oil fields or some other version of that. You have opportunities to increase your income through good employment.

That's life-changing for a lot of people. Thousand dollars will start to allow you to take opportunities of buying things that you need that are a good deal. Number of years ago, I bought a car, a Toyota Corolla, paid $500 for it. It was owned by a little old lady that I knew.

She drove it for a lot of years, but she didn't like driving the manual transmission. She was getting a little older and she wanted to buy a car with an automatic transmission. The car was worth about $1,000, but it was in terrible shape. She was happy for me to pay her $500.

I fixed a couple of things on it and cleaned it up. She was happy. I was happy. I paid $500 for that car. That car is still going strong. I sold it after a few years for $1,000, but the car is still going strong. It's the kind of thing that's perfectly reliable transportation.

1998 Toyota Corolla, four-cylinder, manual everything. I love that. If I didn't travel so much, I'd still have it just as a car around, an extra car. It had zero repairs, nothing. Nothing has gone wrong with it because there's nothing to go wrong with it. That's why I bought it.

The reason I'm saying that, the point is, when you look at people who are really just getting started, a lot of times they make short-sighted decisions. Things like buying cars that are not reliable just because it was available. A lot of times it's done to financing. You go down and you go to the buy here, pay here lot, and you buy a car for $3,500 that the dealer paid $600 for on a trade-in, but you finance it through the dealer.

Then you wind up buying a car that's just simply not reliable. A lot of the cheap cars are not reliable. The problem is that you can't predict when those inexpensive little cars come along. It's one thing to buy a car from somebody that you know, a little old lady that you know who is getting rid of this car that she's had for 12 years, and you know everything's going to be fine on it except for the stuff that I can clearly see.

I see that this is broken, this is dirty, et cetera, and you can just simply buy it confidently. That's very different than going to a car lot and buying that same car that you know nothing about the history of it. It's not nearly as safe of a bet. You can't make those things be produced all the time.

When you see a deal like that, it's kind of like Costco. When you see a deal at Costco, you got to buy it now because you know they're going to get rid of it in two weeks and that's their whole scheme. Deals like that, you got to buy them now.

When you come across somebody who's selling a boat and they need the money this weekend, you got to buy it now. You can't wait, you can't think about it, you got to buy it now, which means you need money. Having a thousand dollars can help somebody to have a backup car or it can help somebody to have reliable transportation so they can get out of a bad car alone, something like that.

A thousand dollars starts to get you to those opportunities. Now, I want you to have more, but I want you to understand a thousand dollars gets you options. A thousand dollars starts to allow you to take advantage of bulk buying. One of your biggest cost-saving measures is to be able to do bulk buying.

Instead of buying small packages of things at high retail prices, you buy large packages of things. If you eat candy bars, get a friend who has a Costco membership to allow you to go into Costco with them and buy a box of them instead of buying them at the convenience store.

If you need food, go and buy big bags of rice and beans and a big box of chicken and set it aside. If you look at the way that many people run their finances, because of limited available money, limited cash flow, often they're paying the most expensive price for food.

One of the basic skills that you have to learn to develop in your financial journey is to lower all of the costs in your life. I used to do construction. I've worked construction. I've worked on a farm. I've done lawn maintenance. I've worked with a lot of blue collar and sometimes low income workers.

One of the most astounding things to me is how somebody who's making $10 an hour can afford to buy gas station coffee, can afford to buy gas station drinks. If you go to most places during lawn care season, if you go to most fast food restaurants, you'll see landscaping trucks and whatnot parked there.

Usually the Spanish guys, all the Latino guys are usually a little smarter. They've got tacos and beans and rice and whatnot from home. But you'll often see, especially the native born Americans that are working in those kinds of jobs, buying fast food. You can't afford it. It's too expensive.

The first skill you have to learn is to change away from that. You start to save some money and you put together your food. You go and you buy a 20 pound bag of chicken. You put that in the freezer. It'll keep fine for months in the freezer. Then you cook some up in advance.

Then it lowers your per meal cost. Instead of spending $5 to $8 a day on gas station food, coffee, etc., it drops your total daily food cost to $1.50 a day. Those savings add up big time. But the $1,000 gives you the flexibility to start to spend it on that.

The very basic level, the first goal should be $1,000. Save $1,000. Then always keep that $1,000 available. That'll give you more freedom. What about other freedom oriented things? Things like changing jobs. Many people don't change jobs because they can't even go a few days without a paycheck. Sometimes people can't even go a week without a paycheck.

$1,000 gets you the freedom to change jobs. And so when the pay periods don't line up, you have the ability to still cover what you need to cover. If you don't have $1,000 right now to your name that you can get your hands on without borrowing it, it's a full emergency.

You should not eat. Or you should not eat anything except rice. Whatever the tortilla, corn tortillas, or rice, or flour. You shouldn't eat until you get $1,000. Don't do anything until you have $1,000. And then resolve to never have less than that. If you have to spend it, if you have an emergency, immediately replace it.

And go to full stop everything. Turn off the air conditioner. Cancel the cable. Do everything to get you back to that $1,000. Life below that number is simply far too risky. It's too much uncertainty and you have no freedom whatsoever. So save $1,000. Now my only addendum to this would be if you don't have $1,000 on your person right now and/or within your ability to go among your belongings, your house somewhere, and get the $1,000.

It doesn't have to all be on your person, but it probably should be. If you don't have $1,000 on your person, then stop and do that. So many people say, "I've got plenty of money in the savings account," but they don't have any money where they can touch their hands on.

And so for an adult of a decent earning, not at poverty level, et cetera, to not have $1,000 on your person and/or in your effects, some in your car, some in your house, et cetera, it's irresponsible. It's crazy. And yet in a credit card driven world like most of us live in, that's where most of us are.

So you're behaving irresponsibly if you can't put your hands on $1,000 right now and you have it. The only exception I'll make to that is somebody who's living in a very vulnerable situation, multiple roommates, high chance of theft, minimal personal belongings, very transient situation. In that situation, bury the $1,000 in a jar and put it in a flower bed somewhere.

Conceal it at a public park or something like that. But make sure you can always lay your hands on $1,000 of cash. Now what's the next number? Well, for me, one of the things that no one told me about was $10,000. And I had $10,000 saved for a very long time from a very early age.

But what I didn't have was $10,000 saved in a place where I could have it because I prioritized so much investment accounts. And I was always setting the money aside, setting the money aside, and investing, investing, investing. And it wasn't until I was old, I don't know the exact age or I'd tell you, but it wasn't until I was older where I finally had $10,000 and I was like, "Wow, this is pretty cool." Because when I got $10,000 available to me in a savings account where I can just simply swipe my debit card and get it out, all of a sudden I felt rich.

And what I came to realize was that the majority of life-changing decisions that I wanted to make were within my grasp. Now when you have $10,000, you are of course insulated from the vast majority of problems in life. Not all, but the vast majority. It's hard for me to think of a problem that can't be solved and/or at least deferred for $10,000.

For most people, $10,000 would represent, especially people without debt or with minimal debt, for most people $10,000 would represent at least a few months of living expenses. And if it doesn't represent a few months of living expenses for you, it could. You might spend $10,000 a month because you have the money, but if you had to spend less, you could do that.

You could live on $10,000 for a few months, especially if you don't have any debt or you have modest debt. If you've got $5,000 a month student loan payments, can't help you. That's what the last show was for. But $10,000 represents at least a few months of expenses. That's powerful because that starts to give people a sense of certainty and security that is really life-changing.

Now it doesn't represent six months of living expenses for all people, even necessarily for most people. But there are so many people who are earning six figures, who are so deeply in debt just because they committed to a debt lifestyle, who when they first have $10,000, it's changing. And there's so many people who are earning $30,000, $40,000 per year, who if they could save $10,000 would help them to start to feel rich.

So from a security perspective, it's fantastic security. Again, what about those things that happen in life? The unexpected illness that somebody misses some work and misses some paychecks, $10,000 protects against that. Unexpected medical expenses, $10,000 protects against a lot of those. All of them? No, of course not. A lot of them.

$10,000 protects against the car accident that breaks down your primary vehicle. Let's say that you're a tile setter, a construction worker for a living in some way. And so you need a truck to carry your tools and all of a sudden you get hit this Thursday morning sitting at a stoplight by an uninsured motorist who runs away.

And now your truck is broken and you've got no insurance payout for it and you can't get to work on Monday. $10,000? Give me one day in any city in America and for $2,000 to $5,000 we'll have a reliable pickup truck or a reliable minivan or a reliable big van or a reliable station wagon, something that can carry your tools and you can be back at work on Monday morning earning an income.

That's so powerful. $10,000 will bail you out of prison in most situations. $10,000 allows you, your grandma dies and you've got to buy a last minute plane ticket. $10,000 flies you across the country or across the world to go to grandma's funeral or to go and help an ailing parent, et cetera.

$10,000 allows you to be covered from most of those emergencies. $10,000 also opens the door to any, I have to qualify that, to almost any, basically to almost any life change that I can think of. Need to move from Miami, Florida to Seattle, Washington? $10,000 will do it. So if you're just done with Miami, Florida and you want to go to Seattle, you can do it.

$10,000 is enough to drive you there, cover the cost of gas, maybe a hotel if you need one. $10,000 is enough to pay first class and security on an apartment. $10,000 is enough to float you for a couple of weeks while you find a job. And so if you're trying to escape life in sunny South Florida and you want to move to Seattle, Washington, you can do it.

$10,000. $10,000 allows you to start so many businesses. Not all, but so many businesses. $10,000 will finance tools, equipment. You want to leave your soul crushing corporate job and start a pressure washing business or a catering business or something like that, $10,000 is enough to get you in business.

And this goes on and on. I don't want to give too many examples, but almost any decision can be done for $10,000. Even some of the big ones, you're stuck in Chicago, Illinois, you got a house, you got a mortgage, but all of a sudden you hear about an exciting opportunity in another state.

Again, $10,000 moves your family there, covers the mortgage for a month or two, allows you to paint the place, replace the carpet and get a tenant in there to cover your mortgage or it covers your mortgage for a few months while you get it on the market and try to get it sold quickly so you can move.

This is the kinds of freedom and opportunities that are opened up by having money. But it's got to be money that you can touch, that you can get your hands on. In addition, $10,000 allows you to take advantage of buying opportunities. Now here of course the buying opportunities get a little bigger.

We're not worried about buying a 25 pound of chicken, pound bag of chicken at Costco to save money on lunches. But you want to buy a boat? Well $10,000 and somebody who's watching Craigslist will create a great family boat for you anytime you want. You can move down, move with cash, they got it listed for $10,000, you offer them $6,000, here's cash, you might drive away with a boat.

$10,000 gets you great cars. $10,000 allows you to buy an RV, use it for a while, sell it when you're done with it. $10,000 opens up so much entertainment and fun and those kinds of things. And what happens is that middle income people often have the money stuck in a retirement account, but they're stuck in the expensive middle income world.

So instead of going and buying a cheap boat on Craigslist to use for a few years and then flip it for net cost of a very little amount, they go and they buy a new boat with payments. And that new boat they pay $25,000 or $35,000 or $135,000, whatever it is, and it depreciates drastically.

Instead of buying a reliable minivan for $8,000 or $7,000 or $5,000 or whatever, and then from time to time just simply replacing it every few years and going ahead and buying another one so they never wind up with an old one, they go out and buy a brand new one.

Depreciates quickly and wind up without any money. Those are the kinds of decisions people make all the time. Instead of figuring out a... I don't need to give any more examples. With $10,000, it's hard for me to think of the thing that can't be done, especially if it's accompanied by debtlessness.

It provides dramatic safety, resiliency, a buffer from the majority of things that happen in life. You die, you don't have any life insurance, you leave behind a wife and five children, $10,000, it's enough to buy a casket at Walmart, stick you in the ground in the family cemetery plot, it's enough to allow her a few months to figure out who's going to watch the kids, it's allowed her to update her resume and go and get a job.

It's a buffer. It's a really, really important buffer. As I close out and move on to the next number, I would emphasize to you that probably, unless $10,000 is the only money that you have, $10,000 is probably the kind of number of cash that you should be able to lay your hands on in a relatively short period of time.

Now maybe you walk around with $10,000 in your boot, some people do, but more likely, it's just an amount of money that needs to be in your home safe. It's an amount of money that needs to be in safety deposit box at the bank or split out in a number of different situations.

Again, I sometimes feel like I'm the number one advocate for cash, but I see so many people who have so much money who can't actually lay their hands on it if they want to. And so your brother is, you know, your brother gets put in prison, you can go bail him out, but you don't have the cash to do it, or your car breaks and you need a replacement this weekend, but you can't get any money out, so you wind up not being able to buy the cheap one on Craigslist.

That was one of the places where I first started to pay attention. I needed a minivan. My wife and I were in an accident. I wrecked one of our cars. We needed a car. I was searching for a minivan. I got a deal on one, went to look at it on Saturday morning.

It was a great deal. I think I paid, it was going to be like five or $5,500. It was what I was looking for, but it was a few thousand dollars under market. But it was hard for me to get my hands on the $5,000 that I needed. And so I called the bank and was able to work it out.

They increased my ATM limits. I went to half a dozen different ATMs and made all the ATM distributions, and I was able to get the money out. But it made me realize how ridiculous that was. How ridiculous is it that I can't just go and buy a minivan on Saturday morning because I don't have the cash, and I resolved, never going to happen again.

I'm never going to have all my money stuck in a bank account and not be able to buy a minivan. And so things like that are so valuable to be able to do. And so you should have probably at least $10,000 secured in a way where it's protected from theft, protected from damage, et cetera, but it's available to you.

You never know when you might need it. Never know when your accounts get frozen. Never know when you might have bank errors. I find more and more that I'm having more and more problems with my banks. Now, it might be due to some of the weird things that I do and my weird travels and whatnot, but the amount of trust that I have in my banking institutions to release my money to me when I need it has substantially diminished.

And I've realized how vulnerable I am if I don't have cash. Sat there and you're trying card after card after card, and something is flagged, but I can't get the message and I can't release it. And so it's important. Pay attention. Now, the third number in my list is $100,000.

And I can't defend that number again scientifically. All I can tell you is, of course, it's a round number, but round numbers work for me. But when I hit $100,000 in savings, not locked away from me, I experienced something that I never expected. I experienced a sense of freedom.

And that freedom is something that I would never trade. Because what I realized is, I have the ability to make the choices that I believe are in my best interest and my family's best interest without worrying about what anybody else says or does. I have the ability to go anywhere in the world that I want to go.

I have the ability to do almost anything in the world that I want to do. I have the ability to live in almost any way that I want to live. Now, am I financially independent? Could I just stop working and never earn an income? No, I'm not. But I never have to worry, as long as I have $100,000, I never have to worry about being destitute.

I never have to worry about being stuck. I can't imagine the situation that I couldn't get out of in that circumstance. I will concede that the $100,000 needs to be mixed with some frugal living skills and some flexibility of mind. There are many people who, their mindsets are so rigid and so inflexible, they're not willing to ever make any sacrifices and they're stuck even with $100,000.

But for me, a man who possesses a fairly flexible mindset, who's fairly adept at thriving in different situations, the $100,000 means total liberty. Can I go and buy a house in Miami, Florida for $100,000? No. But if I need a roof over my head, I can go to Youngstown, Ohio, or I can go to Biloxi, Mississippi.

I can pay $50,000 cash for a house, own a house, no mortgage, ready to go. Perfectly good. Suitable. I'm not abusing my children by making them sleep in a minivan on the streets. I'm in a good situation. I can have a stable situation. I can start all kinds of businesses.

And so if this business fails or another business fails or et cetera, as long as I've got money, got $100,000, I can pivot. I can pay personal expenses for years if I'm living frugally. Six months, a year if I'm not. But years if I'm living frugally and still have the ability to acquire equipment.

And what happens is you move into much more profitable businesses. You buy a food truck trailer or you buy a snow cone equipment or I go and I start buying bounce houses to rent out, et cetera, or I do something online. The world is open to you. And so when you've got investment capital, is it enough to make you financially independent on the 4% rule?

No, it's nothing. It's nowhere near enough. Obviously not. I can't live on the 4% rule on $100,000. But what I can do with $100,000 is I can start a bounce house business that makes me $3,000 on a weekend. It's fully or $2,000 on a weekend. It's fully rented out because I'm running 10 bounce houses or 20 bounce houses depending.

And I can supplement that with somewhat something else, right? Electric cleaning business or something like that that's available to me, low barrier of entry but I just got to have some equipment and then I can make money quickly. Now I can still be the master of my time. I can still be in control of my schedule.

It's enough money that if I want to pivot and go and become educated for something new, I can go and re-educate for something new. I can cover my living expenses for a period of time while I go back to school. I can do whatever I need to do. So there's a famous quote where Warren Buffett when he's talked about how much money he was going to leave to his children, he said, "I want to leave them enough money that they can do anything but not enough money that they can do nothing." And that quote is lauded as being very wise.

I like it. I don't have a problem with it. I think it's nice to leave, to provide for your children the opportunity that they can do anything but not so much that they can do nothing. But as I've thought about applying that to financial independence, I'm presently convinced that $100,000 is enough money to do anything but not enough money to do nothing.

That's why I prioritize it so highly. It's enough money to do anything but not enough money to do nothing. Now I don't think doing nothing is anything to aspire to, which is why although I work towards financial independence and I want to encourage people to work towards financial independence, I think that the common goal of financial independence is this pivotal capstone thing is silly and short-sighted.

I think that financial independence should be a point along a journey and that your goals should go beyond financial independence while you look forward to reaching that crossover point. If doing nothing is not the goal for Warren Buffett and his children, then why should doing nothing be the goal for you or for me?

My opinion, $100,000 is the number. It's enough money to do anything but not enough money to do nothing. Now will I change my tune when I'm a millionaire and a decamillionaire and I don't know, centamillionaire and whatever it goes on beyond? Probably. You listen to rich people talk about things and you hear them say funny things that you can't even conceive of.

How can you live on $100,000 a month and things like that? But I appreciate the bluster and the bravado and perhaps that's how they really feel, but I can't find any logical reasoning to it. If you've got $100,000 saved and maybe the income level is $100,000 a year, I don't know, but basically there's a crossover point at which you can basically do just about anything you want to do, just perhaps not with quite exactly the same luxury that you would do it otherwise.

I don't know what I can't do at this point in life that I could do if I had $100,000,000 except do everything that I do now with more fanciness around. There is a massive difference for somebody who's just starting out or somebody who is very broke. There's a massive difference between hand to mouth, paycheck to paycheck versus having some buffer and some margin and some safety.

But once somebody has $100,000 in the bank and has a business that provides for their lifestyle, it's all just variations on the same theme. You can go on vacation. You can just go on fancier vacations when you're more, maybe longer, I don't know. I think that $100,000 number is so doable for so many people that it should be the first goal.

It may take you 20 years to save $1,000,000, but it won't take you 20 years to save $100,000. Even on a modest income, you can save $100,000 quickly. I just want to encourage you, if you don't have $100,000, set it as a goal and achieve it quickly. One of the neat things about $100,000 is it can be achieved through a variety of means.

Can you save your way to $100,000? Yes, you can. But you can also do something very simple like buy a house, live in it for a few years and sell it, have $100,000. You can possibly do it through some savings plus a little bit of part-time entrepreneurship. Pick up a side hustle gig that makes you $1,000 on the weekend and pretty quickly, you've got an extra $100,000.

Can you do that? Of course you can do that. There's lots of things that you can do to do that. If you set it as a goal, you start seeing ways to achieve it. Now, back to savings. If you only have $100,000, should you save $100,000 in cash? No.

That's far too risky. One of the major problems with cash, with physical currency that you have to be cautious of is through the risk of theft and the risk of destruction, loss through some other means, fire, flood, earthquake, etc., that kind of thing. You want to make sure that you don't put your currency at risk.

There's a scale between $1,000 of cash versus $100,000 of cash where the risk that comes from not being able to put your hands on it versus the risk of loss, if that represents your life savings, is just simply far too substantial for you to turn the risk of having all that money in currency.

Don't do that. The next thing is, does the $100,000 all have to be in your bank account? My answer is no. It doesn't. If you can put it in your bank account, you'll probably feel different. I'm not opposed to 401ks, IRAs, Roth IRAs. I think they should be used.

I think they're useful tools. I especially like them as simply creditor protection tools, things like that. I would not go to an 18-year-old or a 22-year-old who is working at a job and say, "You should not put money in a 401k until you have $100,000." I think that's silly.

I think you should put money in the 401k. I think you should put money in the Roth IRA. I'm being a little wishy-washy on this particular goal to try to account for some of those realities that I think need to be accounted for. My number one priority for you is that you set it as a goal and that you achieve it because it'll be a point of freedom for you.

It'll mean that you can invest. I skipped over all the investment opportunities, but are there investment opportunities with $10,000? Yes. There's a lot more with 50. With 100, though, you get to the point where you can invest in almost anything. You can buy rental houses. You can invest in pretty cool businesses.

You can buy franchises. You can buy in with other people. There's all kinds of things you can do that you can't do before. That money needs to be available to you is the point, but even if it's all in a 401k, I'm okay with that. I'm sorry. I'm not okay if it's all in a 401k, but I'm okay if you're funding a 401k, but you're mentally moving it to money that's available to you.

The big point is for you to have money that's available to you, not money that's locked away in a mutual fund until you're 65. What I would do if I were starting over at a young age, knowing what I know now, I would take advantage of things like 401ks, but I would put money in a Roth IRA.

What I might do is I might be slow to invest the money in the Roth IRA, meaning I might put it into the Roth IRA, but I might keep it in a cash account for a time just so it's stable, so it's not wandering around with the stock market.

I might mentally earmark that as my opportunity fund. If I see something that I think is a better opportunity than mutual funds, I'll go ahead and take the money out and spend it on that. Could be college education or college degree. That's one option. Could be a cheap little rental house for me to live in.

Could be a new car. Could be anything, but I wouldn't mind using those accounts. I just don't want to prioritize those accounts and not have any excess money. So I think you need 10 grand in your savings account, and then you need to be increasing that number while you're also increasing the other accounts.

I know that's a wishy-washy answer. I just want to be responsible with my language and drive home the point of saying $100,000 should be a goal and that that money should be available to you, not locked away in your home equity, not locked away in your retirement accounts. That's what I believe, but there's a prudent path to get there.

I don't think you should have $100,000 in cash and a bunch of debt. Pay off the debt, but move towards having some liquid money. And then you do need to think about where to store it safely. So where to store it? Retirement accounts are fine. Savings accounts are fine.

Some amount of it in physical currency is fine as long as it's protected. I don't mind life insurance cash values being part of that. I don't mind even some conservative investments, but I just want to make sure that a lot of it is cash and that you reach the point where in your mind you say, "I can do anything that I want to do.

I have the ability to do that." Then go back to your life from a place of financial independence, from a place of financial abundance and look at how you're living, where you're living, what you're doing, etc. and say, "Since I'm rich now, is there anything that now that I'm rich?

I would do differently if I were doing this over again." And then start adjusting to that. Don't ratch up your expenses necessarily. That can be dangerous. If you are rich, you got $100,000 because you made frugal housing decisions and you bought a reasonable house in a nice neighborhood, but then all of a sudden you go and you buy an extravagant house, well very quickly you're not going to be rich anymore.

You're just going to have a big extravagant house. To be thoughtful, but approach your life from that perspective of confidence. That's what savings gets you. The ability to be free. When I think of freedom, I'm not looking for the ability to not have to work. Someday, yeah, and I'll tell you what it's really like when I get there.

Maybe I just don't know what it's like. But I value very highly things like freedom of time, freedom of association, freedom of choice. Those are some things that really make a big difference to me. And I found that they can be achieved with a lot less than a few million bucks.

Thank you for listening to today's show. As we go, I want to ask you, if you've enjoyed today's content, do me two favors. Number one, tell a friend about the show. Share with them an episode that you have enjoyed and tell a friend about it. One of the things that I'd really like to do is I'd really like to be able to reach more people.

And the number one way that people find podcasts, and well they find them through searching, but one of the most effective ways is they have a recommendation from a friend. And so tell a friend about the show. And then number two, if you would, it would be very helpful to me if you take a moment and just review the show on whatever platform you're using.

If you're using an Apple device or iTunes, review the show on iTunes. If you're using an Android device, review the show on Google, whatever you're listening to. Just whatever the app is that you use to listen to the show, take a quick moment and look to see if it's got a way to rate it.

If you're on Spotify, just give me a quick five star or whatever you can. And if there's a way to put in a sentence or two, that's so helpful. Just the ratings and the sentences make a big, big difference. Don't think that it needs to be very long. Of course, you're welcome to write as many paragraphs as you like, but just one sentence is super great.

At this point in the growth of Radical Personal Finance, it's a fairly large show. And the most impactful thing to demonstrate that to new listeners is simply the number of reviews. That's why I say that one or two sentences is fine. I welcome, of course, multi-paragraph reviews. That's great.

New listeners do find those. But at this point in time, a lot of those do get buried. And so just one sentence. So that would mean so much to me and be so helpful. If you would just take a moment right as you do this, the next traffic light or pull over right when you get to the office or just take out your phone and whatever you're listening to me on.

Take a moment, look to see if there's a way to rate and review it and do it there. If not, if you have an iTunes account, that's the big daddy of podcasts still. So review me on iTunes. That'd be so helpful. Thank you for doing that. Thank you for telling a friend about the show.

And I'll be back with you very soon for ring five, six and seven. We're going to talk about increasing freedom with rings five, six and seven. The LA Kings holiday pack is back. The perfect gift for the hockey fan in your life. A three game pack starts at just $159 and includes a holiday blanket.

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