Radical Personal Finance

Today, I handle these four questions:

• 3:02 Joshua, I just started listening to your show and I've learned a lot already. I originally started listening because I have an interest in one day becoming a personal finance consultant, but that's a long way off, for now I just need help with a crazy student loan issue! I am currently paying almost $600 a month for a $102k student loan at 7%, couple of key things, credit is shot due to bk filed last year, the loan is with the nelnet through dept of Ed, the question is should I pay down the loan, or find an investment that will pay me $600 to offset payment? Right now the $600 is preventing me from moving forward on anything financial, I'm expecting a lump some of money in February, like $60k, I would love to invest it where I can earn $600 or more a month to offset the payment! Any ideas?
• 28:56 Joshua, I recently stumbled upon your podcast and just started listening to it from the very beginning. Your approach to each podcast has been a from a very practical point of view which I really appreciate and hence enjoy listening to it! Please keep up the great work! At the time of writing this, I just finished with the episode "rfp-0009 - Why is your house a terrible investment." I myself am in the stage of having signed a contract on a home and waiting for closing date. All through the show James and yourself have made many, many valid points. I myself have already tracked down my cost (also factoring in an average monthly maintenance expense) to owning a home in an excel spreadsheet and even-though most often than not, one usually tends to buy a home which is slightly bigger in area that the what one was renting (same with me), the numbers for buying a home vs renting still look better (to me) in the long run. I live in the slightly expensive Northern VA area. I have been renting for the last 7.5 years (in various capacities from being a full-time student to full-time employee to full-time employee + part-time student) and can definitely say that annual rent increase adds up over each year. In order to keep the rents at a reasonable rates you will have to move every 2 or 3 years. This would add moving expenses, cleaning expenses, security deposits and a peace-less mind to your rent calculations. But this has not been factored into the James' calculations. Yes, when you own a home your property taxes may also go up as the home appreciates, but this won't be as much as how much the rent would increase year-in year-out. Also your home may or may not appreciate every year for this to happen. Would like to know what your comments are to this.
• 36:09 Joshua, I have a 1 year old son and am married. My wife is in school earning her PhD. Can my wife and I create two separate 529 plans to double our tax benefits (one in my son's name and one for my wife)? Indiana's benefit is 20% tax credit ($1000 max credit). If not should we create a 529 anyway? We have the money to pay for her $30,000 education already saved to be spread over the next 3 years. Thoughts?
• 40:06 Joshua, My parents just recently started working with a fee-only financial adviser after their recent retirement. She has been doing a nice job with them so far helping them come up with their financial goals, seeing if they are able to achieve them with their current assets, and choosing the most appropriate Social Security choice for their needs and goals. I have been attending the meetings with them. Either in the next meeting or the meeting after, the question of converting their traditional IRA to a Roth IRA will come up. Other than their paid-off house, most of their portfolio is in traditional IRAs. She is of the belief that it doesn't make sense to convert any of the traditional IRA to Roth because they don't have the taxable funds to pay the necessary taxes. I'm of the opinion that since the income they currently receive from their IRAs is well under the $74,900 limit (filing jointly) keeping them in the 25% bracket, that they should convert some of it and pay the 25% tax rate before they have to start taking much larger RMDs in the future at higher tax rates. Of course that also ignores future potential tax hikes. They understand the benefits of having some flexibility for the future as well as the benefits of passing a Roth to me and my sister on their deaths (another one of their goals). The question I have is: What are the appropriate questions to ask the financial advisor as to how to look into whether converting makes sense outside of the generalities that you shouldn't because you don't have taxable funds? How do you 'run the numbers' so to speak to determine if converting is in their best interest? And also, how do you come up with that sweet spot amount in order to stay inside the 25% tax bracket and not pay taxes outside that bracket? Is that a question for a tax accountant or should a financial adviser be able to answer that question as well? Thanks for all you do.

Enjoy the show!

Joshua

• How to Evaluate Your Client's Current and Future Marginal Tax Rate
• Roth vs Traditional IRA: The Four Factors That Determine Which Is Best
• When A Roth IRA May Actually Be A Terrible Asset To Inherit
• How IRA Withdrawals In The Crossover Zone Can Trigger The 3.8% Medicare Surtax
• Why A Roth Conversion May Be A Bad Idea Even If Taxes Are Higher In The Future
• End Of Year Roth Conversions And Capital Gains Harvesting – Paying Taxes To Save Taxes
• To Roth or Not To Roth

Today we dig into the topic of trading stocks. And who better to speak with than the guy who started a "university" to teach the subject?

My guest today is Steve Burns, founder of www.NewTraderU.com.

Here's some background about Steve, directly from his About page:

"After a lifelong fascination with financial markets, Steve Burns started investing in 1993, and trading his own accounts in 1995. It was love at first trade. A natural teacher with a unique ability to cut through the bull and make complex ideas simple, Steve took to blogging and social media by founding New Trader U in 2011.

"Since then, New Trader U has attracted hundreds of thousands of visits a month, becoming the go-to resource for people wanting to build a strong, trading foundation. New Trader U offers an extensive blog resource with more than 1,000 original articles (Steve posts daily).

"Asked daily if he could mentor, Steve realized that there weren’t enough hours in the day to give everyone the attention they deserved, so New Trader 101 was born. Developed to help beginning traders survive their first year in the markets, New Trader 101 quickly became Steve’s passion."

The interview covers:

• Steve's personal story as it relates to financial independence
• His suggestions for individual investors to protect their portfolios
• Learning to manage the psychology of investing
• Teaching kids the skills of investing

Enjoy the show!

Joshua

• Steve's website and blog, New Trader University and his course "New Trader 101."
• Support Radical Personal Finance: http://radicalpersonalfinance.com/patron

Today we continue our life insurance series dig into the topic of term life insurance.

Term life insurance is an incredible financial product and extremely useful. It also has some options that are not commonly understood or explored.

We discuss:

• What is term life insurance useful for?
• Normal life insurance policy designs:
  • level term insurance
  • annual renewable term insurance
  • decreasing term insurance
  • increasing term insurance
• Key policy features:
  • renewability
  • convertibility
  • disability waiver of premium
  • reentry term insurance
  • return of premium rider
• Group term insurance
• How to analyze costs
• What about those who say term insurance is the only appropriate solution?
• How to find a policy
• How to get insurance with a medical condition

Enjoy!

Joshua

• If you'd like access to the spreadsheet with return of premium rate of return calculations and the annual renewable term vs. level term discussion, support Radical Personal Finance on Patreon! http://radicalpersonalfinance.com/patron

I'm not able to record and release a show for you today so I'm releasing an interview that I gave on the Work Strong America podcast with Rick Seigmund.

This interview was originally released on Rick's show on February 4, 2015.

Enjoy the show!

Joshua

Links:

• Rick's Work Strong America site: http://workstrongamerica.com
• The original post of this interview on Rick's site: http://workstrongamerica.com/wsa-episode-005-joshua-sheats-interview/
• Support Radical Personal Finance! http://radicalpersonalfinance.com/patron

Years ago, I learned an extremely valuable thinking process from Brian Tracy called Zero-Based Thinking. Today, I share it with you.

Here's the question: Is there anything in your life that, knowning what you now know, you wouldn't get into again today if you had to do it over?

If the answer is yes, then you follow up with these questions: How do I get out? How fast do I get out?

By consistently applying this question to every area of our lives, we can avoid much of the impact of the sunk cost fallacy. As humans, we tend to want to keep doing something because we've invested a lot of time, money, or emtion into it in the past.

But, for the most part, those costs are gone. They're sunk. You can't recover them.

Rather, you have to zero the decision out, ignore the past, take the information you have today and determine if you want to continue what you're doing.

This type of thinking can be extremely challenging and freeing.

I hope it's a useful concept to you!

Joshua

• Support Radical Personal Finance! http://radicalpersonalfinance.com/patron

Today, we continue the Q&A blitz!

Here are the questions I cover today:

• Do you have any tips or feedback about how to factor a special needs child when planning for retirement, college, etc?. The typical advice usually is that, typical, once you have a special needs child things change as you dwell into the wonderful world of early intervention, therapies, IEPs, tax planning, etc, I used to think I would just need to change my assumptions in terms of planning for our son to be with us long way past his 18th birthday, as well as making sure we plan for after we are gone. But I’m sure I’m missing other strategies.
• I've been working at a major package delivery company for almost 26 years. I was just inducted into the circle of honor. Which means that I have gone accident free for over 25 years. Mind you I drive in New York City. I am highly trained, and pretty good at what I do. Since listening to you, and some other podcasts. I was thinking of starting my own podcast. Driving is something almost everyone does and there really aren't any podcasts on safe driving. Trust me most people don't know what they're doing. The problem I have is exactly what you went through after episode 181. I don't want to argue with people over everything that I say. I don't understand why people can't take the good, and credible information out of a conversation, and leave the bad behind. I don't agree with everything you said, but that doesn't mean I didn't pause, and think about what you were saying. Kudos to you. I'll be retiring in four years, maybe by then I won't care what anybody thinks. Since I have your attention I have a question. I have a 15 year old son. Who works for his mothers company from home. He he takes home takes home $225 every two weeks. In which she saves about 75% of that. I opened up a brokerage account for him to separate the money from savings, and checking. I spread the money out into four different ETFs. I'm trying to teach him to invest and diversify. The problem I have is he maybe using some of this money, or all of it for college. I'm afraid the stock portion could be a problem, since I know you shouldn't have money in the market you're going to need within 3 to 5 years. Would like to know your thoughts on this situation.
• During episode 181 you mentioned that you don’t have your money in the markets for moral reasons. Where do you put your money and have it grow in line with inflation or better yet beat it?
• I very much enjoy your show. I took in the marathon of show #181. Thank you for using such controversial material to make your point. There is not enough genuine debate and too much simplified propaganda from all sides in this country. One point that stood out to me from this particular show is your personal approach to investment for your own family. My question is, if your position on investing in large “Evil” public companies is so strong that you would not personally invest in them, how do you justify working in the financial industry, advising individuals on their investments in those same publicly traded companies? I’m assuming that you are or will be engaged in that financial advisory role. Could you also please touch on the investment categories that you are or will consider for your family's financial plan (generally speaking of course). Keep up the good work. Your show continues to be a source of excellent information and your delivery continues to improve!

Enjoy!

Joshua

• Support Radical Personal Finance: http://radicalpersonalfinance.com/patron

I'm continuing my Q&A blitz today. I set out to answer five questions and wound up answering two. Oh well. At least I think you'll enjoy them!

Here are the two questions I cover:

• What are your opinions regarding real estate investing? Should people invest in real estate? What percentage of the portfolio should it be? Thoughts on wholesaling? Flipping? Etc.?
• My question is can you walk us through your typical financial planning process with an average client of yours. From the initial conversation to the presentation and implementation. How do you prioritize your recommendations?

Enjoy!

Joshua

• Support Radical Personal Finance on Patreon! http://radicalpersonalfinance.com/patron

Today, I do Q&A and answer these four questions:

• Joshua, I absolutely cannot get enough of your show. Thank you very much for the effort you put in and the thought provoking product you create! It is worth the voluntary money!I've got a very open ended question: You often talk about journaling and writing to help develop thoughts, ideas, and plans. How does one get started doing this? What should your listeners focus on when getting into the habit of journaling? How often do you write in your journal? Without any framework or place to start, I find myself wanting to move on to other activities. I know it's not a direct financial topic but I believe there is a huge amount of value to the idea of putting your thoughts down on paper and developing them and it is something I'd like to start as soon as possible. It'd be great to hear your thoughts and maybe some tactics you employ to get the most out of your journaling time. Keep up the great work, -Chris
• 19:52 Joshua, One of the biggest goals I have in my life is to become financially independent. Which is why I came across your Podcast in the first place but I am having a hard time figuring out where exactly to go from here. I just started keeping track of every penny I make and spend so that I can start to budget and plan accordingly (I know I should have done this years ago but I gotta start somewhere!) I am 26 years old and have very little experience saving. I am a compulsive spender but I know I can change my habits with the right motivation and I know that I am still young enough to make a very significant change in my life. I have tried to find something "from the beginning" in your podcast but I havn't yet found one that fits my needs. The questions that I have are things that may seem really basic to anyone who has been financially planning for a while. What do I do with my first savings? Say its only $100 dollars, do I keep it in cash at my house? Do I open a savings account and keep it there? How much should I have saved before I start looking at other options, retirement accounts, etc. Sincerely, Garion.
• 29:45 Joshua, With regard to "Your Money or Your Life" (I have been reading the book for the past few days.), is the strategy for investment/FI that the author's put forth in Chapter Nine still valid today, in your opinion. (I apologize if you have covered this already; I am still trying to get caught up with all of your podcasts.) Please keep up the awesome work. -Daniel
• 36:35 Joshua, First off I just wanted to say I'm a huge fan of the show and your format. It's so refreshing to actually listen to an in-depth discussion of personal finance rather than all the surface level junk online:"The one easy tip for financial freedom." So I hope you never question your long format in the landscape of quick tips and 3 easy steps posts. I've been growing more interested in personal finance/investing. I'm curious if you've ever encountered or heard of families that invest together. Whether it be siblings or siblings and parents investing together. This is something I've been pondering lately. It seems this would be a smart way for families to invest and take advantage of strength in numbers. Perhaps it's not discussed because it's taboo to talk about money at that level of detail. I really have 0 experience in this area so it'd be interesting to hear what some of the benefits/challenges would be of this kind of thing or if you've personally heard of families doing this. Keep up the good work, and know that your work has had an impact on me.Regards, -Ryan

Resources:

• Jukes-Edwards, A Study in Education and Heredity
• https://en.wikipedia.org/wiki/The_Jukes_family
• Support Radical Personal Finance: http://radicalpersonalfinance.com/patron

I enjoy looking for financial planning tips from odd corners of the world. Recently, I stumbled across the book Financial Freedom aFloat: How to Pocket a Paycheck in Paradise by Charles Tuller as I was browsing the finance section in my local library.

Written for the cruising community, the book lays out some specific ideas and strategies for sailors who either need or want to earn some money to be able to afford to stay out on the water for the long-term.

I'm most intrigued by the challenge of the problem: how do you live a "dream lifestyle" without a lot of money?

The answer is multi-fold:

1. Own your shelter.
2. Minimize your ongoing expenses.
3. Work while you travel.

The last item is the most interesting to me right now.

How do you conveniently integrate work and life without feeling like an indentured servant? How do you earn and enjoy life at the same time?

The book does a good job of laying out some ideas. And, it gets better all the time. There are so many more options availalbe now in 2015 than there were in 2000, when the book was written.

Enjoy the ideas we draw and apply them to your own lifestyle--whether you'd like to cruise or not!

Enjoy!

Joshua

• Financial Freedom aFloat: How to Pocket a Paycheck in Paradise by Charles Tuller
• Support Radical Personal Finance! http://radicalpersonalfinance.com/patron

Today I handle your questions and comments.

Right off the bat, I respond to some of the sharp criticism of Episode 181. Perhaps it will be useful to clarify my intention with the show material.

Then, I answer these questions:

• 35:48 Dear Joshua, I have a question regarding a specific method for paying for my children's college education. Putting aside the merits of a college education in general; and putting aside thoughts that I have no obligation to pay for my children's school....let's assume that I would like to pay nearly all tuition expenses for my three daughters (ages 12, 10, 5). I see 529 plans as piggy banks that I fund, will one day need to break, spend, and never see again. However, striving to create a large enough portfolio of dividend paying stocks seems like a option in which I could pay tuition with the money strictly generated from my investments. Assuming (still a moderately big assumption on my end) that I can create the principal to generate ~$25,000 in dividends at a 4% yield, does this seem like a viable option? -Brian
• 44:04 Joshua, I am 42 years old and currently have life insurance from my employer. I'm trying to buy life insurance from one of the providers but have the following questions: Should I continue the life insurance at work even after I get from outside? Will the 2 ever be mutually exclusive? Should I search for an agent? If so, are there any websites that can help me find one? Are websites like Accuquote reliable? How else should I compare the products of various providers? -Vikram
• 1:01:52 Joshua, I wanted to ask you to consider a podcast show around radical ways to lower the cost of owning a home. Not the typical advice out there, but more along the lines of buying a property that meets your families needs but that could provide rental income to offset your mortgage too. Cash flow around homes is a large percent of take home for most families - just seems like an area that most people are not considering and could be a significant win. -Todd
• 1:20:16 Joshua, While listening to Podcast #36 you mentioned changing a 401K plan to be able to defer more than the $17.5K. Can you let me know where I can learn more about this? -Harout

Enjoy the show!

Joshua

• Support Radical Personal Finance on Patreon: http://radicalpersonalfinance.com/patron