Radical Personal Finance

Latest Episodes:

133-Q&A: Paying off Your Primary Mortgage With a HELOC (Mortgage Acceleration) and How Safe is My Deferred Comp Program? Jan 13, 2015

Show notes

We're continuing our Q&A series this week and today I handle these two questions:

00:01 Melissa heard about an idea of using a HELOC to pay off your primary mortgage as a method of paying off the loan faster and saving interest costs. This was referenced in the book "Master Your Debt" and the website TruthInEquity.com.
38:13 Robert asks about the safety of the deferred comp plan that he and his wife participate in at her Fortune 500 Public Utitlity company.

Enjoy the show!

Joshua

132-Q&A: Thinking Through Buying Life Insurance on Your Kids' Lives and Clarification on 72(t) Substantially Equal Periodic Payments for Retirees Jan 13, 2015

Show notes

When I started recording the show, I planned to answer six questions. But, after finishing the first question and realizing how in-depth the show would be if I covered all six in one show, I decided to break it out into multiple shows.

Today, I cover these two questions:

8:41-I'm thinking about buying life insurance on my two kids' lives. What do I need to know?
47:53-Will it work for me to use the 72(t) rules to retire at 50 and then change the payment terms at 59.5?

Notes-Life insurance for kids:

This is one of the most controversial areas in finanancial planning so I'll try to fairly represent the various points of view.
It's tough to have a low-key discussion here because it's such an emotionally intense subject.
There are three major philosophies that I've discovered:
1. Buy lots of life insurance to protect your investment in your kids.
  - Few people in the US will go for this one; much of the world will understand it though.
  - The reality is more and more of us will in fact be depending on our kids as we age due to many factors including the amount of savings most retirees have and financial challenges facing social security and medicare.
2. Buy just the minimum amount of insurance to cover burial costs.
  - The problem here is that the rich and middle class don't really need it and the poor often don't think of it and can hardly afford it.
  - It's also simply not very high as a priority due to the relatively low risk. Consider this model: http://radicalpersonalfinance.com/do-i-need-insurance-a-mental-model-to-analyze-methods-of-dealing-with-risk-rpf0091/
3. Buy some insurance for now and as a hedge for the future.
  - Hedge for the future with an Additional Purchase Benefit.
How to actually buy the policy?
- The advice is conflicting.
- People say to buy term policies for kids. But I've never been able to find a company that will sell a stand alone term product on a minor's life. (Let me know if you know of one, please.)
- If you're buying a big policy (#1 above) and your child is over 18, it's easy. Buy an Annual Renewable Term policy for them.
- If you're buying a big policy (#1 above) and your child is under 18, it's harder. If you want to get closer to term coverage, consider a stripped-out universal life policy. If you have the cash flow, go with a traditional whole life insurance contract. Make sure it's a contract that your kid will be happy owning forever. Shop carefully.
- If you're buying a simple burial policy (#2), do it as a term rider on another policy. You can get these at work, bundled with a banking or property and casualty insurance product, or as a rider on your own term policy.
- If you're hedging now and later (#3), buy a small whole life policy with an Additional Purchase Benefit. That way as health, hobbies, and occupations change, your child will be able to buy more insurance if necessary. Shop carefully.

Notes-72(t) Calculations

Use this calculator to get an indication of the numbers: http://www.dinkytown.net/java/Retire72T.html
IRS info: http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments

131-Filter Your Financial Advice Through the Lens of Scale Jan 08, 2015

Show notes

I read a lot of financial advice from many different perspectices. I also frequently am asked about financial advice. "Is this a good idea?" "What do you think about this investment idea?"

Over the years, I have noticed that I have developed a filter that many people don't have: I view all financial advice through a filtering lens of scale.

When I hear advice, I don't immediately accept is a blanket statement; rather, I think, "what type of household profile would this be appropriate for?"

When I talk to someone who's asking for financial advice, I try to ascertain where they are in their financial journey so I can give them the most appropriate advice.

Having this filter helps me to give advice that matters. It also helps me to coach myself more effectively by identifying where I am in my own journey so that I can focus on the things that are most appropriate for me.

In today's show I share with you many examples, including:

Buying large commercial real estate can be a great investment. But is it right for you? Should you be buying low-dollar mobile homes instead?
Investing in low-dollar real estate can be great. But is it right for you? Should you be buying larger commercial projects instead?
Investing in stocks of publicly traded companies can be a great plan. But is it right for you? Should you be investing in the tools of your trade or business so that you can be more effective at work?
Investing in the tools of your trade or business can be a great idea. But is it right for you? Has it reached the point of diminishing returns and now you'd be better served by investing in the stocks of publicly traded companies to get you closer to your financial goals?
Etc.

Enjoy the show!

Joshua

130-My Personal Development Plan for 2015 Jan 06, 2015

Show notes

I like the change of the calendar year. It's a convenient time to sit down and take an inventory of where things are and assess the plans for where things are going.

2014 was an awesome year. It was certainly one of the more challenging times of my life and was filled with change of all types. But it was awesome.

2015 will be transformative. This year, I'll be heavily focused on stepping up my game and making everything I do to be world class.

I have plenty of goals. But for me, the end result of achieving a goal is less important than who I become on the way.

Also, since there's no way for me to achieve a lofty goal without developing as a person, I tend to focus less on the goal or outcome and more on the plan of what I need to learn and who I need to become.

In today's show I share with you some of my areas of focus for 2015 and some of the plans I have for my personal development.

Here are three of my areas of focus for the coming year coupled with some of my action plans for development as an example with resources:

I am a world-class business owner.
- In order to be a world-class business owner, I need to sharpen and hone my personal productivity skills.
  - Nozbe
    - Action: Complete their 10-part skills course and program training videos.
  - Evernote
    - Action: Work through Brett Kelly's Evernote Essentials Book again
  - Gleeo Time Tracker and Alarm Every 15 Minutes
    - Action: Add a careful review of my time usage to my weekly review. Look for items to delegate.
  - Rescue Time
    - Action: Check to see if it has been improved and if it will serve my needs.
- In order to be a world-class business owner, I need to strenthen my habits in these areas:
  - Work from a list of prioritized importance.
  - Plan each day's work in advance.
  - Complete my weekly reviews, without exception.
  - Complete my comprehensive monthly reviews, without exception.
- In order to be a world-class business owner, I need to establish new skills and a new comfort level with outsourcing and team building. I also need to focus on automation and systematization.
  - Chris Ducker
    - Read Virtual Freedom and implement/test ideas
    - Read his blog archives and implement/test ideas
    - Listen to his podcast archives and implement/test ideas
  - Sam Carpenter
    - Read Work the System again and implement/test ideas
    - Read his blog archives and implement/test ideas
  - Ari Meisel
    - Read Less Doing and implement/test ideas
    - Read his blog archives and implement/test ideas
    - Listen to his podcast archives and implement/test ideas
  - Tim Ferris
    - Read Four Hour Workweek, Four Hour Body, and Four Hour Chef again and implement/test ideas
    - Read his blog archives and implement/test ideas
    - Listen to his podcast archives and implement/test ideas
- In order to be world-class business owner, I need to build new skills with Wordpress on my site and other aspects of internet business.
  - Wordpress
    - Look for Wordpress training and complete
  - Membership software
    - Look for membership software training and complete
  - Aweber
    - Look for Aweber training and complete
    - Look for email marketing training and complete
  - Screencasts and video production
    - Look for screencast solution and create presentations
I am a world-class podcast host.
Radical Personal Finance is a world-class financial education resource.
etc... (listen to the show!)

Enjoy!

Joshua

Teaching Canadians to be Financially Independent By Age 45: Interview with Timothy Stobbs, Author of Canadian Dream-Free at 45! RPF0129 Jan 02, 2015

Show notes

As we begin a new year, I think it's fitting to start with a discussion of financial independence!

My desire for all of you is that you may experience financial independence as you define it and that you may establish a workable plan this year toward its achievement.

Tim Stobbs is right in the middle of his financial independence plan. After stumbling across the idea of early retirement/financial independence, he was awakened to the possibility that an ordinary person could achieve it.

He set out a plan and started following it. He's now ahead of schedule!

Along the way, he wrote a book to teach others how to accomplish the same goal.

Topics include:

Tim's personal plan
Details on how to use Canadian retirement accounts to maximum effect
Flexible work schedules and alternative working arrangements
How financial independence (even partial) can lead to the easier achievement of other goals
How having savings impacts the ability to get better jobs

Enjoy the interview!

Joshua

Links:

The Financial Advisor Who Can't Retire: Interview with Paul Merriman RPF0128 Dec 30, 2014

Show notes

My guest today is Paul Merriman. I was introduced to Paul by a couple of listeners who requested I bring him on the show. I'm glad they did!

Paul is an experienced financial advisor. But, he did that as a retirement hobby rather than as a wealth-building strategy.

To build his wealth, Paul took over, built, and then sold a manufacturing company. After retiring in 1982, he proceeded to build Merriman, a Seattle-based investment advisory firm.

He grew the firm from nothing to $1.6B of assets under management and then sold it and retired to run his financial education site: www.paulmerriman.com.

Topics on this interview include:

The role of goals and affirmations on Paul's journey
What it was like to build an advisory firm in the 1980s
What Paul's retirement schedule looks like

Enjoy the show!

Joshua

Links:

Money Advice For Teens: Interview with Eva From Teens Got Cents RPF0127 Dec 29, 2014

Show notes

Today, I bring you an interview with a dynamo: Eva from TeensGotCents.com.

I met Eva in New Orleans at the FinCon conference. She was attending with her mother and I was incredibly impressed with her.

Eva writes about about personal finance for a teen audience. She began at the age of 15 and she shares her own journey and also gives advice for other young people.

In the interview, we weave two themes:

Eva's advice for teens
Eva's own experience/example as a financial blogger

Both of these themes are valuable. Frankly, I'm a bit jealous of Eva's early start in writing about the topics of personal finance. I wish I'd had the foresight to begin at her age.

Listen carefully to the story of her site and consider how you can help your children--or yourself--to start something similar. It's a really neat story.

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