037: Radical Personal Finance with Joshua Sheats
Joshua Sheats is the creator of the Radical Personal Finance podcast. He’s the world’s leading authority on integrating lifestyle goals and money goals without conflict. He teaches normal people how to seamlessly connect the science of financial planning with the joy of goal achievement.
Joshua is dedicated to helping normal people achieve financial freedom by merging the creative (and crazy) ideas from the world of personal finance with the academic integrity of formal financial planning.
In this episode, Joshua and I have a long discussion about his truly radical journey with money. We get into his past successes and failures and spend some time going over his interesting goals for the future.
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A Willingness to Learn
Joshua believes that being willing to learn can carry you far in your financial goals. From his school days until now, he has observed that being willing to learn from others has had a huge impact on him. There is no need to recreate the wheel in everything you do; you can learn from others and follow their lead.
But once you’ve learned the skills you need, how do you stay motivated to continue to apply those skills? You find new areas to apply them to. Joshua has taken everything he has learned about personal finance and brought it down into a 5 point framework that he now teaches on his website and podcast, Radical Personal Finance.
“Money itself is a terrible goal, but it is a great tool to help you accomplish other goals.” JoshuaSheats
A Desire to Be Rich
Growing up in a very modest middle-class home brought some specific challenges to Joshua’s life. He and his 6 siblings attended a private Christian school and their mother worked at the school to help offset some of the tuition costs.
But during junior high and high school, Joshua and his siblings also worked to help pay for their own tuition. It wasn’t a huge amount, (around $100 a month) but the impact it had on Joshua was lasting.The school was a very distinguished school with some extremely wealthy and famous people as parents. (We’re talking major league baseball players.)
Growing up around those kids, but coming from a more modest background, caused Joshua to struggle with insecurity. He wanted to be rich like all his friends. And he found himself falling prey to the get-rich-quick mindset and specifically the real estate market. Listening to his father’s advice kept him from getting in way over his head at a time when he had no money to do so.
How to Graduate from College Debt Free
Joshua managed to work his way through his first year of college debt-free, but by his sophomore year, he was taking on debt to make up what he couldn’t cover.
By chance, his brother bought Dave Ramsey’s Total Money Makeover and shared it with Joshua. It took 3 read-throughs before Joshua decided that Dave’s plan made any sense, but once he was in, he was all in.
He took a semester off after his junior year to work and save as much as he could. And then he came back for his senior year, taking 19 hours per semester while working as many hours as he could. 2 weeks before his college graduation, Joshua wrote a check paying off all of his school loans.
Choosing a Career that He Disagreed With
Joshua’s first full-time career was as a financial analyst, but the job brought him no joy. When he got laid off unexpectedly, he knew that it was time to do something different.
Joshua had put quite a bit of time into keeping notes on different jobs he thought would be interesting and different places he thought he might like to work. All told, he had over 200 notes of places he thought would be cool to work. And he also had some criteria for his next job, such as not working in an office but being able to be out and about, and getting paid for production rather than hours worked.
A meeting with his former bosses gave Joshua the idea to begin investigating a career in financial services. He was resistant at first because he thought that brokers were scam artists as a whole. Ironically, after a recommendation from that same former boss sent him to Northwestern Mutual, Joshua found himself at age 23 selling life insurance. And he did so from the fall of 2008 until 2014 when he left to go full-time in his business.
Saving Money Won’t Make You Rich
During Joshua’s career in finance, he has worked with hundreds of extremely wealthy people, including multi-millionaires. And to a person, none of them got rich by spending less than they earned and saving the difference. (Okay, there was that one guy…)
In Joshua’s experience, people in America get rich in one of two ways: either by being a highly paid professional who earns in the multi-six figures year after year or by building a business. The reason so many financial advisors are wealthy isn’t that they know so much about finance. It’s simply because it is a very lucrative career path and they have become skilled at making money and selling products.
People who build businesses aren’t trusting their IRA to make them rich. Rather, they are investing in growing their business in order to increase their income.
[tweet_bpx]“Do what works, not just what you’re told.” @JoshuaSheats #mastersofmoney #podcast[/tweet_box]
Budgeting Without a Steady Income
For the past 8 years, Joshua has not has a steady income, and he says that handling his own personal budgeting/cash flow has been the most difficult thing he’s had to do. He has managed to bring in as much as $31,000 in a single month and has also experienced actually owing his boss money “for the privilege of working there.” That degree of instability brings a unique set of challenges.
He built himself a set of custom spreadsheets to track both his income and his expenses. But since starting his business, he recommends and uses YNAB (You Need A Budget). He says that if he had used that software during the time he was dealing with such an unstable income, he would be a lot richer today.
Moving Your Investments to Cash During Transitions
If he has a weakness in finance what would it be? Joshua says it’s that he isn’t a very good businessman. Handling the day to day dealings of budgeting, bill paying, etc is just habit for him now.
Joshua has a very interesting situation currently though; all of his retirement investments are currently sitting in cash. When he closed his financial services business and went full-time in his online business, he did not want to be subjected to the volatility of the market so he sold all of his stocks.
Again, it goes back to what he said earlier; you don’t build wealth through stocks and bonds. You build wealth through income or through building a business. For now, it is more important for him to have the cash in hand that he needs to scale this new business than it is to have it in stocks and potentially not only lose it but not have the capital he needs to scale the business.
Achieving Financial Independence
While Joshua says that one of his goals is to achieve complete financial independence in the future, he is already there in some ways.
He can’t support his family fully without working yet, but he has no debt and nobody has control over what he can or can’t do. Part of his definition of financial independence is being able to use every hour of your week exactly as you would like. He has built a business that allows him the freedom of not having to account for those hours to anyone but himself.
Participating in retirement accounts is not something that Joshua does now or sees himself doing anytime soon, because he simply has other ideas about the best ways to achieve that independence he desires.
A Look Back
It’s been an unusual ride for Joshua in many respects; paying off college loans before graduating, getting laid off from his first real career, starting his own financial firm, and then leaving that to start an online business.
Getting out of debt brought him no more purpose than he had before. He has come to see that solving money problems doesn’t solve all of your problems. While he is certainly in favor of managing your money well, he knows that it doesn’t determine your level of happiness.
There are certainly many reasons to focus on your money and it is important to lower your stress and to achieve security. That security does bring a level of happiness to a family; knowing the money is there has a positive effect on the security of the family.But money doesn’t change you as a person. You will be the same person whether you have a little bit of money or a lot.
Show Notes
Time Stamp-
- 00:00Intro
- 02:05 The importance of being a good student, even after school
- 05:10 What if you’re middle aged and you haven’t started to get a grip on your money?
- 07:30 Why was Joshua working a job in 7th grade to pay for school?
- 09:55 A desire to be rich, a plan to get rich quick, and the advice of a father
- 12:15 The lessons Dave Ramsey taught Joshua and how he applied them
- 19:25 Why Joshua chose a career that he initially disagreed with
- 23:25 The humbling experience of getting back into debt after getting out
- 28:25 How Joshua got his education in financial services and how it affected his own personal finance
- 30:25 Why you won’t get rich by just spending less than you earn and saving the difference
- 38:35 Budgeting on an unstable income
- 41:25 Moving your investments into cash during major transitions
- 51:10 Achieving financial independence
- 55:35 The type of retirement accounts that Joshua recommends for entrepreneurs
- 58:40 The types of investments that Joshua has made for his business and the sacrifices it required
- 01:03:50 Looking back, how does Joshua feel now about all of the decisions he has made?
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This show is part of the FinCon Podcast Network and was produced by Steve Stewart.
