WCI #35: Interview with Jordan Goodman from Money Answers

This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host, Dr. Jim Dahli. Welcome to episode number 35, an interview with America's Money Answers Man. No more wading through dozens of books at the library, scrolling through hundreds of blog posts on dozens of blogs, or checking in daily with online forums trying to gain a financial financial education the way the hobbyists do for a fraction of the price of hiring a professional financial planner. The Fire your financial advisor online course will take you from feeling anxious and having no plan to having a written financial plan. You can follow the rest of your investing career as a professional and a retiree. This course is the material that should have been taught to you in college, medical school or residency, but never was. Fire your Financial advisor also has a version eligible for CME Credit. Get your financial life in order today. Go to whitecoatinvestor.com courses to sign up. You can do this and the White Coat Investor can help. Our quote of the day is from Mr. Money Mustache who said it is not an exaggeration to say that a bicycle is a money printing fountain of youth. Probably the single most important and highest yielding investment a human can possibly own. I'm recording this note In December of 2018, about 11 months after this podcast originally ran. The Just to ask you if you're listening to it now. To make sure you listen to the end of the podcast, there will be a lengthy discussion of some of the things in this podcast that I think Mr. Goodman got wrong, as well as some of the conflicts of interest that weren't mentioned in the podcast. So be sure to listen to the end, okay? We have a special guest on the podcast today, Jordan Goodman. Jordan is known as America's Money Answers Man. He is the host of the weekly national Money Answers radio show, which appears on the online Voice America Business radio network at www.voiceamerica.com. once or more each week, he appears as a commentator on major TV news networks such as cnn, cbs, abc, Fox News Network, and Fox Business Network. During frequent trips around the country, he's a guest on local and regional radio and TV stations, as well as a keynote speaker for such diverse audiences as the military, corporate employees, college students and trade association members, as well, as we just discovered this morning, a lot of dental groups. He also participates in nonprofit personal finance literacy programs such as those sponsored by the Jumpstart Coalition he wrote for Money magazine for years and is the author of 14 books. Jordan, welcome to the show.

Great to be with you, Jim.

Tell us a little bit about yourself, your family, your upbringing, your education.

Sure. So I grew up in Rhode Island. My father was a professor at Brown University for many years. He was in the political science department. So I went to Moses Brown, which is kind of the prep school associated with Brown. I went to Amherst College, London School of Economics through my junior year, and abroad, Columbia School of Journalism, and then came out of there really interested in financial journalism, particularly started my own publication called Info, and then soon after that went to Money magazine, where I was for 18 years. As you said, I've done lots of books, 14 books on different financial topics. The Dictionary of Finance and Investment Terms. Master your debt, Fast profits and hard times. I won't go through all 14 of them, but lots of different books. And as you say, I'm a regular on TV shows, on radio shows, and I love to speak to groups all the time. I've spoken to a lot of dentist groups lately, but also doctor groups. So I think I have a pretty good sense of what they do and what they do right, what they do wrong, how they can improve. And I'm going to try during this talk to make it as practical and helpful and give specific resources to help people take my advice and put it into action.

Good. That's helpful. I appreciate that. Now, of all these books, which one's the best seller by far?

The Dictionary, the Dictionary of Finance Investment Terms first came out in 1983, and I'm actually just finishing the 10th edition now. Right now on the shelves as the 9th edition that sold about three and a half million copies. That is literally the field, the Dictionary of the field. Brokerage firms, MBA schools, libraries. I mean, it's just absolutely everywhere, all the different editions. So it's not even close. Selling three and a half million copies of that dictionary.

Yeah, that's absolutely fantastic. Just to give readers a sense of what that's like, I mean, my book, the White Coat Investor, has been basically a best seller in its category on Amazon for the last three years. And I don't think I've sold 100,000 copies.

Yeah.

So selling three and a half million. Spectacular. Spectacular. So that's really great.

And financially, it's an annuity as well. I mean, you set something up and the royalties keep coming in. I mean, I have to revise it every four years or so. But once you've got something out there, and I'm going to talk about this with you today. I'm a big believer in passive income. Doctors and dentists and medical professionals work too hard. I want to have some, some passive income coming in that they don't have to do something. And that's what a book is, is once it's out there to keep selling, you know, you keep getting royalties without having to do anything new.

Yeah, that's an excellent point. In fact, we just brought passive income md, a blog focusing on passive income for doctors, into our white coat investor network this last month.

Great. That's what should be about. Because doctors work too hard. That's what I think.

Oh, for sure, for sure. So, you know, it's interesting, even though that's your best seller, which one do you think is your best book? Which one do you like the best?

I probably one of the most recent, the second one I did most recent is called Master your debt and it has all kinds of specific strategies that help people get out of debt, pay their mortgages off faster, improve their credit rating. A lot of people just aren't very good at that area. And so that's helped an awful lot of people that came out basically in 2011 after the new credit card bill had come through. So I really enjoy that one. And I mean, one specific strategy we might get to there is what's called optimization. Mortgage optimization for sure.

I want to get into that a little bit.

Allows you to pay your mortgage off much faster. I mean, I like to provide strategies to people that really make a big difference. And that's one in that book.

Yeah, that's great. And which of your books do you think is best for a high income professional like a dentist or a physician?

Well, I would say the fast profits and hard times. That's a book I did in 2008, which I've updated since, which goes through 10 different strategies that help you do well even if the economy is not doing well. I mean, right now the economy is doing well, but it doesn't last forever. And there's lots of things you can do, even if things look like they're going down the drain, that you can still do well with your economy, with your investments. So that one would be helpful for high income people.

Very cool. Now, in all these media appearances you've done, you know, you've been on all kinds of business shows and all kinds of podcasts and lots of live events. What's the craziest thing that's happened to you in connection with one of these?

The craziest thing? Well, when I was on the View. I had the four prominent women going after me all at the same time. That was Barbara Walters, Whoopi Goldberg. You know, none of them can wait. They're all coming at you at once. You have four questions. You have to decide which one you want to answer first. So that was pretty crazy. But it reached a huge audience, so it was willing to do it. And I'll just tell you a funny little story. While I was there, I was doing it and right before me was Jimmy Carter. He was their guest right before that. So I cornered him in the green room and I said, if you had been there, remember he made the big deal with Egypt and Israel when he was there. I said, if you had been there when Clinton was trying to create another peace in the Middle east between Yasser Arafat and Rabin, could you have closed the deal? Because, remember, it fell apart with Clinton. He said, absolutely, I would have closed the deal. We would have had peace in the Middle East.

Wow.

I took that advantage of that moment and said, I'm going to. This is the question I've always wanted to ask him. And he said, absolutely. Clinton blew it. I would have done it.

That's interesting. That's interesting. You know, it's funny to look back and see what the legacy of some of these Presidents is from 20, 30, 40 years later.

Yeah, well, I mean, Carter has a bad rep, but he did do some really good things like peace in the Middle east for the while. So that was pretty good.

Yeah, for sure. Now you've had the opportunity to interact with a wide, wide cross section of Americans. What do you see as their primary financial concerns these days?

Well, outliving their money, I think, because a lot of people are not saving enough or what they're saving isn't earning anything and people are living longer, which is good. But where's the money coming from to support these people? The fastest growing part of the US population is 90 plus these days, percentage wise. So it's great that we're getting to these old ages, but people haven't saved close to enough and the money that they have saved isn't earning close to enough to support them for a long time. So a lot of those people getting to those ages, the so called golden years, are running out of money. They're doing reverse mortgages to try to hang on for a while and then when that doesn't work, they move back with their kids. This is what I call the reverse boomerangers. Boomerangers are kids coming out of college, coming back home again, reverse boomerangers are parents moving back with their kids when they can't afford their own lifestyle anymore. So I see that as a big problem. Demographically, we have 10,000 baby boomers per day turning 65, and we've got 72 million baby boomers. So a lot of those people don't have close to enough to live a decent life in retirement.

Now, it's interesting that you mention that, because a lot of doctors, particularly late career doctors, are caught in the sandwich generation. They've got their kids moving back in with them because they can't, you know, get a job that'll. That'll, you know, they can fly on. And now they've got their parents moving back with them, too. And so they find themselves, you know, running pretty hard on the treadmill, trying to support three generations and working longer.

And harder than they probably thought they were going to. They thought they might retire at 65 or 68 or something like that. And a lot of them have to go longer to support the sandwich, as you say. I mean, on one side, the kids. Over 50% of people graduating from college today are going back and living at home. Now, they don't particularly want to, but if they've got a huge amount of student loan debt, they don't feel there's any choice. If they have a job, it's enough to service the student loan debt, but not enough to have an apartment or get a car or buy a house or kind of start a family or getting on with the world. They're living at home until they're early 30s in many cases. That's not something from previous generations because the amount of student loan debt was not as big as it is now. As we talked about before, the parents are running out of money. So, yeah, the sandwich generation is really feeling squeezed here.

Yeah, for sure. You know, it's interesting. I wrote my first chapter in my book was about the big squeeze, where doctors are getting squeezed between the increasing cost of their education and really the flatlining or even decreasing of their incomes. So it's certainly affecting all strata of our population.

And I saw that a lot in speaking to all these dentist groups around the country. I mean, people getting out of dental school with 300, 400, 500,000 in student loan debt. I had one couple, I was in Las Vegas. Both husband and wife had gone through dental school. They had 500,000 in debt each. They had a million dollars in student loan debt.

Yeah, that's not uncommon at all these days. It's crazy to come out with a job paying, you know, 150,000. That's, that's a real issue.

It takes 30 years to pay it off. I mean, if I could just give you a quick way to help people in that circumstance. Because probably a lot of your audience has a lot of student loan debt. What they don't realize is they can actually refinance that student loan debt into a much lower interest rate. 2, 3%, something like that, instead of 4 or 5, or if it's private debt, 8, 9, 10%. One of my affiliates that I've worked with helps people do that is called Credible. And their website is credible.come moneyanswers. And so what they do, it's like a clearinghouse. They have five or six different lenders who will help you refinance your student loan debt. And you pick whatever deal is best for you. If you do that. Money answers, backslash money answers, they give you 200 bucks off your first payment. But the point is, instead of paying many different loans at higher interest rates, you can pay one loan at, say, 2% or thereabouts and save yourself a lot of money for sure.

I'm surprised how many doctors don't know that they can refinance their loans. I'm always harping on it. I feel like they should all be aware of it.

It's a relatively new thing. It's been around for about five years or so.

Yeah, it was about 2013, I think. DRB was the first company doing it. And since then I've had them as an affiliate on my site. Credible's an affiliate on my site. And about.

Yeah, they're great.

About a dozen others.

It's not just one lender.

The point is, if you're, if you're not going to get them forgiven, you might as well refinance them. There's no point in carrying these 6.8 and 7.9% loans exactly throughout your career when you can get them down to 3 or 4%.

So if you have good credit, 2 to 3%, and doctors typically are going to. What they were looking for is cash flow. And doctors may have a lot of debt, but they've also got cash flow. So that's the way they make the bet, the loan. And you can get literally in the 2 to 3% range on a lot.

Of these things, for sure. All right, so what do you think about high income folks and the way they manage their money? You know, as you go around and talk to these doctors, what problems are you seeing that they're making?

They just don't pay attention is what it comes down to they're so into their medical practice or their specialty or learning or dealing with patients, they just don't pay attention. So what they often do is trust some financial advisor, which may work out, but in many cases it doesn't because they don't really know what the financial advisor is doing. And all kinds of moves they should be making don't happen in many cases. I mean, we just talked about income, for example. I mean, a lot of doctors and dentists that I've talked to have a huge amount of money sitting in cash earning zero pretty much. They're cash machines basically and it's safe, but you don't earn anything on it today. And it's going to stay that way as far as I'm concerned. Even if the Federal Reserve keeps raising interest rates, as I think they will, what you earn on CDs, money market fund savings accounts is going to stay pretty much zero for as far as the eye can see. So a lot of doctors and dentists have come up to me with huge cash balances, 50,000, 70,000, 100,000, whatever it may be. That doesn't make any sense to me because you want that money working for you in a passive kind of way. I mean, one of my affiliates that would be helpful to a lot of doctors are what are called secured real estate funds. And what they do is they pay you an 8% yield very safely, minimum hold times one year. They're lending money to commercial real estate projects that need the money quickly and they don't want to go through the whole rigmarole with a bank. Widely diversified, long term track record, no commissions or fees. And there's a way of getting 8% website for that securedrealestatefunds.com and you can do that both individual, but also as a business. If you have cash in your doctor's practice sitting there earning nothing, you can do something like that as well. So that's one very simple thing people can do is make the money that they've got, earn much more for them.

Now that's basically hard money lending as a way to get a much higher yield. I also invest in hard money loans with a portion of my portfolio. There's lots of different ways to do it. There's funds out there that are available to accredited investors only. There's crowdfunding websites that you can select the investments individually if you like. This, this affiliate you mentioned, the secured real estate loans, what they are, they're.

A regulation A plus fund. In 2012 there was a law passed called the Jobs act, which basically authorized crowdfunding. And it took a while for them to get together, but in 2016 they kind of authorized these things. So this is one of the first funds that does in effect crowdfunding for hard money loans. Exactly as you said. This is where somebody takes out a loan, pledges the property in a first lien position and as a result of that they get the loan quickly and they're in there to improve their property, not to lose their property, but to improve their property. And therefore they're willing to pay a higher interest rate for a relatively short period of time, might be 10 or 11%, whatever it may be. And after that filters through to the investor, they get 8% paid monthly, which if you don't need the money, just reinvest it and have your money compounding at 8%. Or if you need cash, you want income from it, you can do that as well. You give them 100,000, you're going to get 8,000, you're going to Get 666amonth or whatever it comes out to be. So there's nothing taken off the top that way. And it's liquid after a year. You can get your money anytime you like. I don't like a lot of people putting money into annuities, for example, where there's all kinds of surrender charges and fees and the interest rates are maybe 3 or 4% if you're lucky and you have lack of liquidity and something like that might be an eight year surrender charge or eight year surrender period. So this is much more liquid, higher yielding. And it's taking advantage of these new laws, this JOBS act which allows these so called regulation A plus funds to thrive.

Now, is that particular fund accredited investors.

Only, both accredited and non accredited. And the minimum is $5,000. And again, it's a one year hold. So there have been some funds that are accredited only, but this allows anybody in basically who's got $5,000.

Now, how is it that this fund's able to avoid the accredited investor issue? Because most of these that I've looked at are accredited investors only.

That's because it's a regulation A fund. A lot of these others are what it's called, 405C or something like that, where it has to be accredited only, but because they've gone through the SEC process, they have an offering circular and so on. And you can do it either directly@securedrealestatefunds.com there's also a platform which is called Folio, which a lot of financial Advisors use where you can get it overfolio as well through a financial advisor. So if he's say it's a registered investment advisor, an ria, he can offer this as an income source and then he earns a fee, his asset management fee on top of that, wherever the money is located, this could be one of the choices that they would offer to a registered investment advisor, which is what a lot of medical professionals use.

Sure. Very nice. Now, in your book, master your debt, you discuss equity or mortgage acceleration. Let's talk a little bit about that. Because it's really a pretty clever way to pay off your mortgage a little bit faster without taking much more risk than you would otherwise take with a standard mortgage. Can you tell us a little bit about that?

A lot faster. Okay, so if you have a 30 year mortgage and you use optimization the right way, literally you can pay off your mortgage about five to seven years instead of 30 years, you're saving 25 years off your mortgage and literally tens of thousands of dollars in interest on your existing level of income. You don't have to earn more, just the way you flow your money makes it work better. And the affiliate I have in this case that helps people is called truthinequity.com they kind of model how it works. So let me just give you a very simple example, Jim, of how this would work. With a traditional mortgage, say a 30 year mortgage, you make the same payment for 30 years every month. All the interest is front end loaded. The first 10 to 15 years, you're making very, very little progress on the principal because you're paying mostly interest. And then the final years, you're finally paying off the principal. And then if you refinance the mortgage, you start a new 30 year clock all over again. So even though the rate may be lower and the payment may be lower, all the money you paid on the previous mortgage you basically just threw away because you're starting a new 30 year clock all over again. That's the traditional system. And you keep your cash earnings and so on in a checking account earning zero. That's basically what works very well for the banks. Mortgage optimization kind of reverses that completely. You use what's called a home equity line of credit, or heloc, which is a liquid line. It's a second mortgage against your house. You can put money in it, you can take it out whenever you like. And basically the idea is to blend the HELOC and the first mortgage so that you keep your income in that home equity line of credit, pushing down the balance every day, and then you pay that off, and then you can kind of do transfers to your first to pay it off. Let me just give you a very simple example to make it kind of come alive here. Say you had a house worth 300,000 and say your first mortgage was 200,000 at 4% good rate. You take out a HELOC at maybe 50,000, okay? And then you just open it up so it's free and clear. You then write a check on the HELOC for 50,000 towards the first where you owe 200, now you owe 150. And then you keep your income in that HELOC, pushing the balance down every day. And after whatever, nine months or so, that 50,000 is paid off. And then you do it again, you write another $50,000 check on the HELOC. And now instead of 150, you owe 100. And then, whatever, a year later you've paid off the heloc, you do it twice more. Your first is now paid off, and then another year later you paid off the heloc, and you are now mortgage free in roughly five years. Using your money for you every day because you're making progress on the principal as opposed to a traditional mortgage. We make very, very little progress on the principal on a monthly basis. Does that make sense?

It does make sense to me. So in essence, you're using the HELOC as your checking account.

Correct. And even better, if you can combine all of your bills into one credit card, then you basically pay one bill a month. So do your medical bills and your food bills, utility, all that on one credit card. So literally every day you're making progress in your principal. And one day during the month when your credit card is due, your balance goes back up, you pay your credit card bill, and then every other day you're making progress on paying that mortgage down. So what a difference that's going to make. And you also feel good about it. You feel like you're empowering yourself by getting this mortgage taken care of as opposed to having this huge albatross around you for 30 years. Imagine a young doctor who's 30 and who has his mortgage paid off at 35 instead of 60. Is that going to be transformative to his life or what?

For sure, certainly it's going to improve his cash flow. Now, let's talk about this. Let's talk about the risks of it. I mean, generally, HELOC is a variable interest rate sometimes or even interest only. So I guess a couple of the risks would be that Rates rise very rapidly. And perhaps also that people just don't have the discipline to actually, you know, work on paying down the mortgage. Talk about those two risks.

So let's, let's do the first one first. So I agree with you. HELOCs are adjustable rate. They're typically tied to the prime rate. The prime rate today is like four and a quarter, thereabouts. So it'll be 4% or thereabouts. So even if interest rates go up, it doesn't affect you as much as you think. At that website I gave you, the truthanequity.com, they actually model it for you. You do a personal profile, it's all free, and you put in your income, your expenses, your house value, your mortgage and all those kind of things and say, okay, at today's rates, you'll pay your mortgage off in 6.3 years, whatever the numbers come out to be. And they say, well, just for fun, let's bring interest rates from 4% to 10% tomorrow, okay? Which will never happen, but just for fun. So they, and the algorithm kind of figures out saying, okay, instead of 6.3 years, it'll be 7.1 years. Hardly any change at all. Because remember, every day you're making progress and moving the principle down. So even if the interest rate is higher, it's a higher rate on less and less principal. So it's amazing how it hardly affects your payoff at all, even in the absolute worst case scenario with rates rising on the second one. I agree with you completely. You need discipline. But if you're motivated to pay your mortgage off 25 years faster than you ever thought possible, it works. But you have to kind of manage it. You get your money in your checking account, you move it into the heloc, you pay your bills out of the heloc. But it's a new habit. Once you've got that habit, you are completely empowered. And I know a lot of dentists and doctors who've actually done it and it really feels good for them. And sometimes their spouse is the one who actually manages the day to day, but the payoff is just enormous on something like that.

That's great. Now this company, this affiliate of yours, what do they do that's different from me just walking down to the credit union down the street, opening a HELOC and doing this?

So truthanequity.com has been doing this. I've referred over 50,000 people to them over the last 10 years or so. First of all, they analyze your situation and see if you're appropriate for it. And then once they do that, they kind of. You have a living, breathing website where you can kind of see if you make these kind of payments instantly, how it will affect your payoff, that kind of thing, so you really know what's going on. And then month by month, they kind of help you monitor it. And they also help you get the best heloc. It may be down the street, you have a good one at your credit union, but it may be across the country somewhere. It's constantly changing. You want a HELOC where it's very flexible. You can electronically tie it to your checking account at wherever your bank is you want it where the interest rate is going to be lower, the fees are lower, There's a lot of things. And they've had many, many relationships with HELOCs all over the country. So they help you find the best heloc. And I mean, I've given you kind of an oversimplified example of how it works, but there's a lot of details. You want to make sure you know how to do it. So that's the way the truth inequity people do, and they've helped a lot of people implement this and literally save tens of thousands of dollars and years off their mortgage in a way that you can't do otherwise. And people say, oh, well, I'll just make an extra principal payment or I'll pay bi weekly. Well, that's nice. If you pay bi weekly, that means you're making 13 mortgage payments a year instead of 12. That'll cut two, maybe three years off your mortgage. We're talking about cutting 25 years off your mortgage. So it's a completely different animal. Yes.

And especially for a doctor that's known to carry a lot of cash because, you know, maybe he's waiting, you know, he's got his taxes sitting there in the checking account or whatever. All that would be earning whatever The HELOC rate is, 4 or 5% or.

Whatever it is for the entire year it's earning it. I would say you're not paying interest. Right. Instead of the money sitting in the heloc, pushing down the interest that you are paying, the HELOC doesn't pay interest, but it's costing you interest. But by having that 100,000, whatever it may be, in the HELOC, you owe $100,000 less of principal. Right. So as opposed to keeping it in the checking account, earning zero, you owe interest on $100,000 less. So it's kind of a Reverse way of thinking about things. But it's very, very powerful, very nice, very cool.

Now, if you had 30 minutes to teach a doctor the most important things about personal finance and investing, what would you cover?

Setting up automatic habits because I know how busy they are and how involved in their career they are. So setting up automatic habits so automatically the right things happen. So we talked about paying your mortgage off faster. We talked about investing where your money is earning something for. You certainly want to have some index funds where you put money aside automatically and just do dollar cost averaging, as they call it. You're putting in the same dollar amount. When the prices are high, you buy less. When the prices are low, you buy more. Which is against your normal emotional pattern to want to buy more when it's up and less when it's down or sell when it's down. Credit card debt. Kind of handling your credit card debt in a good way and not paying an awful lot of interest on that. I mean, you'd think all the credit card doctors would have paid their credit card off. Not all of them. A lot of them still revolve balances. They're just not managing their cash flow in a very good way. Making sure insurance is done. I'm in the seminar that I give to financial professionals and to medical professionals is called getting your financial act together. And basically they don't have their insurance. Well handled. Life insurance, health insurance, disability, home and auto coverage, and long term care. Those are the five that you have to make sure you're covered on. I always say about insurance, it's the one thing you buy, hoping never to use it, because when you have to use it, it's too late to buy it. If a tornado is coming at you, it's too late to buy tornado insurance. So I find a lot of doctors are not properly insured. So those are some things that kind of setting up the right habits is basically the idea.

Yeah. I find doctors also don't buy the right policies. They are underinsured on the stuff that really matters, like term life and disability insurance. And then they tend to buy all these random insurances that are just costing them money. Speaking of insurance, you talk a lot about selling cash value life insurance policies that you don't want or need or that you can't afford. When does that make sense to do versus just surrendering it or exchanging it to a variable annuity to capture the loss.

So a lot of people have life insurance policies they've built up over a long period of time. They've been paying premiums for years. And then either they don't need it anymore because say their kids are now self supporting, or the premiums have gone up to a level they can't really afford it. So what most people do is just let the policy lapse and they don't have to pay premiums anymore. The insurance company is real happy about that because the insurance company is now off the hook. But they don't realize you can actually sell your life insurance policy in what's called the life settlement market for potentially hundreds of thousands of dollars. And you still get off the hook because the people that buy the policy take over the premiums as well. So I'll just give you a super simple example. Say you had a policy worth a million dollars and you had 100,000 cash value. You built it up over many years and you were say 70, something like that, you let it lapse, you get your 100,000 or put it into an annuity and that's it. But if you were to sell that policy, you might get $300,000, $400,000 for that. Say a hedge fund, they buy these policies all the time. Say they pay $400,000 for the policy. Now when you die, they get a million, they become the beneficiary and get the death benefit. Now they don't know when that's going to happen, but that's a pretty good return for them. Pay 400,000, pay the premiums, get a million. And if they do a whole portfolio of them, they make a lot of money that way. Banks do these things all the time. Now the life insurance company and your life insurance agent probably will never tell you that this is a possibility because they want to have kept taking your premiums all these years and get off the hook. There's a website which is called fundinglife.com fundinglife.com what they do is they put you together, they're kind of a brokerage service that puts the buyers and sellers together and they kind of shop your policy to get you the highest possible price. Now if you're older, you're going to get a higher price and frankly, if you're sicker, you're going to get a higher price. Because the people buying the policy would rather that you not stick around too long. Like five years would be fine instead of 30 years. So if you're like 75 and you've got a heart condition, you're going to get a much higher price than if you're 60 and really healthy, that kind of thing. But that's something a lot of people do not know exists. And FundingLife.com is a free service that helps you find the buyers for your insurance policy.

Now does that do anything for people that are early in a policy? They're two or three years into a policy, they're still really underwater on the payments they've made versus cash value. Is anybody going to buy those? Or do you got to be 60 or 70 before anybody's interested in that?

60 or 70? 60 or 70. This is not an early years of policy. The people buying the policy do not want to wait 50 years to get paid off. You know, 5 to 10 is basically what they're looking for. So typically I would even say 65, 70 plus is who that's appropriate for because they're the ones who are going to die sooner and also have built up a lot of a big size policy.

Very interesting. Now in the press these days, there's a lot of talk about Bitcoin. What do you think about bitcoin? Is it really a currency? Is cryptocurrency an attractive asset class? Should people invest in it? How much is too much to put in it?

Absolutely. It is not a fad that's going to go away. This is not tulip bulbs. Some people have talked about cryptocurrencies. Now Bitcoin is about half the market. But there are tons of other legitimate cryptocurrencies. Ethereum is one of them. Litecoin. There's a whole bunch of these things. There are some very illegitimate ones as well, but these are being used. In fact, recently the Chicago futures market started trading futures on bitcoin which kind of legitimizes it to some extent. It's being used for actual transactions around the world. McDonald's will now take bitcoin and all kinds of places are actually taking bitcoin. Now. It's had a speculative frenzy. It started last year at about $1,000 and went way over 10,000, 1,000% return in a year. And that causes a bit of a frenzy. But yes, I think you can definitely play into it. It's obviously a risky asset, but in the long term I think it's going to do extremely, extremely well. Now you can open an exchange. There's one called Coin Exchange. There's a whole bunch of these things. Coinbase is another one. Or there are stocks you can buy. I'm in this. I do this myself, Jim. One of I do is called Bitcoin Investment Trust. GBTC is the fund name, the symbol for that one. And that started last year at about 200 and end of the year at about 1700. So you know, these things have got a lot of volatility. But I think in the long run for your risky assets, you want to have something in bitcoin.

Yeah. So it's interesting, I mean I can't remember the last time I bought into an investment that had gone up a thousand percent in the last year and did well. It just seems like particularly the last few months is just like you mentioned, a speculative frenzy. It feels very tulip bulb ish.

It does. But tulips bulbs really didn't have any purpose. Okay, they were pretty, but they didn't really have any. You couldn't do something with them. This you actually can do transactions and people are doing transaction in cryptocurrencies all over the place and they're going to continue to do so. It's more secure. The so called blockchain makes sure that you can't be hacked in various ways. And it's global and it's instant and it's cheap. And a lot of people like doing things outside of the traditional banking system. All the big banks are getting into this. Some of the top guys say it's a fraud, but meanwhile back at the headquarters they're all trying to figure out how to offer Bitcoin to their clients and do transactions. So it's not going away.

Very interesting. I appreciate your perspective on that. Now you've spent years in the financial press, you spent time at Money and you've spoken on all these various networks and shows. Now people frequently refer to the financial press as producing what I'll call investment porn. For example, 10 stocks you must invest in. Now, what are your thoughts on what the financial press does well and what they do poorly?

Well, you're right. And I was there doing all these things happening at Money magazine and I mean it was to sell magazines that worked very well. It's very different now. I mean where I was at Money hardly does any investment stuff at all. They just say buy index funds basically.

But I've noticed that transition over the last 10 years. It really is far more mention of just get a static portfolio of index funds.

Correct. That's what. So to me they've lost their franchise frankly. But yeah, we do the top 10 mutual funds for now or the hot stocks and we would sell 400,000 issues copies on Newsstand every month in the 80s when the market was soaring. Today it's like 10,000. So it's a completely different world than it was. And frankly TV is similar. I mean they used to call CNBC bubble vision, right when the market was going crazy. And it's just not a lot of people doing index funds these days. So there is some investment porn, but I think less than there was to some extent. The journalists are very skeptical of the market. In fact, I think they've missed a lot of this huge market. If you go back and look at the Wall Street Journal and CNBC six months ago, a year ago, two years ago, it's all about how we're reaching the peak and get out and cash and bear markets and all these things they missed. That's huge rise in the market here. So I think they're much more cautious than they used to be.

Do you think the financial press is part of the problem or part of the solution for the investor trying to get ahead?

It's the solution. I mean, people have to be educated and the press is the best way to do it. Better than financial advisors who have some kind of an axe to grind. So if they do it right, you have to kind of use your intelligence. And by their nature, medical professionals are very intelligent. They've learned a lot about their specific field. And if they can apply the same intelligence to investments, they can do very, very well. They tend not to in many cases because they're so busy with their practices. But no, I think if you have good media and it's not only magazines and TV today, there's tons of good newsletters and online sources and the brokerage firms have all kinds of information. It just takes time and effort to kind of sift through all that to see what's appropriate for you.

Now, speaking about all these online resources, I mean, in the last five to 10 years, really, the blogosphere has taken off as providing a lot of financial information for people of all walks of life. What do you think the blogosphere does well and poorly compared to the financial press?

Depends who the bloggers are. I mean, there's some very reputable people doing really good things, like you, offering really good advice. You're not offering kind of hypey advice that's going to really hurt people. And there's a lot of people doing front running, meaning they're buying the stock before they promote it, or hype of all types. So it's a huge. There are no barriers anymore to being in the media as they were in the past. You can just start a podcast and just kind of let it fly. So you just got to be careful. And the people who have credibility are the ones you should be listening to long term.

Very nice. I Appreciate that. Anything else you would like to say to our audience? Any other recommendations you can make to them that would help them in their financial lives?

I just want to talk briefly about the business side because a lot of businesses, I mean medical professional businesses, have cash flow issues. They often get paid late by the insurance companies or Medicare, and meanwhile they got to pay their salaries and pay their rent and their expenses. And it's very hard to get loans from banks these days because of all the Dodd Frank regulations. And people often need loans. And it's a very arduous and long process to get loans from banks. Banks want inventory, they want widgets they can seize if something goes wrong. And that's not what a medical professional has. They've got clients, they've got cash flow, but they don't have stuff you can seize if something goes wrong. So there's a whole new kind of world of alternative financing for small businesses, including medical professionals that might be helpful to some of your audience. And what they'll do is they kind of look at your business, they look at your cash flow, they look at your bank statements. And based on that, they can do vendor financing, they can do equipment financing, they can do payroll financing. There's just a lot of ways of doing it. And my affiliate in that area is called corporate lendingsolutions.com and they kind of tailor loans to what's appropriate for your small business in a way, a tapping people that hedge funds and others that you might not know about. So that may help some of your people if they have issues with their businesses, to finance their businesses. Corporate lendingsolutions.com thank you for sharing that.

And I appreciate you taking the time to be with us today.

Well, I appreciate it, Jim. Thanks so much. And I'm glad to get their emails as well. At moneyanswers.com is my website.

Thank you very much. I'm recording this Note now in December 2018. This is an addition to the podcast that I felt needed to be made based on feedback and results of some searching and some due diligence I've done over the last year about some of the topics mentioned in this podcast. When we first recorded this to run for January 2018, Cindy and I looked at each other and asked, do we really want to run this for our listeners? We kind of felt icky with it right after we had recorded the podcast, but decided to go ahead and run it. It turns out in retrospect, that probably was not the best decision and we put policies and the process in place here at The White Coat Investor Podcast to really make sure something like this doesn't happen again. Originally, this was going to be kind of a podcast exchange. I was going to be on Mr. Goodman's podcast. He was going to be on our podcast. I brought him on, we recorded it, we ran the podcast. Then all of a sudden, it seemed to be impossible for me to be on his podcast. So that was obviously left kind of a sour taste in my mouth. But more than that was just kind of how much pushing of his Affiliated products he did during the podcast. And in retrospect, I mean, that was the whole point of him coming on. I should have recognized that and not let him on in the first place or after it recorded and sounded like that, not let it run. But at this point it's run. I've sold ads on it to completely unrelated companies, you know, with the promise that we'd leave the podcast up for people that want to listen to it. And so I don't really want to take it down, but it's time to really add some notes to it and kind of an explanation and a little bit broader discussion of some of the topics that were covered in this podcast. First of all, early in the podcast, Jordan pushes his affiliate with credible.com. that actually takes a lot of gall to come on somebody else's podcast that has an affiliate relationship with a company like we do with Credible, and push your own links for it. You know, I mean, that really takes a lot of gall. Obviously, I think Credible is a great company, but I want you to go through my links. And the truth is, if you go through my links for Credible, you're going to get a bigger cash back bonus back than you will going through Jordan's. Another company that he mentioned in the podcast is secured real estate funds. Now, it's pretty obvious he had an affiliate relationship, at least with this, but I don't think he made it clear that he's not only, you know, an affiliate partner there like I am with lots of companies that are advertised on the White Coat Investor. But he's an advisor and a part owner of the company. Right. The Secured Real Estate Income Strategies. I also didn't like the way he described this as very safe. Right. You don't get anything that pays out 8% every month. That's very safe. There are risks there. If it was very safe, it'd be paying yields like a Treasury Bond is with 2 or 3%. And so bear in mind that if you want to invest in hard money loans, I think that's fine. I don't know a lot about this particular company. I don't invest with it, but I do like the asset class. Just realize that it's not, you know, very safe. There's a reason it pays 8 or 10 or 12%, and it's because it's not very safe. We should probably also talk for a minute about mortgage acceleration or equity optimization. Now this I actually wrote a rebuttal to shortly after recording the podcast. It ran on February 19, 2018, a big long blog post about it. So if you're really interested in mortgage acceleration, you need to go read that blog post. But let's go through some of what it says here. You know, people who can make a buck off this say it's magic. You know, that it's just awesome. Instead of paying off your mortgage in 30 years, you can pay it off in seven. But when you dive really deep down into this, you see that maybe there's something worthwhile there. But you really don't have to pay too much in fees and extra costs before you've eliminated the benefit that's there. So let's distinguish between something that's often called mortgage acceleration. That really is not what we're talking about today. And that's just bi weekly payments. Some people pay their mortgages bi weekly instead of once a month. They pay every two weeks. And because there are more two week periods than there are months in a year, you end up making extra payments. For example, if you just do monthly payments, that's 12 monthly payments, or the equivalent of 24, you know, half monthly payments. But a bi weekly payment, there are 26 of those in a year. And so you end up making two extra payments during the year. And that's why your mortgage is paid off early. All right, that's not the mortgage acceleration we're talking about here. Obviously that works, but if you're paying a third company a fee for that, that's kind of silly, right? You can just send in payments to your mortgage company anytime you like. So the real scheme we're talking about is what Jordan was referring to today. And of course, he was pushing the company he's associated with that helps you do this. And what you do with this is you're replacing your mortgage and your checking account with a home equity line of credit. Yeah, that's right. So it's really not all that complicated. It's kind of clever, but it's not magic. You know, it's not nearly as good as Jordan made it sound on this podcast. Here's how it Works. Let's say you get a mortgage, let's call it a $400,000 4% 30 year fixed mortgage. You make that $1910 payment every month for 360 months and you'll be debt free. But instead of doing that for 30 years, you decide you want to do something else. So you take out a hundred thousand dollar home equity line of credit and you take that $100,000 and you pay down the mortgage with it. So now you've got the $300,000 mortgage fixed at 4%, that payment of 1,910. And at that rate you'll pay off the mortgage in 223 months or just shy of 20 years. You knock 20 years, knock 10 years off your mortgage.

Right.

That's pretty awesome. But you also have $100,000 home equity line of credit, which is probably at a higher rate than your mortgage, maybe it's at 5% or so. And that rate's variable and you probably had to pay for an appraisal and some other fees to get it. So now that move doesn't sound quite so smart. Right? You've traded a lower fixed rate loan for a higher variable rate loan. And HELOCs are also often interest only. Right? That's convenient. But if you just pay the minimum payment for 20 years, you're still going to owe all 100,000 for that. And you would have paid more interest over the years than if you just kept that boring old 30 year mortgage. So this is where the fund comes in. Instead of using a checking account that's paying you 0% and a savings account paying you 1%, you just use the home equity line of credit. So your paycheck is deposited into the home equity line of credit, which decreases the size of the debt there. And your payments, your mortgage and your other payments are paid from this home equity line of credit. And so interest is calculated on these things based on the daily balance. And so you've normally, because your checking money is all in there and maybe your savings money is all in there, is less than $100,000 in debt. So if there's really only $50,000 in that home equity line of credit, then the interest is half as much as it would otherwise be. And in fact it's less than it would cost you even at a lower interest rate if you just left that other $50,000 in your savings account and earned 1 or 2% on it. So the idea here is that you're getting a little bit money that's going toward the mortgage because you're earning a little higher rate of return on it inside that home equity line of credit than you are in the checking account. So think about it like this. If a year's worth of interest on a $400,000 4% mortgage is $16,000 or $9,600 after tax, and a year's worth of interest on $50,000 in 1% savings account is $500 or maybe $300 after tax, if you put that together, you're paying $9,300 in interest. Whereas if you do this mortgage acceleration thing, you've now got a year's worth of interest on a $300,000 4% mortgage, which is $12,000 or perhaps $7,200 after tax, and a year's worth of mortgage on a year's worth of interest on a $50,000, 5% home equity line of credit, which is perhaps $2,500 or $1,500 after tax, that adds up to about $8,700 worth of interest. So there's a difference there between those two of about $600 per year, okay? And that is the benefit of doing this mortgage acceleration, okay? And maybe you get a little bit of float on your credit card too. So that gives you six weeks worth of $5,000, maybe, maybe a few weeks, a few dollars more there. But really that's about it. And of course, as the home equity line of credit gets smaller, eventually you can take some more out of that home equity line of credit and put it against a regular mortgage and further accelerate that things. So is that going to help you pay off your mortgage sooner? It sure is. Right. But it's not magic, Right? If you want to do the really magic stuff, which is these guys promising you that you're going to pay off your 30 year mortgage in seven years, there's another piece to the puzzle. And what that piece is is paying more toward the mortgage and home equity line of credit every month than you otherwise would have. Right? So if you're spending less than you earn, then that extra money is sitting in the home equity line of credit. But that's exactly the same thing as taking the difference between you earn and what you send and what you spend and sending it in as an extra mortgage payment. So there's a few extra days worth of interest savings messing around with the home equity line of credit. But the bottom line is you're just making a bunch of extra payments without realizing it. This is a behavioral solution, not a mathematical one. You know, and of course, alternatively you could be investing that money and making a better return than you'd get paying down your mortgage anyway. So this really isn't a magic thing. There's a few dollars benefit there, but obviously if you're paying any significant fees to do this, that's going to be wiped out by the fees. There's also some risks. You know, obviously there's a benefit even if it's small, but there's some risks. You're now running interest rate risk, right? This home equity line of credit is usually variable. So if rates rise dramatically, you're now stuck with the home equity line of credit at 6 or 7 or 8%. I mean, at a certain point there, you're better off with just the old mortgage. And of course there's the behavior risk, right? I mean, once you start getting home equity line of credits, your home equity starts looking an awful lot like an atm. And so this system only works if you're actually making those extra payments by spending less than you earn. And of course the opportunity cost is there of passing up on better investments in order to be essentially making extra payments on your mortgage. You might pick the wrong home equity line of credit, right? That's a risk there. A big one is that you risk paying too much in fees. For example, if you go to Jordan's company, there's going to be an additional layer of fees for them to help you pick out the right home equity line of credit. You know, everybody involved wants to get paid. And then of course, if you're using a credit card in order to do this, you may get some reward points, but you're probably going to end up spending a little bit more money with the credit card than you otherwise would. And if you start carrying a balance on that credit card, that's going to wipe out all the benefit you get from this. And so if you really want an alternative mortgage payoff plan, here's my plan. Don't over consume housing. Keep your mortgage less than two times your gross income, put down 20%, get a 15 year loan, max out your retirement accounts and send some of what you would otherwise invest in a taxable account to your mortgage company. And then if you get any windfalls, use that to pay off your mortgage. You know, Katie and I paid off our mortgage in less than seven years. How'd we do it? Just that plan, that's all we did. We, instead of investing in taxable, we sent some of that money to the mortgage company. And when we got some windfalls from the white coat Investor, we sent it in. We didn't have to do any complicated fee laden mortgage acceleration kind of tactics. Another company that Jordan mentioned in the podcast is fundinglife.com this is a life settlements company. I don't actually have a problem with this particular investment from either an investor perspective or a policy owner perspective. I mean, basically the policy owner comes out ahead of what they were otherwise going to do, which was surrender their policy to the insurance company. And they come out ahead because they get a little bit more money there and the investor gets a halfway decent investment if they can pay a low enough amount for that insurance policy that it's going to provide them a good return. I don't have a problem with that. As a general idea of investing, there's lots of funds out there that invest in these life settlements and the returns actually look pretty promising. And obviously there's very low correlation with the overall market for this sort of a thing. And so I've actually been interested in investing in this type of a fund in the past. My wife put the ixnay on it. She said, no way are we investing in that. And of course you don't have to invest in everything. And so we decided not to invest in that. Now, I don't know anything about this particular company and it's not one I've done any sort of due diligence on. The ones I've looked at are different from this company, but I'm even not prepared to recommend any of those. But if you're interested in this sort of a thing, I would make sure you do your due diligence. Jordan also was obviously a pretty big fan of bitcoin. I'm not. Even before this podcast ran, I was very vocal about how this was probably a terrible idea and that it reminded me of the tulip bulb mania. Of course, I've been proven right in the last year as bitcoin has dropped 83% from its peak to the trough. Now, I have no idea what it's going to do in the future, but I just want readers to be very clear that I am not a fan of bitcoin. I mentioned that in the podcast, but I probably didn't push back as hard as I should have. Why you don't invest in bitcoin? Well, first of all, there's no called strikes in investing. You don't have to invest in everything, right? So if you have any doubt whatsoever about an investment, just skip it. There's plenty of other great investments out there. Second, don't invest in stuff you don't understand. Okay, Bitcoins are mined by fancy computers that solve complex mathematical calculations, but there's all these other aspects to them. For example, it can become easier or harder to mine at any given time. There's an arbitrary limit on how many of these there can possibly be. And now there's hundreds and hundreds of these other cryptocurrencies competing with it. And I don't know which one's the best cryptocurrency by any means, but you probably don't either. And my recommendation is that you just don't invest in stuff you don't understand. So if you don't understand Bitcoin, don't invest in it. Reason number three, the reason why a lot of people were super interested in bitcoin back in January when this podcast originally ran was because it had done so awesome in the recent past. You know, but performance chasing is not a recipe for investing success. You know, people talk about investments after they go up in value, but that's not when you want to buy them. And so even if you are super fan of bitcoin and you really want to hold it in your portfolio for the long run, and I don't know why you would, but if you did, the time to buy it is now in December 2018, when it's down 80%, not in January, when this podcast originally ran, and it was, you know, going through the roof. Reason number four why I'm not a big fan of bitcoin is that currencies have an expected return of zero even before their expenses. Right? I mean, if you go buy some yen, what do you expect the return on that to be against the dollar over the longer term? Well, I mean, it's purely speculative. If the yen strengthens against the dollar, you'll do fine. If it weakens against the dollar, you're going to lose money. But there's no rent check coming there, there's no dividends. This is not a company that's making profit. Nobody's paying you interest on it, and that's before your expenses of investing in it. So at best, you're going to have a 0% real return. Much more likely to be a 0% nominal return, because most currencies have some sort of inflation issue. So that's, you know, with a reasonable currency. The problem with Bitcoin is it's not even a currency anybody uses. I mean, who uses this thing as a currency? There's a few companies out there that use it, but that's mostly marketing. They just want to say, hey, we're cool. We do bitcoin. You can do bitcoin here. But how much of their business actually comes in in bitcoin? You know, 0.1%. It's just not even relevant to them from a business perspective. And so who are the people using it as business? Well, you know, drug dealers, people trying to hide their payments, that sort of stuff. I mean, nobody's using this as a currency. Do you have any bitcoin that you're walking around spending every week? Of course not. But you're spending dollars every single day. And so bitcoin really isn't a currency at this point. I suspect it never will be a currency that anybody is using in any significantly relevant way. And so that's not really a great investment to invest in a currency to start with and a currency that nobody's using as a currency. You know, it's just a speculative investment. And then the last reason, of course, is that I just can't handle that kind of volatility. I don't need investments in my portfolio that drop 83% in a year. You know, that is just not something that I can handle behaviorally, that I can handle from an emotional perspective. This is just too much. Now, maybe you don't feel that way. Maybe not only are you going to buy bitcoin, but you're going to do it with leverage. But that's not me. I don't need to take that kind of risk, and I can't handle that kind of risk. And the most important thing in investing is to be a good investor. The investor matters a lot more than the investment. So know yourself and what you can handle and what your risk tolerance is and don't exceed it. Risk tolerance is like the price is right. You want to get as close as you can to your risk tolerance without going over, because that's when financial catastrophes happen. Okay. Another company that Goodman talked about was corporate lendingsolutions.com. i don't know anything about this company. There's lots of people out there that will give you business loans. We're trying to get some partners, some advertisers, and the white coat investor that I can trust and recommend. We're still working on that. Goodman did not mention another company called Woodbridge on the podcast, but he has had an association with it in the past. He has promoted it and it turned out it ended up in a big scam or something. You know, I don't have all the details with it, but let's just say it didn't end well. And a lot of investors, lost a lot of money. He's been taken to town about it on another podcast called Talking Real Money that may be worth googling up and listening to if you're really interested in that sort of a thing. It wasn't promoted on this podcast, so I don't feel any particular need to dive into the details there. So as I mentioned, we thought about deleting this podcast, but given that I'd already sold ads on it and I would have a big gaping hole at podcast 35 in my list of podcasts if I took it down, I decided to just put this note on it and that way anybody who listens to it in the future will know what I really think about both Mr. Goodman and the investments and other companies he's promoting here. But also so I can refer those who have listened to it in the past back to this note, which I plan to do on a podcast coming up here. So mia culpa, I think the processes we put in place will keep this sort of a thing from happening again, and I hope that this didn't result in anybody losing any significant amount of money, and I hope it was an educational experience for you as much as it was for me. No more wading through dozens of books at the library, scrolling through hundreds of blog posts on dozens of blogs, or checking in daily with online forums trying to gain a financial education the way the hobbyists do for a fraction of the price of hiring a professional financial planner. The Fire your financial Advisor online course will take you from feeling anxious and having no plan to having a written financial plan. You can follow the rest of your investing career as a professional and a retiree. This course is the material that should have been taught to you in college, medical school or residency, but never was. Fire your Financial Advisor also has a version eligible for CME Credit. Get your financial life in order today. Go to whitecoatinvestor.com courses to sign up. You can do this and the White Coat Investor can help. Thank you for listening to the podcast. Be sure to sign up for the free monthly newsletter and 12 step financial bootcamp program@whitecoatinvestor.com head up, shoulders back. You can do this. See you next time. My dad your host, Dr. Daly, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor, so this podcast is for your entertainment and information only and should not be considered official personalized financial advice.