Interview with Jordan Goodman from Money Answers – Podcast #35

Dr. Dahle: [00:00:19] Welcome to episode number 35 an interview with America's money answers man. This episode is sponsored by ProAssurance, professional liability insurance for doctors. ProAssurance treats you fairly. Offering medical professional cyber liability protection for doctors, medical groups, hospitals, and health systems. ProAssurance group is financially strong, rated a plus by AM Best and awards 50 top P and C Company every year since 2007. Learn what it means to be treated fairly at ProAssurance.com.

Dr. Dahle: [00:00:48] 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.

Dr. Dahle: [00:00:00] I'm recording this note in December of 2018, about 11 months after this podcast originally ran 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.

Dr. Dahle: [00:01:00] OK 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 W w w voice America dot 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 is 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.

Jordan Goodman: [00:01:50] Great to be with you Jim.

Dr. Dahle: [00:01:52] Tell us a little bit about yourself your family your upbringing your education.

Jordan Goodman: [00:01:56] 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 for my junior year abroad. Columbia School of Journalism and then came out there really interested in financial journalism particularly. I 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 of different financial topics. The Dictionary of finance and investment terms. Master your debt, Fast Profits in Hard Times, I won't go through all 14 of them but lots of different books. 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 that 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.

Dr. Dahle: [00:03:04] That's helpful. I appreciate that. Now if all these books which ones the best seller?

Jordan Goodman: [00:03:09] Oh by far the Dictionary. The Dictionary of finance investment terms first came out in 1983 and I'm actually just finishing the 10th edition there. Right now on the shelves is the ninth edition that sold about three and a half million copies. That is literally the The Dictionary in 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.

Dr. Dahle: [00:03:38] 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. So selling three and a half million is spectacular, spectacular. So that's really great.

Jordan Goodman: [00:03:57] And financially it's an annuity as well. I mean we set something up and the royalties keep coming and I'm going to have to revise it every four years or so. But once you've got some out there and I'm I'm 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 them to have some passive income coming in that they don't have to do something and that's what a book is. Once it's out there to keep selling you know you keep getting royalties without having to do anything new.

Dr. Dahle: [00:04:25] Yeah that's an excellent point. In fact we just brought Passive Income M.D, a blog focusing on passive income for doctors, into our white coat Investor Network this last month.

Jordan Goodman: [00:04:34] Great, that should be great because doctors work too hard right now.

Dr. Dahle: [00:04:38] 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?

Jordan Goodman: [00:04:47] Probably one of the most recent ones. The second one I did most recently is called mastery 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 mortgage optimization, allows you to pay your mortgage off much faster. I mean I'd like to provide strategies to people that really make a big difference and that's one in that book.

Dr. Dahle: [00:05:26] 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?

Jordan Goodman: [00:05:33] Well I would say the fast profits in hard times book. I did in 2008 which I've updated since which goes to 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. But you can still do well with your investments. So that one would be helpful for high income people.

Dr. Dahle: [00:05:58] Very cool. 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?

Jordan Goodman: [00:06:10] 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.

Jordan Goodman: [00:06:26] You have four questions you have to decide which one you want to answer first. So that was pretty crazy but it reached a a huge audience so I 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 greenroom 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. I took 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.

Dr. Dahle: [00:07:17] That's just that. That's interesting. You know it's funny to look back and see what the legacy of some of these presidents is from you know 20, 30, 40 years later.

Jordan Goodman: [00:07:26] Yeah well I mean Carter has a bad rap but he did do some really good things like peace in the Middle East for the while. So that was pretty good.

Dr. Dahle: [00:07:32] Yeah 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?

Jordan Goodman: [00:07:42] 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 living longer which is good but where's the money coming from to support these people? The fastest growing part of the U.S. population is 90 plus percentage wise. So it's great that we're getting to these old age. 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 boomerang. Boomeranger's 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.

Dr. Dahle: [00:08:48] Now it's interesting that you mentioned 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 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.

Jordan Goodman: [00:09:10] And working longer and harder than they probably thought they were going. 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. I mean on one side the kids, over 50 percent of people are 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 it's any choice that 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 you're getting on with the world that they're living at home into their 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 they have the sandwich generation is really feeling squeezed here.

Dr. Dahle: [00:09:57] Yeah for sure. You know it's interesting I wrote the first chapter and 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 income. So it's certainly affecting all strata of our population.

Jordan Goodman: [00:10:13] And I saw that a lot in speaking to all these dentist groups around the country I mean people are getting out of dental school with 300, 400, 500 thousand 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 and a million dollars in student loan debt.

Dr. Dahle: [00:10:31] Now that's not uncommon at all these days. It's crazy. And to come out with a job paid 150,000. That's right. That's a real issue.

Jordan Goodman: [00:10:39] It will take them 30 years to pay 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 percent something like that instead of four or five or if it's private debt eight, nine, 10 percent. One of my affiliates that I've worked with helps people do that was called Credible on their Web site. It's a credible dot com backslash money answers. And so what they do it's like a clearinghouse that 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 at Backslash money answers, they give you 200 bucks off your first payment. But the point is instead of paying many different loans of higher interest rates you can pay one loan at say two percent or thereabouts and save yourself a lot of money for sure.

Dr. Dahle: [00:11:30] I'm surprised how many doctors don't know that they can refinance their loans. I'm always harping on it and I feel like they should all be aware of it.

Jordan Goodman: [00:11:37] It's a relatively new thing that's been around for about five years or so.

Dr. Dahle: [00:11:40] It's about 2013 I think DRB was the first company to do it. And since then I've had them as an affiliate on my site, Credible as an affiliate on my site, and like a dozen others. The point is if you're if you're not going to get them forgiven you might as well refinance them. There is no point in carrying these six point eighty seven point nine percent loans when you can get them down to three or four percent.

Jordan Goodman: [00:12:03] If you have good credit two to three percent and doctors typically are going to what they will 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 loan. And you can get literally in the 2 to 3 percent range on a lot of these things.

Dr. Dahle: [00:12:19] All right. So what do you think about high income folks and the way they manage their money? You know as you go around to talk to these doctors, what problems are you seeing that they're making?

Jordan Goodman: [00:12:28] 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 adviser 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, you know their cash machines basically. And you know 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 funds, savings accounts is going to probably 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. Fifty thousand seventy thousand one hundred thousand 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.

Jordan Goodman: [00:13:31] 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 an 8 percent yield very safely minimum hold time is 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 is a way of getting 8 percent. Website for that is secured real estate funds dotcom and you can do that both individually 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.

Dr. Dahle: [00:14:15] So that's basically hard money lending as a way to get a much higher yield. I also invested 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 crowdfunded websites that you can select the investments individually if you like. This affiliate you mentioned, this secured real estate loans.

Jordan Goodman: [00:14:39] What they are. There are regulation a plus fund. In 2012 that was law passed called the JOBS Act which basically authorized crowdfunding. And it took a while 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. Well it's exactly as you said OK. This is where somebody takes out a loan pledges the property, 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 percent whatever it may be. And after that filters through the investor they get 8 percent paid monthly which you you don't need the money just reinvest and have your money compounding at 8 percent or if you need cash, your income from it, you can do that as well. You give them 100,000 you're going to get eight thousand. You're going to get 666 a month or whatever it comes out to be. So there's nothing kind of 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 interest rates are maybe 3 or 4 percent if you're lucky and you have a lack of liquidity. Something like that might be an eight year surrender charge or your surrender period. So this is much more liquid, higher yielding, and it's taking advantage of these new laws this jobs act which allows the so-called regulation a plus funds to thrive.

Dr. Dahle: [00:16:12] Now is that particular fund accredited investors only?

Jordan Goodman: [00:16:15] Both accredited and non accredited and the minimum is five thousand dollars. And again, a one year hold. So there have been some funds that are accredited only but this allows anybody basically who's got five thousand dollars.

Dr. Dahle: [00:16:28] Now how is it that this funds able to avoid the accredited investor issue? Because most of the ones that have looked at are accredited investors only.

Jordan Goodman: [00:16:36] That's because it's a regulation a plus fund. A lot of these others are what's called four or five C or something like that where it has to be accredited only because they've gone through the S.E.C. process. They have an offering circular and so on. And you can do it either directly at secured real estate funds dotcom. There's also a platform which is called folio which a lot of financial advisors use where you can get it over Folio as well through a financial adviser so if you 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 adviser which is what a lot of medical professionals use.

Dr. Dahle: [00:17:21] 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.

Jordan Goodman: [00:17:39] A lot faster. OK so if you have a 30 year mortgage and you use optimization the right way literally you can pay off your mortgage in 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 Truth in equity dotcom, they kind of model how it works. Let me just give you a very simple example Jim of how this would work.

Jordan Goodman: [00:18:12] 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 are 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 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 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 a heloc which is a liquid line.

Jordan Goodman: [00:18:59] 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 home alive here. Say you have a house worth three thousand and say your first mortgage was 200000. At 4 percent, good rate. You take out a heloc at maybe 50000. OK. And then you just opened it up so it's free and clear. You then write a check on the heloc for fifty thousand towards the first. We owe two hundred now you owe 150 and then you keep your income and that heloc pushing the balance down every day and after whatever nine months or so that 50000 was paid off and then you do it again you get another 50000 dollar check on the lock and now instead of 150 you owe 100 and then whatever a year later you paid off that heloc you do it twice more. Your first is not paid off. And then another year later you pay off the heloc and you are now mortgage free in roughly five years. Using your money for you everyday because you're making progress on the principle as opposed to a traditional mortgage. We make very very little progress with the principal on a monthly basis. Does that make sense?

Dr. Dahle: [00:20:17] It does make sense to me. So in essence you're using the lock as your checking account.

Jordan Goodman: [00:20:21] Correct. And even better if you can combine all your bills into one credit card then you basically pay one bill a month so do your medical bills and the food bills utility all that on one credit card. So literally every day you're making progress on your principle. 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 that 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?

Dr. Dahle: [00:21:09] Well sure certainly it's going to improve his cash flow. Let's talk about the risks of it. I mean generally heloc is variable interest rate 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 pay down the mortgage. Talk about those two risks.

Jordan Goodman: [00:21:31] Let's let's do the first one first. So I agree with you. Helocs are adjustable rate that typically are tied to the prime rate the prime rate today is like four and a quarter or thereabouts. So it will be 4 percent or thereabouts so even if interest rates go up it doesn't affect you as much as you think. That that website I gave you the truth and equity dot 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. OK. At today's rates you'll pay your mortgage off in six point three years. Whatever the numbers come out to be. And they said well just for fun let's bring interest rates from 4 percent to 10 percent tomorrow which will never happen but just for fun. So the algorithm kind of figures out OK instead of six point three years it will be seven point one years. Hardly any change at all because remember every day you're making progress and moving the principal down. So even if the interest rate is higher it's a higher rate on less and less principal. So it's amazing. It hardly affects your pay off at all. Even in the absolute worst case scenario with rates rising.

Jordan Goodman: [00:22:39] The second one I agree with you completely, you need discipline. But if you're motivated to pay your mortgage off twenty five years faster than you ever thought possible. It works but you have to kind of manage your money in your checking account.

Jordan Goodman: [00:22:53] 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, doctors who have actually done it and it really feels good for them and sometimes their spouses want to actually manage the day to day. But the payoff is just enormous. Something like that.

Dr. Dahle: [00:23:12] 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?

Jordan Goodman: [00:23:22] So in truth in equity dot com has been doing this. I've referred over 50000 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 can have a kind of a living breathing website where you can kind of see if you make these kind of payments instantly how it will affect your payoff account. So you really know what's going on and then month by month that 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 to 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'll help you find the best deals. And 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 that truth in equity 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 biweekly.

Jordan Goodman: [00:24:34] Well that's nice if you pay by weekly. That means you're making 13 mortgage payments each year instead of 12. That will cut two maybe three years off your mortgage. We're talking about cutting 25 years of mortgage so a completely different animal.

Dr. Dahle: [00:24:48] Yes especially for a doctor that's known to carry a lot of cash because You know he's got his taxes sitting there in the checking account or whatever. All that would be earning whatever the lock rate is four or five percent or whatever it is.

Jordan Goodman: [00:25:01] I wouldn't say it's earning it I would say you're not paying interest right. Instead the money sitting in the heloc pushing down the interest that you're paying. The heloc doesn't pay interest but it's costing you interest. But by having that hundred thousand whatever it may be in the heloc you owe one hundred thousand dollars less in principal. Right. So actually as opposed to keeping it in the checking account earning zero you owe interest on one hundred thousand dollars less. So it's kind of a reverse way of thinking about things but it's very very powerful.

Dr. Dahle: [00:25:31] 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?

Jordan Goodman: [00:25:39] 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. We 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 and the prices are low you buy more which is against your normal emotional pattern to want to buy more when it's up unless one is down or sell them. 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 were to pay 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. In a seminar that I give 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. I would say about insurance is the one thing you buy hoping never to use it because when you have to use is too late to buy it safely.

Jordan Goodman: [00:27:06] 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.

Dr. Dahle: [00:27:17] You know I find doctors also don't buy the right policies. They are under insured 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.

Dr. Dahle: [00:27:29] Speaking of insurance you talk a lot about selling cash value life insurance policies You don't want or need or 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?

Jordan Goodman: [00:27:44] 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 and the insurance companies will 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 100000 cash value built up over many years and you were say 70 something like that. You let it lapse you get your hundred thousand are put into an annuity. And that's it. But if you were to sell that policy you might get 300, 400 thousand dollars for that. Say a hedge fund. They buy these policies all the time so they pay 400 thousand dollars 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 400000, pay the premiums, get a million and if they do a whole portfolio of them they make a lot of money that way.

Jordan Goodman: [00:29:01] 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 Web site which is called funding funding life dot com. What they do is they put together the kind of brokerage services that puts the buyers and sellers together and they kind of shop your policy to get 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're not sticking around too long like five years would be fine instead of 30 years. So if you are 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 funding life Dotcom is a free service that helps you find the buyers for your insurance policy.

Dr. Dahle: [00:29:56] Now does that do anything for people that are early in a policy. They are two or three years into a policy. They're still really underwater on the payments they've made versus no cash value. Is anyone going to buy those? Or You got to be 60 or 70 before anybody's interested in buying?

Jordan Goodman: [00:30:13] 60-70. This is not an early years. The people buying the policy do not want to wait 50 years to get paid off you know five to 10 is basically what they're looking for. So typically I would even say 65 70 plus is whose that is appropriate for because they're the ones who are going to die sooner and also built up a lot of big size policy.

Dr. Dahle: [00:30:32] Very interested now in the press these days there's a lot of talk about bitcoin. Yes. What do you think about bitcoin is it really a currency? Is crypto currency an attractive asset class? should people invest it? How much is too much to put in it?

Jordan Goodman: [00:30:46] Absolutely. It is not a fad that's going to go away. This is not tulip bulbs. Some people have talked about. Crypto currencies that Bitcoin is about half the market. But there are tons of other legitimate crypto currencies theorium as one of them, lite coin. There's a whole bunch of these things. There are some very illegitimate ones as well but these are being used very 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 a thousand dollars and went way over 10,000, a thousand percent 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 this one called coin exchange there's a whole bunch of these things. Coinbase is another one or there are stocks you can buy with. I'm in this. I do this myself Jim. I do is called Bitcoin Investment Trust. G BTC is the fund name symbol for that one and that started last year at about 200 an end of the year and 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.

Dr. Dahle: [00:32:15] So it's interesting. I mean I can't remember the last time I bought into an investment that had gone up 1000 percent in the last year. And Did well. It just seems like a particularly the last few months. Just like you mentioned a speculative frenzy it feels very Tulip bulbish.

Jordan Goodman: [00:32:31] It does. But tulip bulbs really didn't have any purpose. OK they were pretty but they didn't really have any. You can do something with them. This you actually can do transactions in, that people are doing transactions in crypto currencies all over the place and they are going to continue to do so. It's more secure the so-called block chain. Make 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.

Jordan Goodman: [00:33:00] All the big banks are getting into some of the top guys say it's a fraud. Meanwhile back at their headquarters they're all trying to figure out how to offer bitcoin to their clients and do transactions. So it's not going away.

Dr. Dahle: [00:33:12] Very interesting. Appreciate your perspective on that. Now you've spent years in the financial press. You spent time at Money and you've spoken at all these various networks and shows that 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? And what they do poorly?

Jordan Goodman: [00:33:35] Well you're right and I was there doing all these happening at Money magazine and I mean it was to sell magazines. It 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.

Dr. Dahle: [00:33:49] I noticed that transition over the last 10 years it is far more mention of just get a static portfolio of index funds.

Jordan Goodman: [00:33:57] Correct. So to me they've lost their franchise frankly. But yeah we do the top 10 mutual funds for now are the hot stocks that 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 you know get out the cash and bear markets things they missed. That's a huge rise in the market here. So I think they're much more cautious than they used to be.

Dr. Dahle: [00:34:57] Do you think the financial press is part of the problem or part of the solution for the long run trying to get ahead?

Jordan Goodman: [00:35:06] The solution. I mean people have to be educated and the press is the best way to do it better than financial advisers who have some kind of an axe to grind. So if they do it right you have to use your intelligence and by their nature medical professionals are very intelligent they learned a lot about their specific field and that 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.

Dr. Dahle: [00:35:45] 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?

Jordan Goodman: [00:36:03] Depends who the bloggers are. I mean there are some very reputable people doing really good things like you offering really good advice not offering kind of advice that's going to really hurt people. And there's a lot of people doing frontrunning meaning they're buying the stock before they come out it are 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 the people who have credibility are the ones who should be listening to long term.

Dr. Dahle: [00:36:34] 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 with their financial lives?

Jordan Goodman: [00:36:43] 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 lending solutions dotcom and they kind of tailor loans to what's appropriate for small businesses in a way of tapping people that hedge funds and others that you might not know about. So that may help somebody or people if they have issues with their businesses to finance their businesses, corporate lending solutions dot com.

Dr. Dahle: [00:38:11] Thank you for sharing that and I appreciate you taking the time to be with us today.

Jordan Goodman: [00:38:15] I appreciate it. Jim thanks so much and I'm glad to get the e-mails as well. At Money answer dot com is my Web site.

Dr. Dahle: [00:38:21] Thank you very much.

[00:00:00] I'm recording this note now in December 2018. This is in 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 to each other and 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 a process in place here at the White coat investor podcast to really make sure something like this doesn't happen again.

[00:00:42] Originally this was going to be kind of a podcast exchange. I was going to be on Mr. Goodmans podcast he was going to be on our podcast. I brought him on, we recorded the podcast. Then all of a sudden it seemed to be impossible for me to be on his podcast. That 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 is a whole point of him coming on. I should have recognize that and not let him on in the first place or after it recorded it sounded like that. Not let it run. But at this point it's run. I've sold ads on it to a completely unrelated company you know with the promise that we'd leave the podcast up for people who 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.

[00:01:40] First of all early in the podcast Jordan pushes his affiliate with credible dotcom. 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 cashback bonus back then you will going through Jordan's.

[00:02:08] 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 nvestor but he's an adviser and a part owner of the company right. This 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 percent every month. That's very safe. There are risks there. If it was very safe you'd be paying yields like a treasury bond is with 2 or 3 percent. 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 percent. Because it's not very safe.

[00:03:04] 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 in on February 19th 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 is 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 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 biweekly payments. Some people pay their mortgages biweekly 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 as 12 monthly payments or the equivalent of 24 you know half monthly payments but a biweekly 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.

[00:04:38] 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 the 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. You get a mortgage let's call it a four hundred thousand dollar four percent 30 year fixed mortgage. Can you make that one thousand nine hundred ten dollar 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 hundred thousand dollars and you pay down the mortgage with it. So now you've got the three hundred thousand dollar mortgage fixed at 4 percent. That payment of 1910 and at that rate you'll pay off the mortgage in 223 months or just shy of 20 years. You're knock 10 years off your mortgage right. That's pretty awesome. But you also have a hundred thousand dollar home equity line of credit which is probably at a higher rate than your mortgage maybe it's at 5 percent or so and that rates 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 helocks 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 hundred thousand for that. And you would have paid more interest over the years than if you just kept that boring old 30 year mortgage.

[00:06:13] So this is where the fun comes in. Instead of using a checking account it's paying you zero percent in a savings account paying you 1 percent. 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 you're checking money's all in there and maybe your savings money is all in there is less than a hundred thousand dollars in debt. So if there's really only fifty thousand dollars 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 50000 dollars in your savings account earned one or two percent 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 then you are in the checking account.

[00:07:26] So think about it like this, if a year's worth of interest on a four hundred thousand dollar 4 percent mortgage is sixteen thousand dollars or 9600 aftertax and a year's worth of interest on fifty thousand dollars and a 1 percent savings account is five hundred dollars or maybe three hundred dollars after tax. If you put that together your pain nine thousand three hundred in interest whereas if you do this mortgage acceleration thing you've now got a year's worth of interest on a 300000 dollar 4 percent mortgage which is twelve thousand dollars or perhaps 7200 aftertax and a year's worth of mortgage on a year's worth of interest on a fifty thousand dollar five percent home equity line of credit which is perhaps 2500 dollars or 1500 after tax. That adds up to about eighty seven hundred dollars worth of interest. So there's a difference there between those two of about six hundred dollars per year. OK. And that is the benefit of doing this mortgage acceleration. And maybe you get a little bit of float on your credit card too so that gives you six weeks worth of five thousand dollars maybe maybe 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 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 is 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 what you spend and send 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.

[00:09:47] There's also some risks. You know obviously there's a benefit even if it's small but there are 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 a 6 or 7 or 8 percent. 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 a home equity line of credit your home equity starts looking an awful lot like ATM. And so this system only works if you're actually making those extra payments by spending less than you are. 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 and you might pick the wrong home equity line of credit right. That's a risk there. A big one is that your 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.

[00:11:03] And so if you really want an alternative mortgage payoff plan, here's my plan: don't overconsume housing. Keep your mortgage less than two times your gross income. Put down 20 percent, 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 do we do it? Just that plan. That's all we did. 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.

[00:11:46] Another company that Jordan mentioned in the podcast is funding life dot com. This is a life settlements company. I don't actually have a problem with this particular investment from either 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 thing. And so I've actually been interested in investing in this type of funds 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. 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 thing I would make sure you do your due diligence.

[00:13:00] 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 percent from its peak to 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.

[00:13:33] 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 investment just skip it. There are plenty of other great investments out there. Second don't invest in stuff you don't understand. Ok Bitcoins are mined by fancy computers 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 is an arbitrary limit on how many of these there can possibly be. You know and now there's hundreds and hundreds of these other crypto currencies competing with it and I don't know which ones the best crypto currency by any means but you probably don't either. And my recommendation is that you don't invest in stuff you don't understand so if you don't understand bitcoin don't invest in it.

[00:14:23] Reason number 3 and 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 performace 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 I don't know why you would but if you did, the time to buy is now in December 2018 when is down 80 percent. Not in January when this podcast originally ran and it was going through the roof.

[00:15:04] 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 long 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 zero percent real return much more likely to be a zero percent 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 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 and 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? point one percent. It's just not even relevant to them. From a business perspective. And so who are the people using it as a business. Well you know drug dealers people trying to hide their payments that sort of stuff. I mean nobody is 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.

[00:16:43] And then the last reason of course is that I just can't handle that kind of volatility. I don't need investments my portfolio drop 83 percent 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 you can buy bitcoin but you're going to 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 only get as close as you can to your risk tolerance without going over. Because that's when financial catastrophes happen.

[00:17:27] OK another company that Goodman talked about was corporate lending solutions 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 in the white coat investor that I can trust and recommend. We're still working on that.

[00:17:44] 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 listen into if you're really interested in that sort of thing. It wasn't promoted on this podcast so I don't feel any particular need to dive into the details there.

[00:18:18] 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.

[00:18:50] So mea culpa. I think the processes we put in place will keep this sort of thing from happening again. And I hope that this didn't result in anybody losing an insignificant amount of money and I hope it was an education educational experience for you as much as it was for me.

Dr. Dahle: [00:38:22] This episode was sponsored by ProAssurance, professional liability insurance for doctors. ProAssurance treats you fairly. Offering medical professional and cyber liability protection for doctors, medical groups, hospitals, and health systems. ProAssurance group is financially strong rated a plus or superior by A. M. best and awards 50 top PNC company every year since 2007. Learn what it means to be treated fairly at ProAssurance.com.

Dr. Dahle: [00:38:47] Thank you for listening to the podcast. Be sure to sign up for the free monthly newsletter and 12 step financial bootcamp program at White coat investor dot com. Head up shoulders back. You can do this. See you next time.