E034: Basic Financial Literacy with Joshua Sheats

This week Rich and I sit down with Joshua Sheats of the Radical Personal Finance to ask…well, all the things we want to know about money: financial “prepping”, EDCing cash, being financially “competent and dangerous”…and more!

Intro Stuff

What Are You Drinking?

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What Did You Do This Week?

  • Rich: Three hardcore BJJ sessions, range with Andrew and Cody, and broke his toe

  • Justin: Dropped boots off to be resoled to become my spare pair in my vehicle, two range sessions shooting Dot Torture and 1-2-R-3 Drill

The Show

Like most people, we aren’t as financially literate as we should be. This week we bring in expert Joshua Sheats to discuss money. Some of the highlights from the show:

Joshua’s Five-Step Framework for Increasing Wealth

  1. Increase income

  2. Decrease expenses

  3. Invest wisely

  4. Avoid catastrophe

  5. Optimize everything

How Long Should You Financially Prepare For?

See Radical Personal Finance Episode 616: If Missing One Paycheck is a Problem for You, You’re Behaving Stupidly

Joshua offers some basic financial goals everyone should have:

  • Accumulate $1,000. More than 50% of Americans can’t put their hands on $1,000 without borrowing it

  • Accumulate $10,000. This allows you to move anywhere in the country, take time to find a new job, travel the world (if you so choose) and deal with the massive majority of problems like can throw your way

  • Accumulate $100,000. This allows you to be FREE. You can buy a house, start a business, etc. but you have true FREEDOM

Hedonic Adaptation: We discussed this concept during the show, which states that humans quickly achieve a state of stability and happiness after large positive or negative changes to their lifestyle.

Joshua’s Stages of Financial Independence. Joshua has one of the best ways of describing wealth-building we have seen. His Stages of Financial Independence are as follows:

  • Stage 0: Financial Dependence. All humans are at this stage at some point. Financial dependence means you depend on someone else’s generosity to meet your financial obligations. All of us are at this stage as children, and many of us are well into adulthood.

  • Stage 1: Financial Solvency. This stage is defined by being able to meet your own financial obligations on your own income, and being current on all your bills.

  • Stage 2: Financial Stability. Being in this stage means you meet all the criteria for financial stability and have a buffer. This buffer is a money that will prevent you from reverting to financial dependence if a disaster befalls you.

  • Stage 3: Debt Freedom. In this stage you have met the previous two criteria and have no high-income, personal debt. Some debt is excluded from this like a mortgage, business loans, or other loans that are secured with capitol.

  • Stage 4: Financial Security. At this stage you can cover your basic expenses with your investment.

  • Stage 5: Financial Independence. Being financially independent means that your investments will cover not only your basic expenses, but also your lifestyle.

  • Stage 6: Financial Freedom.At this stage you can maintain your lifestyle and consider large purchases, experiences, or philanthropic efforts without risk of impacting your lifestyle.

  • Stage 7: Financial Abundance. At this stage you have amassed wealth well beyond what you need to cover your lifestyle and expenses and have a comfortable safety margin. The hardest part of this stage is decided what to do with your money because it is likely more than you will ever spend.

Book of the Week

The Last Lecture by Randy Pausch

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Justin Carroll