Morgen Rochard: Holding Bitcoin Is Not a Financial Plan

Hi, everyone. Welcome back to Stephan Livera Podcast. Rejoining me on the show today is Morgen Rochard. Morgen has recently written a book called Bitcoin Personal Finance. It's a great book. I had a chance to read it and Morgen is also the founder of Origin Wealth Advisers and also has appeared on the show previously. Welcome back to the show, Morgen.

Thank you so much for having me on. I appreciate it.

Yeah, so it's a really cool book you've written. Let's let's just start with what was the goal of this book?

Yeah, so the goal of the book is that there's tons of personal finance books out there and there are tons of Bitcoin books out there for people to, thank God, there are tons of Bitcoin books where people can go and actually understand what Bitcoin is and why they should buy it. But there aren't any books that combine the two and that actually help people understand that once they have Bitcoin, how can they help it, use it to change their personal financial lives.

And I think, you, you made an interesting point in the book that in some ways, both sides can get this wrong, right? Because on one side, the typical Bitcoiner, they, we have our own, let's say, biases or blinders, and then of course, the fiat side, they have their own things that they're getting wrong. So let's, let's take it from both sides. What would you say Bitcoiners, like typical Bitcoiners who are not as savvy about these things, what are they getting wrong here?

Yeah, definitely. So the number one thing I would say is that if people think that if they just hold Bitcoin, that that is the financial plan. And that Bitcoin is basically going to save them from any personal financial behavior that they have, any under saving that they might be doing, any other just little finicky habits that we all tend to have as people, right? We're all people and we all make mistakes and we all are supposed to make mistakes. It's kind of why we're here is that we're trying to improve ourselves and do better. And so Bitcoin doesn't fix any of those things about us personally. It fixes things about the monetary system for sure. It gives us an equal playing field. And that's definitely what they're getting wrong on the fiat side is that like Bitcoin is I think the great equalizer and what is going to help people actually get out of some of these monetary issues that we're currently in. But it doesn't fix any of the personal issues that we all have. And so if you are carrying around with you all sorts of money baggage, like you grew up and you have these money scripts or other things that are kind of holding you back, those aren't changed just because you went and bought Bitcoin, right? You still have to work on those things and you still have to make sure that you have income coming in and that you're creating savings and that savings is appropriate. And that if it's not appropriate, that you're watching your spending.

And then from there, making decisions about, okay, am I going to save and save in Bitcoin? Am I going to save and save in fiat because I have a very much shorter term goal? Or do I actually want to invest in excess of what I'm saving? And so the book is designed to help people sort through some of those money scripts and other things that they have in their mind, help them make good financial decisions with the information that they have, and then from there, be able to design their own financial plan with Bitcoin being like the balance sheet asset rather than just some sideshow where it's, you know, 1% that people are recommending in the fiat world.

And obviously the other side of the question, what do you think the typical fiat people are getting wrong?

Yeah, so I think that they're often just dismissing this asset class altogether, or they're using it as a diversifier rather than it actually being what it is, which is a savings vehicle. And so, and thinking of it more as an investment, right? So like when they look at portfolios and they do portfolio construction, they'll say, okay, we're going to put 5% here and 3% there and 30% here. And Bitcoin will be, you know, this little 0.5% sliver or 1% sliver, whatever it is. And if they're being really good about it, they might even say, okay, we're going to market weight it and look at it and make me take a 2% position, right? But they're not thinking about it as, okay, this is a long-term savings vehicle, and it would be something potentially that people would want to hold instead of investing. And we've never been in a situation before where we actually have a long-term savings vehicle, right? Because fiat is a short-term savings vehicle by design because of inflation and so forth. And so because of that, nobody actually thinks of this as just a monetary asset that you might want to hold for the long term so that you don't have to invest, but so that you're not priced out of future wants and needs. And so that's definitely what I think the fiat world is getting wrong is that there are a lot of people out there who they're sick of trying to decide what to invest in, and they just want to hold savings, and then they want to make sure that when they're holding that savings that they're making appropriate decisions.

And so that's what the book will help do.

It's probably fair to say that most people live their financial lives in a very emotional way or things that are hot right now, right? So obviously AI, right? So there's probably like tons of people into AI or whatever, whatever the hot trade is at the moment. How do you think about that? How do you advise people, you know, when they're your clients or in the book, how should people think about these, these questions of where they should, you know, invest or save?

Yeah, definitely. So I think it starts with what a person's financial goals are, right? So if let's say somebody is looking to go buy a house in one to three years, then buying AI stocks, or even Bitcoin actually, is not going to be the right thing for that person because they're saving for a specific goal that is happening in a short period of time, and therefore they would want to be in short-term assets like just a fiat money market fund or short-term bonds, something like that. If let's say they're saying, okay, I don't need this money until I'm retiring, and I'm retiring in 10, 15, 20, 30 years, whatever it is, or I'm sending my child to college in 20 years, and therefore I don't need this money, then you can decide, okay, do I want to hold it in long-term savings, or do I want to invest? At that point, what people have to decide, which is not something that people have been thinking about for a long time, is will I get more out of investing than just savings? Because we've never had a long-term savings vehicle before. So basically, investing is that there's capital that could be put to good productive use that you will make an excess return on whatever you're currently holding. And so if you make an excess return over what, let's say, just holding Bitcoin over the long term, and that is something that's appropriate for your financial situation, then yeah, like investment does make sense.

If that investment is not available, then you could hold long-term savings until you wait for that opportunity.

In your book, you also mention this notion that asset ownership is becoming the dividing line. Can you elaborate a bit on that? Why is asset ownership becoming that dividing line?

Yeah, so I think because people are not necessarily, they're not distinguishing, and, and rightfully so. In the many, many years that we've had for investing in savings, people are constantly chasing returns and trying to see what it is that they could put in their portfolio to beat the market or beat other people or try to get out of their financial situation, I think is actually realistically. And I think people even use Bitcoin in that, in that regard as well. They're saying, okay, I've got, I can't save enough. I'm in the situation where I have these expenses. I have this income. I can't seem to either make more money or save less, or save more as a result of, of like what my current expenditures are. And therefore, I'm going to try to find the best AI stock. The, or I'm going to chase, you know, crypto Bitcoin returns in, in a, in like an event to try to like get out of their situation. Instead of thinking about it as a holistic picture of, okay, I need to work first on what my income is, what my savings rate is, trying to target a 20% savings rate is going to be sound regardless of whether or not you get these outsized returns. Or you're just, you know, plodding along at a 7% to 8% return ratio, right?

And so, like, making these long-term decisions where you are solidifying your financial situation by creating savings and then deciding from there what you're going to do with those savings, rather than just saying, okay, I'm going to, like, throw money at this stock or throw money at this at Bitcoin and hope that, like, it makes 100% this year. And then I'm going to buy the bottom, sell the top, obviously, because everyone thinks that they can do that. And when you look back at a chart, it's very easy to do that, to say, oh, yeah, I totally could have known when to buy and when to sell.

But obviously, right, like, right now, I think it's confusing for people. We're at, you know, sitting around 80K for Bitcoin. People are unsure, is it going to go lower? Is it going to go higher? Are we going to go back to that 120? Are we going to go much higher? You know, there are people complaining online that Bitcoin treasury companies are going to get liquidated at $10,000. You know, so, I mean, I think there's just such a wide array of opinions about what could happen. And when we look back at this chart, let's say in next year even, it'll seem obvious what was going to happen at this exact juncture in time. And so I think what people need to decide is since we don't know the future, since we don't know what's going to happen, we have to make asset allocation decisions based on what we do know, which is the things in your own specific life, in your own specific lifestyle that you can actually control, like what income you're going to make, what expenses you are or not allocated towards, what expenses potentially you can cut, what savings you can create, and then from there designing an asset allocation that actually makes sense with your timeline. And so, and if you're able to do that, then over the long term, absolutely you're going to do great, no matter what the returns are.

Let's get back to this other point you were making, which is around timing and matching your asset for when you need it. I think that's probably an important point to expand on. Can you just explain a bit why should listeners try to time their assets with when they need it?

Yeah, so the best example I can give is let's say you bought Bitcoin at 120,000 and you were expecting it to go to 250,000. So it seemed like a great buy at the time. And also, you know that your kid is about to enter a very expensive preschool and you needed the money for that. If you had taken, let's say, the $20,000 that you were going to allocate to this child's expensive preschool and you put it into Bitcoin with the hope that you were going to be able to get three years of preschool out of it, right? Now you have no years of preschool. So I think that people need to keep in mind, right, if we have any kind of short-term goals, we need to match that with a short-term asset. And if we have long-term goals, then we match that with a long-term asset. And long-term assets, right, I mean, you have to be mindful, obviously, about what long-term asset you put it in, right? You don't want to say, okay, I'm going to put it in, you know, this long-term asset of a company that makes screen windows for submarines, right? That's not going to pan out in the long term. But if you're thinking clearly about, okay, I'm not quite sure what I need to, what I want to invest in, I want to just hold money. And I'm going to hold Bitcoin for the long term, and I don't need it for my goals in, in, you know, the next 10, 15, 20, 30 years plus, or maybe I'm thinking about the legacy I want to leave or charitable goals that I have in the future.

All of these things, if you can align, if you can just, basically, if someone could just sit down and write, okay, these are the things I need to do in the short term. These are what's going on in my life in the next one to five, seven years. This is what's going on in my life, seven plus years. Yes, obviously, I don't know the future. Things are going to change, right? But there are certain things that we know, right? We're going to age, please God, we're not going to just, you know, drop dead on this call. And that we're going to need certain things in the future as a result of that. And you can sort of, like, at least picture, you know, retiring or having to maybe pay for aging parents or needing health expenses in the future. Just simple things. Or, you know, you want to take a trip around the world when you're in your 50s, right? You can plan for these things now, even if they don't actually come to fruition, knowing that you'll have that, that long-term flexibility by creating that long-term savings now and matching that long-term asset with that long-term savings is going to help. And same thing on short term, sorry, right? You can have all sorts of short term goals that you may or may not do, right? Buying a new house or sending to an expensive school or even taking a short term trip that you want to save for, right? If you, if let's say you say, okay, I want to spend $50,000 traveling the world next year, and you start saving for that goal, if you don't make that $50,000, you're not going to necessarily take that trip, but it doesn't mean that that was, that wasn't a worthwhile thing to do.

It just means that maybe you push that goal off a little bit. And so I think people need to keep that in mind when they're creating their asset allocation. I often get this question from people because when they hear I'm a financial planner, well, what should I invest in? And what is the market doing? Are you okay investing in the market right now? And it's like, that's not really the question. The question is, do you need money now or do you not need money now? Because if you don't need money now, the right time to invest is always going to be now or save, right, for a long term. And if you do need money now, then absolutely, it doesn't matter what the market is doing. It is not the right time to put your money into a long term asset.

And related, the question of a fiat emergency fund. Let's talk a little bit about that, like what kind of range do you think is reasonable for people to hold as fiat so that they've got that, call it a fiat buffer, fiat ballast, or a dry powder, whatever you want to call it.

Yeah, definitely. I think at a minimum, people should absolutely have at least one month's worth of total expenses, whether they're discretionary or not, just so that they have some kind of buffer. In general, I, I tend to at tell people that they need at least three months and that they should just calculate total expenses for three months because the reality is that if something, God forbid, were to come up, that at least you can cut other expenses and that you can probably extend that three months to be six or nine if you needed to. It's also really going to depend on risk tolerance and other assets, right? So if you don't really have a lot of other assets to draw on, then yeah, you should actually have a larger emergency fund. So it's one of the reasons why it's beneficial to create a larger savings buffer just based on income and expenses is that like if you've got that savings buffer, then you're much, you have much more flexibility in how much you have as an emergency reserve versus how much you have in assets. Because like the reality is, right, that if, you know, you were to lose your job or something were to come up, that you want to make sure that you can immediately cover expenses without having to take any job that comes your way or be able to deal with whatever situation. Not having to immediately sell long-term assets.

And then you want to be able to have enough flexibility to decide, okay, do I take whatever job comes my way because I don't want to touch my Bitcoin, or do I hang on and I can figure out other ways to maybe scrimp and save with what I have so that I could protect my long-term assets. So there's decisions to be made for sure. If you have a higher risk tolerance, then I would say that people are generally going to on the shorter side of an emergency reserve. And if you have a lower risk tolerance, generally people like to keep more cash around. I would say though that three to six months for anybody is going to make sense just because you don't know when you're going to get into that bad situation. And I feel like people often think, okay, well I'll just I'll just deal with it when it comes up. But the reality is that when I've seen this in my practice, people absolutely hate selling their Bitcoin and it's always at a bad time because these things tend to align unfortunately, especially like job losses and so forth are generally going to align with a bad market, which means that you're probably selling assets when they're down. And so that emergency reserve is really going to help you in times of need. And generally what I've seen also is that when people over allocate, they tend to end up with less later. And the reason why is because right they have to sell at the worst possible time.

So maybe they're selling when they're underwater. And yeah, they get to take a tax loss, but nobody wants to actually take that tax loss even if it you get to deduct $3,000 on your US tax return. And the reality is right is that you still lost money. And so like I I would say for most people at least three months, if you're really going to you know live on the wild side, I guess one month would be just fine, but not not a glowing endorsement for that on my side.

Yeah, of course. And I think in your book you mentioned more like six to twelve months if you've got a family and that kind of thing. So obviously people have to tune it for their own life situation and all that. And I think as you said, it's kind of in Bitcoin, if you're a Bitcoiner and you, you know, really hate to sell the bottom, and that can happen if we're talking like, you know, December 2018 or December 2022 or this recent kind of 58K, if that was the bottom, right? That people risk having to sell at those moments, whereas if you had a small fiat, you know, emergency fund, then you can dip into that fiat fund instead of having to sell Bitcoin or this kind of thing. So that's probably an important lesson for people because on one hand, if you're like really, you know, you're really a diehard Bitcoiner, you might think, I want to maximize my Bitcoin, but it can come at the cost of you're a bit more fragile, your setup is a bit more brittle in that moment of, you know, the bear market, the bottom of the bear market.

Yeah, definitely. I would say too also, I get this question a lot. Okay, well I have no emergency reserve. I've got nothing. I'm just starting out. Now what do I do? I don't want to spend the next year stacking fiat while Bitcoin is at these great prices and so forth and maybe I'm going to miss out. And so there are ways to design it where you're like, okay, now I'm now going to save 20% of my income and I'm going to allocate 15% of that to my new emergency fund and 5% of it to Bitcoin or however you're going to do it. That way like you could do both at the same time and that way if if something God forbid does come up between then and when you actually have created this whole emergency reserve, at least you've created something so that you don't miss out. You have some fiat cushion to help you in that case.

Yeah.

Yeah.

Now talk to us a little bit about I guess some of these different strategies. I think in especially in the Western world, houses became like the store of value for people. I know you comment on this a little bit in the book. How do you see that now? Do you think it's, that's going to change over time in a Bitcoinized world?

Yeah, so I've actually never thought that houses were a store of value, but maybe that's because my house is constantly needing things, and so.

Right, yeah, no, I'm saying the popular conception or people that think of it that way, they act as though it is, even if they don't.

Absolutely. Yeah, so I think it's, there's a couple of tropes. They're not making any more land, real estate is something real and tangible and therefore it has value, right? I think that these things are definitely subjective money scripts that people need to work through, absolutely. And that absolutely get turned on their head in a Bitcoin world. I think that people really need to evaluate on a personal level whether or not their primary home actually is an investment. For most people, it is absolutely not, unless you have like somehow by the grace of God picked an absolute perfect location and for whatever reason your house was built by the same people who built the Colosseum, you know, and like it doesn't have the same wear and tear and maybe you also don't have kids that are, you know, crashing into the wall, like they're, you know, the Kool-Aid guy and all sorts of other things that might come up in a house. And even without kids doing that, right, there's just general wear and tear or people have pets and all sorts of other things. Or there's always people who are like, you know, what? I'm going to do a home improvement project because I'll get my money back because if I update my kitchen, then my house will be worth more. And the reality is, every time we do the numbers in my practice, these are always consumption items.

Yes, you have to maintain your house, of course. You don't want your house to fall down, but that doesn't mean that when you do something to improve your home, then it's an investment. At the end of the day, it is generally still consumption, and for the most part, people don't, maybe they get back some of what they put into their home when they sell their home, and maybe if you look at some of the boomers, of course, if they bought their home, you know, in the 1980s and then they're selling it today, I think it's a really different story because of inflation and so forth. But the reality today is that that's not actually the case in what's going on.

It makes it even more interesting, I think, because then people say, okay, in not just my primary home, I also want to own a rental property because then I'll have, I'll get these great cash flows, and the property itself is going to appreciate in value, and it's really easy passive money. I don't have to do anything. And the reality is that that's actually not true. And the reason why our, like, real estate companies and rental companies and all these other things is because it's an actual business and you have to spend time on this business in order to make sure that it's something that pans out and comes to fruition. And so generally when people say, like, find some sort of random property and then they get a renter in there, the returns don't justify the risk that they're taking on that single property. And it's even less interesting with Bitcoin, right? If you look at Bitcoin's returns, even if you're not projecting out the same returns that we've gotten in the past, but if you're assuming somewhere between 10 and 12%, let's say, on Bitcoin, and that's generally low speaking, you're still probably netting out better than some of these rental properties. I've done cap rates on individual properties where people are making 2, 3, 4%, and they don't even realize it because they're taking some kind of cash flow from it and they think, wow, look at this, I'm getting cash, cash in hand.

And I think that that skews, it skews our perception of what is and isn't valuable just because you're receiving cash from it and then you're not including all the expenses and other things that you're putting out for it. And even just holding a REIT, for instance, those generally make 7% and you're holding a diversified portfolio of real estate. So if your individual rental property is not making at least 7%, then you're not even beating just buying a REIT. And so all around, I think it's not very interesting, but that's just me personally.

Yeah, I think there's a lot of things to dig into there. So it reminds me of like Airbnb. So recently they stopped the cleaning requests from the host. And then there was some Airbnb kind of on the Airbnb host side who were upset about that. And then other people saying, "Hey, you guys are actually in the hospitality business. You thought you were just in this kind of easy passive money world. Actually, you're in the hospitality business." And people are getting more than they, they're biting off more than they can chew or they're not quite sure what they're saying. Now, there's probably one thing that does shift it a little bit is the leverage aspect, right? Because if it's, let's say, even if it's 4%, 5% unlevered, but let's say they have leverage on it, then, then maybe that's where they might feel that they are doing really well for themselves. Of course, that really works in a bull, in a bull market for housing. But, of course, that can work, that can work on the reverse side on the way down. So, how do you address the, the leverage question for the people who are going to look at rentals and say, no Morgen, but I'm, I am using, hypothetically, they're going to use leverage to do this rental play.

Do the math, right? You could still do the math on your cap rate and include your leverage in there. And with leverage, right, if you're doing an unlevered bet on, let's say, REIT, not even Bitcoin, you should be making an unlevered 7%. And you could, you could lever up and buy a REIT in the market, right? You can do the same thing. There's no law against it. You can borrow against whatever to go and buy it and have create some sort of leverage, leverage ratio for yourself. Obviously, it's easier for the most part because of the society that we live in to go and get the mortgage rather than, let's say, taking a personal loan or doing whatever it is. But you can create that own, that, that leverage and you can equate the two and see, does this, does the risk I'm taking still justify it? The issue I would say is also, it's the, it's the single property thing that generally people don't understand. So I had a client who we tried to steer them away from buying this rental property and they decided to buy it anyways. And then a wall fell down in their single unit. So there, things like this happen, right? And so I think that like that kind of stuff you don't necessarily price in. If you have a portfolio of a hundred different rentals, right, and a wall falls that falls down on one of them, it doesn't necessarily affect returns.

When it's the only rental property that you have and you have a major issue in it, leverage is actually going to make that worse, right? Leverage is going to amplify the damage rather than make the damage better. And obviously, yes, if the returns pan out, then the leverage does help. But more often than not, I've seen leverage actually hurt in these scenarios than help. And especially with interest rates where they are now, it's not the same slam dunk that it was back when you can get a three and a half percent interest rate. And to add to your Airbnb comment, so what I've noticed now that they do is they have this long list of rules when you are a renter in the Airbnb where you have to like put the sheets into the laundry for them and clean up. And if you don't do all this, they'll leave you a bad review. I mean, like, could you imagine going to a Marriott and they're like, hey, before you leave, can you take all the sheets off the bed and bring them down to our our little utility area? And don't mind all the other people doing this too. Oh, I'm sorry. You're going to miss your flight. I mean, it's It's unreal because they, they don't have, they're, they're not actually making money on these properties is the reality of it.

And I think some of it is just being able to say to friends, hey, I have this rental property, rather than it actually being something that's a meaningful investment.

So it's consumption. It's consumptive in the bragging sense.

I think so for sure. And it makes you feel like you're productive even if you're not, right? Like I feel like there's some, there's some reality.

They're getting tricked by inflation, they're getting tricked by these things. And yes, I mean, what I was saying is that Airbnb are trying to make moves now against some of those rules. Right? So Airbnb have come out saying, no, house, you're not allowed to like force your guests to go and like put the laundry out and take the bins out and whatever. It's like if you're charging a cleaning fee, then that cleaning fee should be it. They shouldn't be like charging the cleaning fee and also abusing the norm of if you stay at your friend's house, that's a different story of like, but they're trying to, you know, because it's like no, Airbnb is a business. It's like a arm's length transaction. You know, staying at a friend's house and paying an arm's length transaction for a, you know, business, you know, deal, let's say, to stay someone's house that they're separate things. And I think that's where maybe some of the ire was being raised by the Airbnb hosts who didn't like that because it's making the deal worse for them. And it was beneficial to them. But like, I think more broadly, let's talk a bit about debt and, you know, some people frame it as good debt versus bad debt, right?

Like consumption debt versus investment related debt. How do you see that? Do you agree or disagree with that framing? How would you explain it?

Yeah, definitely. So, I think I wrote this in the book specifically because I like this analogy that debt is like a campfire. So, or a fire, fire in general, right? If you have a little bit of debt, right? We could, you can warm, warm your hands, you can roast marshmallows, you can tell good ghost stories and all sorts of things around your campfire. When it turns into a wildfire, it's really problematic. And so, it's one of these things that it could be a good tool to use, but you have to be careful how you use it, and you certainly don't want to be using it in a way where you can't, where there's no actual way to repay it. So, consumptive debt is one of those things where if you are just in your mind saying, okay, well, I'll just, I'll make more money later and I'll figure it out later. That's the wildfire situation because generally what happens is that we don't make more money later and what ends up really having to happen is that people have to become extremely austere to change their lifestyle. To pay down that debt over time, or they just live with this, you know, this saddled debt, and they're not able to actually, like, move on with their life because their credit score is so damaged and everything else. So, I think that people have to keep that in mind. I think also there have been a lot of, and I, and I don't want to put anybody down because I think everyone in the community is great, but also when, when we go on podcasts, we have to be responsible about what we're telling people to do.

People come on podcasts and they say, okay, well, rates are low and Bitcoin's going to do great, and therefore you should just borrow and deal with it later because Bitcoin's going to make 40 plus percent per year, and you can, you know, you can't outspend your Bitcoin if that's the, that's the reality of the situation. And actually the reality of the situation is that the sequence of Bitcoin returns actually really matters when you're taking on debt, especially consumptive debt. So if you're taking on some sort of investment debt where there is at least a, a great potential for return, then generally it makes sense because the whole point of doing that investment is, like, is to be productive. When you're doing it just to, you know, have a better house or a better car or, whatever else it is in your lifestyle that you want to have with the hopes that returns are going to pick up later and fix it. I would say it almost never works out. And yes, you could be very lucky where you get some tailwind where let's say you start borrowing when Bitcoin is low and then you're able to repay it when Bitcoin gets much higher. But in general, like then you're relying on Bitcoin actually doing exactly what you need it to do when you want it to do it, right?

Which I think as we know, right, that's not what markets do. And so if let's say you get a couple of bad years in a row or Bitcoin doesn't move, now all of a sudden your debt is growing and you have no way of repaying it. And now all of a sudden you're selling Bitcoin potentially at prices that you didn't think that you would be selling. And this is kind of an issue in general. It's not just with debt. I feel like it's also with retirement planning. Retirement planning is kind of like a debt because you're saying, okay, I'm giving up my income and now I'm going to live off my assets. And while you're not directly borrowing, right, and you do have the option to let's say go back to work at any time, generally when people retire, they don't actually want to go back to work, which is why they've retired. And so It's effectively like a form of income debt in a way, because now all of a sudden if you haven't actually done the math on how much you have, you could be like the sequence of returns can significantly affect the outcome. So if you retire and then we hit a bear market and you didn't have enough to begin with, all of a sudden now you're selling Bitcoin at the worst possible time and you're potentially needing to go back to work because you can't maintain like you can't maintain your level of spending for that long period of time that you would have initially thought you could.

Yeah. And you were touching on it there a bit. Any broader thoughts about the whole Bitcoin collateralized lending space? That seems to have grown dramatically in the last, let's say, year, year and a half. There's been a big growth in that when I talk to people in the industry. How do you see that? Do you see that as too much risk or maybe it's like you have to be conservative in how you do it? Are you totally against it or is it more like conditional? How do you address the question around collateralized Bitcoin loans?

Yeah, definitely. I think it's really a case-by-case basis for sure and evaluating somebody's situation to decide whether or not it makes sense. Best use case, though, for collateralized lending, in my opinion, is always going to be when you have a near-term liability that you cannot meet, and you have a near-term asset that you know is coming in, that's basically guaranteed, but you have no way of getting that asset sooner. So the best example of this is you have to pay your taxes on April 15th in America. And so if you know, okay, I always get my bonus in July, and I have this tax bill that I have in April, and we could talk about all the reasons why you should have done better planning the year before, but maybe you didn't, and that's fine. But in this situation where you've got this bonus coming in, and you have this tax bill, right, you can say, okay, this is a perfect situation where I can borrow, get what I need to pay the tax bill on time, not pay any penalties, not have to go onto an IRS payment plan, and then I know this money is coming in, and therefore I can use that to pay off the debt. And that would be a good short-term example. There are maybe other examples where things are a little bit more long-term, but in the reality is that you know that this is coming due.

One other example could be, let's say, that you're going to buy a new house, and you decide to take the collateralize that to do it, knowing that you're going to sell your other house, but there's a timing mismatch there. There are some issues with that for sure, like hey, maybe you can't sell your house, or maybe you don't get the price that you intended and so forth, right? So there are some, there are definitely some nitpicky issues there that I can, I can like certainly pick on a client about. But the reality is right that you've got just this cash mismatch, and that's when collateralized lending I think works the best. When people are just saying, okay, you know, I, I don't want to sell my Bitcoin, I don't want to change my spending habits, and therefore I'm going to start borrowing against my Bitcoin because Bitcoin is going to make 40% a year. It's, it's not going to work out. And it hasn't worked out. And we've unfortunately had to have conversations with clients about going back to work. And no one, no one likes that conversation. Nobody. Because, right, the reality is that the situation is such that they don't want to do that for whatever reason or can't do it. And so like you, my, my assumption is always that if you're going to get into these situations, you want to be as conservative as possible so that you don't end up in that other situation on the other side where you have to make all of a sudden make these and changes that are very difficult to make, like make incremental changes before you make these large, life-changing financial decisions so that you have more flexibility when you actually make them, rather than putting yourself in a situation hoping it's going to work out and then having to pick up the pieces later.

Yeah. Now, let's talk a little bit on the retirement side of things. We don't have to redo the whole safe withdrawal conversation because I think we did that last episode that you were on the show. And I know from your book, you were maybe more targeting towards the idea of a spending level as opposed to a so-called safe withdrawal rate. Can you explain a bit of how you see that?

Yeah, sure. So I like both in all honesty. I think the safe withdrawal rate is a really good place for people to start to target what they should save. The reality is though is that the safe withdrawal rate is actually extremely conservative and the reason why is because it's just sort of if you don't want to actually track every little thing, you don't want to have to decide exactly what you're going to spend in retirement, using a safe withdrawal rate is going to just be a wide net that you can cast to make sure that you don't outspend your assets. And that's great. If for whatever though, that is not like in and in general, it means that you have a lower withdrawal rate because you have to account for all the little things that might come up along the way that you didn't account for and so forth to make sure that the plan actually works over time. Whereas If you're going to be really targeted about your spending, you can actually really hone in on what you need for the next five, ten, you know, five to ten years, let's call it. And then you can divide things like we were talking about earlier as short-term assets and long-term assets. So let's say I know I need $100,000 a year of spending and I want to target eight years worth of spending. I can literally put away $800,000 and I'm just doing easy math rather than you should actually figure out a present value with an interest rate and so forth.

But let's just, let's just call it $800,000 that you set aside. Those are my eight years worth of spending. Anything I have in excess of that, I can now put in long-term assets and those assets will then protect me later. What you then have to do though is say, okay, have I saved enough for those long-term assets to actually then provide an additional eight years of spending and also provide for the next set of years that I need for retirement. So it's a much more involved calculation that people don't often like to do, which is why the safe withdrawal rate is really quite nice because you could just say, okay, I'm going to spend two to four percent of my assets and everything's going to work out just fine. Or you could be really, really targeted and do lots of math and create all these scenarios where it's every eight to ten years, you're calculating what you need and what the potential returns will be to make sure that you have enough in long term and enough in short term.

The book is kind of ranging on across a range of, you know, various topics, so we don't have time to kind of get into every single one of those, but can you talk to us a little bit about, let's say, structuring and inheritance aspects of it? I think you get into a little bit around trusts and some of these questions or even like the charitable giving. Maybe you could just touch on those points around, I guess, around inheritance and then also donations and giving.

Yeah, sure. So the goal of the book was to help a wide range of Bitcoiners. So everyone from the person starting out who just wants to hold Bitcoin, who doesn't know what to do, to the person who has now accumulated quite a lot of Bitcoin and has all sorts of, thank God, estate planning problems or assets locked up, let's say, in retirement accounts in the US and they're wondering how to get these things out or they have charitable goals or other items. So as the book goes, it's like it starts out kind of on easy mode and then you get to medium mode and then you get to like, you know, okay, now I have all these these difficult problems because thank God I have a lot of money now. And so my hope is that people can go through the book in stages and get to like the stage that they're at to help them make decisions about it. So the last few chapters of the book are basically around inheritance and charitable planning and really tax planning too. So like the tax chapter itself sort of just outlines like how it works, but like the reality is that like tax planning is not paying taxes. So like generally when you go to your CPA, your CPA, you give them all of your information and then they create your tax return, right?

And then they file it with the IRS and you pay what you owe or you get back a return, a refund. That's not tax planning, that's tax preparation. And so I think it just needs to be clear, right, that tax planning is what you do during the year to make sure that when you hand over your information to your CPA that now you will owe less taxes. There are some CPAs that can help you throughout the year, right? But if you've already missed the December 31st deadline, pretty much between December 31st and April 15th when you are going to file your taxes, your accountant can't do anything for you other than tell you to maybe contribute to an IRA. That's about it. And so tax planning has to be done during the year. And there are many different ways that you can do it. You can look at where you have your assets and decide whether or not maybe you want to sell some of them or reallocate based on what your tax rate is. Maybe you want to give to charity to offset some of the taxes since you're charitable anyway. So what I've seen in the Bitcoin community especially is that people tend to be very charitable minded anyways. And so since they're going to do maybe make some changes to their portfolio to make sure let's say that they can retire and maybe take some money out of long-term Bitcoin and put it into shorter-term assets, that a good year to do their charitable planning too would also be the year that they take capital gains.

So balancing the taxes that you're going to owe with maybe offsetting it by donating to charity and so forth or putting it in charitable trust vehicles to make sure that you can let's say put away a lot more than let's say just giving a thousand bucks to a charity. And so there are definitely different designs and ways to do it. And then the last part of that is, okay, maybe I don't want to be, I want to be charitable and I want to do all these things for retirement and everything else, or maybe I don't, but I also want to make sure that I leave assets to my children and what are the best ways to do that.

So, and then that would be trust planning. So there is, there is some aspects of trust planning in the book. It can get extremely complicated and you can actually write an entire book, I think, on retirement planning just for Bitcoin and on estate planning just for Bitcoin. And so unfortunately, I feel like this book scratches the surface and I don't think I'm going to write another book. So maybe someone else out there can

Do that.

Someone else can do that. But, and I always say that and then I end up writing another book. So God only knows. But, but the reality, right, is that you have to then decide, okay, am I doing trust planning to just protect my assets today for privacy and other reasons and because I don't want to go through probate, in which case you're going to use something like a revocable trust where everything's still in your name, you're still the grantor, you could still access all of your assets and so forth, or am I doing planning to literally get money out of my estate for the purposes of saving estate taxes later? And so when you're in that situation, it's because you've now made quite a lot of money and you're trying to get money out of your estate to take advantage of the exclusions and so forth. And so there's a lot of planning to be done for sure if you're in that situation to make sure that you're not just, you know, handing over 40% to the government. And so it can get very complicated with what trust rules and so forth that you want to do. My suggestion to people though is that if you are leaving significant assets to children, that you trust them. You trust them with their trust basically. And the reason why is that I've seen kids who receive trust funds who have all sorts of rules on it and it's basically, it's like a modified level of social security where parent is now the government and they're doling out money with the hopes of making this money last over a long period of time.

And generally psychologically it really does affect children and so the best thing to do is that if you know you're going to be very wealthy or you hope to be very wealthy is that you're educating your children along the way so that by the time they're actually getting this money that they're in a position that's that they can actually handle the money. Handle what you're giving them.

I think it's a prudent way to go. So I guess finishing up, we've got, I guess, two ends of the spectrum. On one side, you've got maybe the, the really hardcore Bitcoiners who are all in Bitcoin, and then the full fiat side who have zero or only 1%. And I guess you're switching it a little bit in the middle, and you're saying, look, this is actually the realistic pathway, the prudent pathway. Any, how would you sort of sum up, you know, your, your key takeaways from the book?

Yeah, I love that. Key takeaways is always like, I feel like because I'm so long-winded, I have trouble having people with just the key takeaway. But the reality is that I don't think that there's any one size fits all. And so there's a lot of it depends in the book or, you know, yes, you can use this as a general rule, but at the end of the day, you have to evaluate your own situation. And so I think it really does come down to that is that you have to be as clear as you can about your goals and about your needs and what you're willing to do and not do in your personal financial situation. Because I've spoken to regulators about, let's say, having a client that's 100% in Bitcoin, and the reality is that we would never tell a client who came in with 100% in real estate that they had to sell everything just because we didn't agree with their position. The reality is that our job as a fiduciary and a financial planner is to work with what the client has if they don't want to make changes, explain to them the risks of what they're doing, and then if they are fine with those risks, help them with the actual financial planning needs that they have. And so my goal with the book is to meet people where they're at, right? If you want to be 100% Bitcoin, there's no rule against that, right?

But maybe look at the emergency fund chapter and see if that's something that actually makes sense given your situation. Or if you're not in Bitcoin at all, like really review the beginning chapters of the book as to why you would want to include this in your financial situation and in your overall asset allocation. And then you can sort of work up and decide, okay, do I want to just allocate this position and let it ride? Or do I want to have rules around how I rebalance and so forth, right? And all this is going to be really individual and dependent. And the goal of the book is to help every individual get where they need to go in their stage and where they're at with the information that they have.

Excellent. All right, well, we'll put the links in the show notes, but for listeners, it's bitcoinpersonalfinancebook.com. You can follow Morgen Rochard on X and also the website for Origin Wealth Advisers is Origin WA. Morgen, thanks for joining me on the show today.

Thank you so much for having me, Stephan. It's good to see you again.