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Rich Habits Podcast
Q&A: $120K Farming Side Hustle, When To Take Profits, & Income Versus Growth Investing
00:46:51
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- [00:01]
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- [00:57]
Austin
Pricematch for details hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes where every Thursday we're coming at you, answering your questions as if we were in your shoes. If you have a question to ask us, DM us on Instagram at Rich Habits Podcast or email us at rich habits podcastmail.com We've got seven questions in this episode and they're a toss up. Half of them are from Instagram DMS and the other half come from email. So I don't want to hear anything from y' all saying you never got back to me on Instagram. We never got back to my email. We're trying our hardest, Robert. We're in here. We're trying to get back to as many people as we possibly can.
- [01:39]
Robert
Yeah, if there was a world for us to keep up on the DMs, these episodes would be four hours long and 87 questions. But we appreciate all of the engagement because you have to look at it this way between the Rich Habits Network with the seven day free trial, the podcast episodes, the newsletter, all of this free game that everyone has access to. So there's no reason you shouldn't be sharing these episodes. Getting engaged because it's all free and it helps each and every one of you hopefully level up in your finances, your business and your mindset.
- [02:12]
Austin
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- [02:37]
Robert
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- [02:58]
Austin
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- [03:18]
Robert
Full disclosure in the podcast Description so
- [03:21]
Austin
our first question comes from Jason G. Via email. Again, Rich Habits podcastmail.com Jason says Hey. Hey guys. Love what you're doing. Longtime listener, first time writing in for the Q and A episode. My name's Jason G. I'm 38 years old and my question's pretty short and straightforward. When should someone take 25% off the top when they're trying to take profits from a winning stock investment? Thank you all so much. Can't wait to hear your answers. Robert, you've got a really cool sort of strategy that you incorporate in your own investing. So maybe one set the table as to the difference between taking profits on something like an etf, like a VOO or a QQQ versus an opportunistic single stock. So like the two differences there and then when it comes to taking profits on those opportunistic stocks, how you sort of implement your strategy?
- [04:16]
Robert
That is a great question first from Jason, but a better follow up from you. So let me do my best to cover all of it. First and foremost, let's talk about these high beta, high conviction stocks, these high flyers. My general rule that I've used for 30 years now, 30, 35 years now is once I get up 50% on a position with these high beta stocks, I take 25% off the table. Then when the position gets up 50% more, I take 25% off again. And I continue that until I'm fully out of the position or close to it with my own money. I call it playing with the house's money because so many people find these good investments or they invest in some of these cool companies that are really high beta and blowing up. But they never take profits. And then eventually the volatility of those stocks gets you and you didn't get some of the profits off the table and moved into more of these stable environments and the things like the ETFs like Voo and QQQ. Now when it comes to those ETFs, for me it's a little different. I don't generally take profits from vo, qqq, MOAT or even aiq. I just let that reinvest, reinvest, reinvest because those are my long term holds that I'm not worried about the volatility because the US stock market is not going to zero. I don't have to worry about it for the long term. So that's how I do it. I want to get as much money out of the high beta kind of volatile stocks that may go up and down 30, 40% over the course of a year and get them into those safer investments once I've made those outsized returns.
- [05:57]
Austin
I think it's a great explanation. But I also think that this is not just exclusive to high beta stocks. Right. I'd argue that it's just any opportunistic investment you make in general. Think about precious metals or maybe a cryptocurrency, or maybe you have a thesis on an ETF. For example, XLE is a energy ETF. I'm up about 20, 20ish percent or so like, like that on at the moment. And you know, that's not a high beta, high anything. It's just an opportunistic investment. So let's continue to set the table here to make sure people understand. We talk about the core satellite portfolio strategy all of the time. And it is in our opinion the best way to build a durable portfolio. We think 65 to 85% of someone's portfolio should be invested into those tried and true blue chip index funds and ETFs. Talk about S&P 500, NASDAQ, Dow Jones, things like that. The other 15 to 35% could be diversified into blue chip single stocks, precious metals, real estate, cryptocurrency, opportunistic things that make sense to you, venture, things like that. Right. So one, when you're taking profits and Robert's talking about like these high beta opportunistic, you know, names that he's investing into. It comes from that satellite section, the 15 to 35%. It's not coming from, you know, he's already got the vast majority of his portfolio and I the exact same strategy. Right. So we have the vast majorities of our portfolios invested into the index funds and ETFs. That will go up over a long period of time. But what we're doing is we're opportunistically looking at a, a stock like an Nvidia or a Paler. You know, that was one of Robert's favorites back in 2023 or 2024. You know, hey, my name is Robert and I like palantir at 20 bucks a share. So I'm going to go put some money into this, right? It's like that's how you should think about it. It's like it's, it's not a, oh, I'm, I'm going to stop investing into VO and I'm going to instead put all my money into these single stocks. You know, that's a crazy strategy. Please don't do that. You want to have the vast majority of your money in index funds in ETFs. Now kind of thinking further about other ways to consider taking profits. Robert has a great Strategy about the 25% when you're up 50%. But being up 50% on a stock that might not be a high beta name could be hard to achieve. So a couple other strategies you can implementing JSON. I've got two for you. The first one to consider is how high is the stock price trading above its 200 day moving average. You can use a platform like I think Seeking Alpha or Trading View. Even Robin Hood I think has some, some moving average stuff there. But if the stock is 30, 40, 50% above its 200 day moving average, that means that the stock might have gone on a nice little run here and maybe it's time to take some, some profits and move some into, you know, oh, I'm going to take some profits and now I'm going to move it back or toward those index funds that Robert and Austin always talk about. Because that's the name of the game, right? If we are not going to be investing into these index funds by opportunistically investing into something else we see over here, if it's a Palantir and Robert's, you know, long standing example. Well, once I take those profits, I'm going to go redirect them back into those index funds. So the 200 day moving average, 30, 40, 50% above, that could be interesting. Another website that I like to use is called fast graphs.com not affiliated, don't have a partnership with them. That pretty cool though. But fast graphs.com does a really good job of Showing you, historically speaking, is a stock currently overvalued or undervalued compared to its price to earnings, free cash flow, multiple operating cash flow, adjusted EBITDA price to sales. All these like different ways to value a business. So if you are looking at it and it's like wait a second, this stock is literally way overvalued you historically speaking than it was in the past, maybe that's a great opportunity to take some profits. Or hey, I got into this stock because I thought it was dramatically undervalued, historically speaking and now it's more fairly valued, maybe that's a good time to take some profits. So when it comes to a lot of this stuff, a lot more hands on and a lot more time spent in front of the computer of course than just buying and dollar cost averaging into a VO or a qqq. But sometimes people like that.
- [10:13]
Robert
Wow. I think we just end the episode there. That was incredible. And I really like the two day moving average tip. And you're right, it is a little more difficult if you're just looking at traditional investments. I think you mentioned xle, but you just always have to have a plan not only on the way in with the dollar cost average strategy, but on the way out. So do your research. Hopefully this helps because that was three great options of how we take profits in our portfolios.
- [10:39]
Austin
So our next question comes from Eric B. Eric says, hey guys, really appreciate how thoughtfully you break down financial decisions in a way that feels practical, nuanced, actually usable in real life. Thanks Eric. Eric says, I'd love to get your take on my situation. I'm 33, currently have $360,000 in tax advantage retirement accounts, 280,000 in my bridge account and 180,000 in a high yield savings. The high yield savings is earmarked for my emergency fund, a future primary residence down payment, as well as a seed fund for an eventual investment property. So I don't view that portion of my net worth as a long term retirement portfolio that's already earmarked. So here's my question. Should I be thinking more intentionally about boosting my taxable bridge account so I have more funds accessible to me before retirement at 59 and a half, maybe around 49, 50, 51 years old. While I also let my tax advantage retirement accounts continue compounding untouched into my mid-60s? I'd love to hear how you all think about balancing those two buckets accessible early retirement capital versus maximizing tax advantage growth and what trade offs, blind spots or second order effect. I may not be fully considering. Robert, you want to kick this one off?
- [11:55]
Robert
Yeah. This is a great situation and a really, really cool breakdown from Eric B. So here's where you're at. I think you're spot on. You could leave the tax advantage retirement accounts right now. You mentioned not adding any more to them, and you will be crushing it in retirement. But. And you'll have millions of dollars just with starting with that 360,000. But I would do exactly what you're thinking, and that is build up that bridge account, that taxable brokerage account, MO because that allows you to build that, have the autonomy and retire early if you want to. And I love that you already have all this money earmarked for your down payment for the future primary residence, the investment property, all of the above. You've really got a solid plan. And the only thing I would do is exactly what you've alluded to, and that is build up that bridge account. So then that way, if you choose to want to retire early, you can, and you can have that money available and that growing into the millions of dollars as well.
- [12:54]
Austin
Yeah, I totally agree. So I'm going to walk through, Eric, how I think about balancing those two buckets on one side of the equation. You've got $360,000 in your retirement accounts. If you don't touch this money between now and 65. So let's call it 30 years from now, it'll be worth about 4 to 5 million, depending on your assumptions, 8, 8 and a half, 9%, whatever you want to do there for your compound growth. So you've got four and a half to $5 million now already locked and loaded in your retirement account at the age of 65, when you want to begin to retire and enjoy your 60s and beyond. So, yes, the, the first question I want to ask myself is like, do I need to add more money to my retirement accounts? Because I'm in a similar situation. I've got 250, 3, 300, 350, something like that in my own retirement accounts, which means if I don't touch it, and I'm about 30 years old, right. So if I don't touch it, it'll grow into millions of dollars as well. But now I have to ask myself, okay, do I want to add more money there or do I want to take the money I would have added to these retirement accounts and put it into a taxable brokerage account? Question you're asking. And I've chosen to do a little bit of a hybrid because I really Want to make sure that I'm taking advantage of those tax advantage. Right. Part of the retirement especially. I'm a high earner. I've got different tax things I can do to lower my effective tax rate. Maybe you're the same here, but Robert knocked it out of the park. At the end of the day, it's. It's just balancing and understanding how much do I need to retire on at 65 and how much do I want to have at. At 50. So for the next 17 years, 15. 17 years or so here, between 33 and 50, you have to ask yourself, what amount of money will I need to bridge the gap between 50 years old and 60 years old, or even 50 years old and 65 years old, depending on what assumption you want to use there. It's really hard to predict what your future expenses are going to look like, especially with inflation. Something else you really should consider. But Eric, you're a smart guy. I'm sure you can figure out all those inflation assumptions. Two, two and a half, 3%, whatever. If I were in your shoes, I would paus on those tax advantage retirement contributions. I'd let that grow and then I would really start to beef up the taxable brokerage account contributions and I'd ensure that the taxable brokerage account is invested very normally. Right. Don't go yolo this stuff in option contracts or leveraged ETFs or crazy things, because this money very much has a purpose of bridging you between the age of 50 and 60 throughout early retirement, which means you need this invested into some index funds and ETFs that are going to go up by 7, 8, 9, 10, 12% over a long period of time. So here's the other question I think we should kind of delve into, Robert. Eric is 33. He has 280,000 in his taxable brokerage account. If he doesn't add anything to it, it's going to be worth about $1.1 million, adjusted for inflation. At 50, I'd argue 1.1 million is a pretty good nest egg to have an early retirement off of. It might not be everything you need, but it's definitely a good place to start over the next 17 years, adding more money to that, it's of course going to grow. So from your perspective, Robert, and he already kind of started alluding to this with his eventual investment property, there's going to be a world in the next probably three to five years that Eric is going to be set. He's going to have a couple Million dollars locked in for an early retirement at 50. Several million dollars locked in at a retirement at 65. And he's still be earning money and figuring out where to allocate it. Do you think he should allocate it more to that taxable brokerage and have a massive nest egg for an early retirement? Maybe more money to a, to a tax advantage retirement account so he's got a little bit more again, tax advantage or maybe somewhere else. Right. He talked about the investment property. Maybe he wants to get into syndications or venture investing or franchising. Like what, what would you do in his situation?
- [16:43]
Robert
That is a great question. I think what I would do because if he continues to be a high earner and is really smart with his money, like obviously he is, I would say he could start putting some more money into the retirement accounts, but also build up the bridge account more. He could do it simultaneously. But I think what I would probably do is I would carve out over the next 17 years of that example, I'd probably carve out 20% of it because technically he's already going to be set for retirement or early retirement. I carve out 20% of all new net capital for diversification. What does that mean? Real estate, REITs, syndications, maybe looking at other types of venture investing, maybe gold and silver, maybe get a little bit in crypto, but I would branch out and get further diversification because he knows that he's already set in both aspects. But he can also still take 60, 70, 80% of all new net capital and break it down between the retirement and the bridge account. And I would probably do that maybe in like a 60, 40 balance. 60% to the retirement and 40% to the bridge, because the bridge account is a bridge account. He's only going to need that money for that 10 or 15 years. So he doesn't need as much as he does in retirement. But also for everyone else out there listening, this is a great example of setting yourself up early and letting compounding do its magic. So many People get their 401k set up and they're like, I'm good, I got the, this 401k. That doesn't help you because trust me, when you're burned out at 54 years old or 56 years old and you want to retire, but you can't get to your 401k money yet and all your equity is either there in your home, you're stuck. And this is the way out of being stuck and have an ultimate freedom to do what you Want as you get a little bit older.
- [18:38]
Austin
I love that breakdown. Great question. Eric. Our next question comes from John N. John says, hey Robert Nosson. I'm a huge fan of the show and I've been listening for a very long time. Appreciate all you guys have done. John thanks for listening. John. That's so cool to hear. John says, I have a question regarding investments. Sort of a unique position I find myself in. I'm a specialty crop farm manager. I make $60,000 before my year end bonus which usually works out to be between 15 and 30,000. I have $30,000 invested. Here's how that's invested. I've got 6,000 in a brokerage account, about 3,600 in a Roth IRA and about 20,000 in a traditional IRA. I saved up $20,000 of cash last year and I'm under contract to buy 12 acres of land. The asking price was 295 but they accepted my offer of 209,000. My uncle wants to help me purchase the property with zero strings attached by covering my down payment. We've written up documents and he wants to help me establish a small farm here. Currently the land has about 4 usable acres that I could plant on. I'm considering using up all of my cash savings and dipping into about 50% of my investment holdings in order to prep up and plant the specialty crops that I'm very familiar with. The first two years won't yield much, but with the average market price I can net between 20 and 30 thousand dollars per acre per year. From year three onward. The plants can remain in place for 15 years or more. I can save money on development costs by digging shallow wells myself, doing all the prep, labor myself, etc but from raw farmland to planted crops will cost me 18,000 per acre. I discussed with my uncle putting some cows out there but the ROI wouldn't be nearly as good on this small acreage. So we're gonna go with specialty crops. What would you do? Would you stay in the market? Would you use cash to develop what I can each year take the plunge and let the plants start growing. How do I start this endeavor? What a cool situation. Robert John N over here just being master farmer. He's got 99 farming on Runescape. That was a joke for nerds like me. So let's talk about this. He's got 12 acres to buy 209000 is what he's buying it for. Uncle' helping him purchase it with this no strings attached down payment. Which is awesome. Really want to make sure there's no strings attached there. He said, you got some documents written up, make sure those are ironclad. But here's my perspective on the situation, Robert. John has done a really good job of saving money, right? Saving about $20,000 per year in cash and he's only earning about 60,000 or so before his bonus. So in my opinion, I would be really hard pressed to encourage John to tap into slash cash out of any of his retirement, considering one, how small it is. But two, how we always say do not borrow from your future right to fund today. And I think cashing out on a Roth IRA or traditional ira, incurring a penalty, things of that nature is only going to set you up for failure. Now if you wanted to cash out on the taxable brokerage account, be my guest. Just consider doing it in the most tax efficient manner if that's long term capital gains or selling, you know, stocks that are maybe in the red right now because the markets are a little turbulent, things of that nature. But I'm cool with the 6000 brokerage account, but I'm not cool with the retirement stuff. So if I were in your shoes, I would cash out the 6,000 and I would also use some of, not all of walnut, of course, keep that emergency fund some sort of buffer between you and life so some of your cash savings and see what that can do for you to start building this raw farmland into usable land. It's not going to finish it, of course. You need 18,000 per acre. Here's the other thing I would do. I'd be patient. I'd be very patient. I would not go into, you know, some sort of unsecured debt, high interest debt at 12, 15, 18% interest, depending on what kind of personal loan you're trying to do here. I would not cash out of these retirement accounts and use that to get the land. You're saving 20,000 a year right now. You said you're pretty good at this. I'd wait around probably a year and a half to three years and ever and just, just move at the speed of cash. I would just move at the speed of cash. That doesn't mean you're going to get all four acres done immediately. It means one acre is going to get done, the next year, another acre is going to get done. What's going to be cool though is by the time your fourth acre is finished, because you're moving at the speed of cash, the first acre is going to start spitting off, you know, 20 to 30,000. So, you know, a couple years are going to go by here. But that's, that's my perspective. I wouldn't go into high interest debt on this. I wouldn't cash out retirement. But what would you do? Robert?
- [23:12]
Robert
Yeah, this is a wonderful question, but a scary question. And you did really, really well at covering it from a tactical perspective. But John, I've been doing this a very long time, decades and decades. And I have seen so many people that have the drive and the entrepreneurial want to be able to go into their expertise and go out on their own too soon, and they end up going backwards. So my biggest fear here is you said that these acres are going to take a couple years to mature to where they're really profitable. So that means you've got a couple years of carry cost. You've got to water these, you've got to till, you've got to keep the grass. Whatever you have to do for maintenance is going to be an additional cost that I don't think you're set up for financially to be able to do without completely depleting all of your cash. So you have to ask yourself this one question. If you're not going to follow Austin's blueprint, if I do all four acres immediately, if I buy everything to do this and set it up and I run out of cash, will my uncle provide me more cash? Because in the beginning, what I would do is say, hey, Uncle Bill, or whatever his name is, you're helping me with the down payment. Can you also give me a low interest loan of $25,000 to get me to year three, something like that? So I would look at that. Or if you're not sure what other options you have, I would go out and look and see what low interest loans are out there. I did a little bit of research and there is a down payment program where you can get these really low interest loans for new and beginning farmers with smaller farms. There's a farm ownership program that has some loans that it looks like they're around 5% interest rate. So I would check all options rather than just depleting all your cash, because here's what happens. So many people, whether it's farmland buying their first restaurant, buying the food truck truck or buying a duplex, they deplete all of their cash. Then they run up all of their credit cards and it takes longer and, and costs more. Then they end up going back to zero and a lot of times failing. Now, I love that you want to do this and I really hope you figure out how to do it because it's awesome and everyone should own land, but I just don't want you to go broke in the process. So I hope this helps.
- [25:27]
Austin
Yeah, I think the biggest takeaway from both of us here, Robert, is our friend John should be moving into the next chapter of his life from place of strength. Right? He's got the money saved, he's got the line of credit if he needs it. He's got, you know, the support of his uncle. He's, you know, he's moving at the speed of cash or whatever makes sense for him in his situation. He's not doing it from a place of scarcity, of I gotta run up my credit cards, I gotta borrow against this. I gotta ask this person for money. I like. Don't do that. Right. That's, that's just a recipe for disaster. John, we're rooting for you, man. Is a really cool situation. I'd love to know what you're planting that's netting 30,000 per acre because I feel like a lot of people are curious. But really cool stuff, man. And that's, that's awesome. So our next question comes from Steph G. Steph says, longtime listener, first time writing in. I just started a new job and my company offers a 401k and a Roth 401k. Trying to decide which option to go with. My husband and I are both high earners. We're both making above 100,000. Specifically, I make 185 and he makes 132. We max out our Roth IRAs every year and know that soon we'll likely have to do a backdoor Roth IRA because our combined income will be over the income limits for the Roth ira. So I've got two questions. My first question is should I do the Roth 401K or the traditional 401K? Quick answer to that. I would do the Roth 401K. So you have after tax dollars growing for you indefinitely into retirement. Who knows what the tax rates are going to be like when we're all in retirement. So having some nice tax free money waiting on us is a great idea. So answer the first question. Roth 401. Here's my second question. If I do the Roth 401, will that have any impact on doing a backdoor Roth IRA in the future? No, it will not. So 401K is completely separate from IRA. IRA stands for individual retirement account. 401K is an employer sponsored retirement account. Now the only thing that will have an impact on your ability to do a backdoor Roth IRA in the future is having pre tax dollars sitting somewhere. So think SEP ira, think traditional ira, think something of that nature. If you have all of your money and a Roth IRA and all of your money in a Roth 401K, you can do a backdoor Roth IRA all the time, all day. Super simple. I do mine on carrie.com super simple platform to do it on. Literally you just like they do it all for you. It's awesome. You just contribute and then you click a couple buttons, boom, boom, bam, they do it. It's great. It's, it's very, very simple. Big fan of them. But regardless, you're going to be just fine to do the backdoor Roth ira, assuming you do not trigger that pro rata rule which gets triggered when you have pre tax dollars sitting in an IRA somewhere, specifically a traditional IRA. Me personally, I had a SEP IRA from like 2021 that I had created with Vanguard. I rolled it over into a pre tax solo 401k and then I began doing those backdoor Roth IRA contributions because I no longer had that SEP IRA, those pre tax dollars. Right. I moved it into a 401k. So you can have a traditional 401k, you can have 401k, it doesn't matter. From the 401k perspectively, employer sponsored retirement account perspective, the only pro rata rule impact for pre tax dollars comes from the IRA perspective. Right. So no traditional IRA. If you want to do a backdoor Roth IRA, a lot of IRAs and 401ks and a lot of things in that explanation. But I hope that helped.
- [28:54]
Robert
Yeah. And I think the only thing I'll add to this is just understand that, that there's different tax implications and we just always are of the ilk that we don't like to kick the tax man down the road because we never know what's going to happen 10, 20, 30 years from now. So just make sure you do the research, understand the difference. But Austin, what a great breakdown. And I hope this helps a lot of people out there who are confused over the best way to implement these roth and traditional 401k variant variants.
- [29:25]
Austin
Now before we jump to that next question, reminding y' all, generated assets, really cool new product from public. It is ETFs with infinite possibilities. You literally type in I want to invest into. I don't know, Robert, give me something cool. Give me a cool example of things that people can invest in right now. What's an idea that's been on your mind for a while?
- [29:44]
Robert
I want to invest in Companies where the CEOs or founders are known to work out a lot or be some sort of athlete.
- [29:55]
Austin
There we go. You can type that in to generate assets. And generated Assets will screen thousands of stocks, find the founders and CEOs that run those marathons that tend to work out and are very active. And then it will find what those specific names are, put it in a portfolio for you, and allow you to invest into that portfolio. It is. It's the coolest tech I've ever seen. It's really, really, really, really, really awesome. So if you've not yet checked out generated assets, go to public.com richhabits go sign up for generated assets Assets. Come up with your own ideas and any ideas that you do come up with that are really winning strategies. When you back test them against the S and P, be sure to share them with us. We want to know what y' all are working on and cooking on over there. But again, that's public.com rich habits and you get an uncapped 1% bonus when you transfer your portfolio using that referral link.
- [30:46]
Robert
You guys all know we love public.com and it's mostly because they're creating the coolest tools out there to make it easier and level the playing field for each and every one of you that follows the podcast.
- [30:59]
Austin
Yeah, their recent tool of AI agents that just became the world's first agentic broker. We had an awesome conversation with Yannick Malling, the co CEO I think was published last Saturday morning. So go check out that interview if you've not yet checked it out. Their agentic brokerage is should be live now. We're filming this on Monday, but this comes out on Thursday, April 2, so it's definitely live. Go check out all the fun stuff that public's doing. So our next question comes from Nick on Instagram. Nick says, what's up, Austin and Robert? I've been listening for a few months and I want to know your thoughts on where I should put my money for buying a house either next year or the year after. I'm thinking about buying a duplex, living on one side and renting out the other. I'm 21 years old. I don't have any debt. I make about 80,000 a year. My expenses are only 1400amonth and I've got 25,000 in a high yield savings, 8,000 in a Roth IRA, 9,000 in my taxable brokerage account, and 7,000 in crypto. I have so much in my high yield savings because I want to use it for the down payment. However, I don't know if it's smart to put it in the market until I'm ready to buy. I want to have at least $100,000 saved and invested before buying a property. You guys talk about building my base. So thank you all for your wisdom. I just need to know what my next steps are. Robert, what advice do you have for Nick here? He's got 25,000 in a high yield savings account. He's 21 years old, he wants to do some house hacking. Right. But he also knows he needs to build that base.
- [32:24]
Robert
Yeah, I mean, I just love these questions. Nick, thank you so much. 21 years old, already has a high yield savings, making great money, has money put aside in a Roth ira, traditional brokerage and crypto. I mean, this is like the blueprint of what all 21 year olds should do. Now here's the stickler. I didn't listen to this advice because I didn't know yet. But when I was 23, I bought my first, first fourplex and I was all in. I still had money set aside and I had a little bit, but I definitely didn't have that 100k base and it worked out fine for me. But it usually doesn't work out for people if they don't have the backup cash working for them in case they needed it for an emergency. Because you never know what's going to happen with a property. But I love that you're thinking about house hacking to keep your expenses low. However, I would wait another 1, 2, 3 years, years, get to that hundred thousand dollars saved and invested. So that way you are rock solid, you're 24 years old. Buy that first property house hack and just keep rocking and rolling and do what you're doing right now because of the fact that I just don't want to see you get in there, get in a pinch, have to run up the credit cards for a renovation, or let's say a pipe breaks in the middle of the renovation or you find that the roof gables are weak and you have to replace a roof that you didn't, you didn't account for that was $10,000. All of these things happen and are real and get lost in inspections and walkthroughs and properties all the time. So I would wait a little bit longer. But don't get discouraged because I love the plan you have and you are crushing it.
- [34:02]
Austin
Yeah. So if I were in your shoes, tactically speaking, here, what I would do is I'd put $12,000 in a high Yield Savings Account and treat that as my emergency fund. If you want to just do 10,000, you can probably get away with it that. But what I did was $2,000 a month because let's be real, you're not just only spending 1400. You're going to have some months and, you know, things like that. So 2,000 times six, six months, that's $12,000. And then above that, 12,000. So let's call it that. 13,000 between 25 and 12, right? That's 13,000 there. I would take the 13,000. I would use it to max out my Roth IRA for 2025 and 2026. If I've not yet done that, that in itself is 14,500. So you're going to use all of it. Or if you've done some of that, or for whatever reason, you can't do 2025 because maybe you're not listening to this episode in time. What you can just do is max out the Roth IRA for this year, 7,500 bucks, and then use the remainder to invest into your traditional brokerage account and then do what Robert said, continue this process. Rock and roll. And now you've got fast forward maybe two, three, four, five years into the future. You're making great money, so it's not going to take you that long. You now have, have $100,000 saved and invested between your Roth IRA, your crypto, your taxable brokerage account, and maybe even your high yield savings. And then it's time to say, okay, how much do I want to set aside for a down payment on this duplex, triplex or quadplex? I know Robert talks about the 5% down Fannie Mae mortgage, or maybe Robert, you can talk about that a little bit. But generally what that comes out TO is a 5% down payment here on a, on a duplex, maybe a. You want to buy a duplex in Knoxville, Tennessee for $400,000. That means all you have to do is come up with $20,000 down, borrow the other 380 from, you know, the loan that Robert's going to describe here, and live in one side, rent out the other. And just to make sure we're on the same page, I think that's a trick people fall for. House hacking doesn't always mean you're living for free. It just means you're living in a way that is much cheaper than if you went and bought a single family house home. It's okay, Nick, if you do this, and of that $380,000, you borrow your monthly payments, let's call it $3,000 or so and you're, you know, sharing this duplex with someone and their, and their monthly rent is 2,000 and you're picking up the other thousand. That's better than paying 1,800 bucks a month living, you know, an apartment by yourself or you know, whatever. Right. And you're building equity. Right. So I guess I'm trying to get at here is don't beat yourself up if it's not a perfect likes. Oh, but I can't live for free. The stuff doesn't work. I can't do it. I think it's a great strategy. A lot of people have seen success with it. But Robert, maybe spend some time talking about that 5% down loan option.
- [36:46]
Robert
Yeah, I love this. Anyone listening that's looking to buy your first multi unit up to four units. The Fannie Mae 5% down mortgage is incredible. It's exactly that. You only have to, you're required for 5% down. You have to have some credit ratings that are above 620 credit score which is pretty good for most of you guys. I'm sure you'll be able to meet that, that and you can buy up to $1.4 million with this loan. I love this loan for people that are looking to get in their first property, especially if you're house hacking because it gets you in the door with only 5% down with some closing costs. Maybe you're going to have a few other fees commissions. But what it does is it prevents people that are first time home buyers or first time investment property buyers from draining all of the money they've seen saved. This is a vicious cycle. So many people save for years and years and years, buy their first property, then they're back to zero again. And these types of mortgages really help you keep your money invested. Use 5% of it like Austin talked about with a 400 $500,000 duplex, you're up and running and off to the races. You're saving yourself a ton of money each month because you're going to have that other tenant paying a big portion of the mortgage mortgage. And that way you can keep your money rocking and rolling into the future, making you money while you sleep.
- [38:04]
Austin
So our next question comes from Henry on Instagram. Henry says, I listen to your podcast and have a couple questions. 22. I'm a senior in college where I'm getting my bachelor's in data engineering. I'm engaged and currently have an eight year contract with the US Army I have 63,000 invested into ETFs and 1,000 in REITs. I've been doing Uber Eats as a side hustle, bringing in around a hundred dollars a week and I invest that money. My questions are, number one, I'm thinking about investing in gold and silver, but I don't know if it's smart to do that or instead just start my Roth ira. And two, thinking about buying a property at my first duty station, but I'm not sure if that's a good idea financially. I'll be making only 65,000 per year in an additional $1,300 a month for housing. Is this a good idea? And if so, what kind of property should I invest in? Henry, first off, I have no idea how you have your 63,000 in ETFs invested if you don't have a Roth IRA. Maybe it's just in a taxable brokerage account you opened up, but. But if that's the case, I would 100% figure out how to transfer the 63,000 into a Roth IRA. Right? You don't want to just be rocking in this taxable, you want to do tax advantage retirement accounts, AKA the Roth IRA there. So I would figure out how to move 14,500 2025 and 2026 contributions from the 63 into the Roth IRA. Robert, what's your take on this? I'm kind of confused.
- [39:22]
Robert
Yeah, it's a little confusing where the 63k came from from in these ETFs, but you're spot on. Get the Roth IRA. Let me make this clear to everyone watching this podcast or listening. If you're over 18 or you're parents of someone that's about to be 18 years old, get the Roth IRA set up day one. Everyone above 18 years old should have a Roth IRA and contribute as much as they can to it every single year. So in this case, Henry, we don't know where the 63k is held. Held. But you need to go get the Roth IRA set up right away. And I would not start thinking about buying a property just yet. If you want to earmark some money for a property and put away a few hundred dollars a month that's in a high yield savings account to buy a property in a couple years, great. But we still want to see you get to that 100k base saved and invested, especially because you have a good housing situation right now, keeping your costs low low. But I think it's a little premature to be thinking about investing in a property now prior to Getting everything else dialed in. You mentioned you're just starting to diversify. Keep doing that. If you have the traditional brokerage, get the Roth maxed out, get the emergency fund set aside. All of those things come first before you risk it all on one property.
- [40:42]
Austin
I also think when it comes to property, I understand you have an eight year contract with the US army, but I'm not positive if that means you're going to be in the same location for eight years. And, and it's kind of a rule of thumb. You don't really want to buy property unless you're going to be there for at least five years. Seven years is more preferable. If I were in your shoes, Henry, I probably wouldn't go out and just buy property at your first duty station. I would rent, I would enjoy that $1,300 a month housing allowance and I would save and invest. Max out that Roth IRA every year. Like Robert was alluding to. Have yourself a high yield savings account and then use your bridge account as a way to invest more money. If you, you know, already are doing that, maybe some other cool investments you can do with the army toward those retirement accounts, those pensions, things of that nature. But I'm not sure that I would go out and buy property. And by the way, thank you for your service. That's awesome, Henry. And a final question comes from Bryson. Bryson T. Bryson says you both are the bee's knees. Love listening. Thanks so much. Bryson Bryson says I'm 34 years old, married, without kids and I contribute enough to qualify for my 401k employer, match match, max out my Roth IRA and my wife's IRA. Mostly in the index funds and ETFs you talk about. I make about $200,000 a year and my trophy wife takes care of the horses. I know it's a horrible investment, but we love having a hobby to share together. That's cool. Horses are fun. Just don't be allergic to them. I've got friends that are allergic to horses and it's. It's very bad. I like horses though. They're pretty cool. They are expensive, I will give you that. Bryson says I have 20000 in a high yield savings at 4 and a half percent. I hear you guys talk a lot About NEOS funds ETFs. Like Spyi and QQ recently, their new ETF MLPI. But if my long term goal is to grow my portfolio as aggressively as possible. From what I understand, NEOs funds ETFs aren't going to help me do that would it make sense to wait until I'm 60 or so and then sell shares in a bull market and use the proceeds to buy shares of SPYI and QQQI to then start generating passive income in my portfolio? Or is there a benefit to having them as a major percentage in my portfolio now? Bryson, what a great question. Major aggressive growth like you were used these words that are opposite of NIO's funds. I've got about 120ish thousand dollars right now invested into NIO's funds. It makes up 7 to 10% of my total investments right now. And when I think about it like that, right, I've got, you know, high single digits, low double digits in these NIO's funds. The reason why I do it is because one, they are the best covered call ETFs that you can purchase. They're very tax efficient, very consistent payments, all that fun stuff. But for me it's about the diversification. For me it's about having that monthly income that I can always depend on if I want to reinvest it back into the etf. If I want to use it to go on a vacation to Mexico, like I'm going to go later this year, like I can use that any which way I want. I also have very aggressive growth ETFs and blue chip single stocks in my own portfolio. I've got hundreds of shares of Tesla and Amazon and Google and Apple and Microsoft. Like I've got so much money invested into Aggressive Growth ETFs index funds because I realize I'm 30 years old, I should grow my money aggressively over the next 1, 2, 3, 4 decades. But I think balance is key. I really enjoy having both. To your point though, when you are ready to retire and completely optimize for income in your portfolio, it does make a lot of sense to sell those aggressive growth ETFs that whatever the ones that you're buying and use those proceeds to purchase NEOS funds so that you have that predictable high income that is again caveated with when you're ready to optimize for income. Right now, in your own words, you're optimizing for aggressive growth. And NEOS funds are not aggressive growth. They did just come out with their boosted ETFs which are absolutely much more aggressive. For example, XSPI is the NEOS boosted S&P 500 high income ETF. So a little bit of a sprinkling of leverage I think is what they use to really get you moving with the markets. But it's not as aggressive, I'm sure, as what you might be implementing in your own portfolio. But no, I like the strategy. I think that's how a lot of people are approaching NEOS funds. And. And in my opinion, again, I like to have a sprinkle of it. High single digits make sense for my situation. It could be different for you, different for everyone else listening. But having the information to make an educated decision with your money is what we try and do here on the show. And I hope this helps.
- [45:05]
Robert
I think that's a great breakdown. And at 37 years old in all of these buzzwords, portfolio aggressively, all of this high income, I think you should continue diversifying, buying, have that small percentage in the NEOS funds and then just make sure for everyone out there that understands. And Austin, you did a great job of breaking it down. Don't take your foot off the gas too soon. A lot of people, they get into these target date funds or these, you know, dividend funds or bond funds and all of this and they're just leaving so much growth on the table. Don't do it at such a young age that you're leaving a lot of growth on the table. So I really like that breakdown down. And Bryson, I would keep doing what you're doing, but I would not go heavy into the NEOS funds just yet. I would get further diversified. And if you want to be a little more aggressive, you could look at maybe adding some AIQ to the mix, some xle, get a little bit more diversification, balance with these index funds and ETFs that you're talking about and keep rocking and rolling and doing what you're doing.
- [46:04]
Austin
Everybody, thanks so much for tuning into this week's episode of the Rich Habits podcast, Question and answer edition. Please consider subscribing to the Rich Habits newsletter completely free. Think about 60,000 of you come back and read it every Thursday morning, which means it probably came out right around this episode was released. So if you're not yet subscribed, there's going to be a link in the show notes below. Or you can just Google Rich Habits newsletter. It should just pop right up there. And don't forget, we've got the Rich Habits Retreat. We literally only have a couple tickets left. So if you've not yet checked out the Rich Habits Retreat, there's going to be a link in the show notes for that as well.
- [46:37]
Robert
That's right. Don't forget to mention Austin, though. That it is in Austin, Texas. Texas. So if any of you guys are in the area and want to come see us. This is going to be an incredible, incredible weekend. We have great speakers. Cool, cool event space at Capital Factory. Lots of stuff happening. But there are only a few tickets left. And don't forget for all of you that are in the mix here in our ecosystem, you have to go back and check out wall street favorites.com we have a 2.0 version that is just incredible. Austin keeps building out more and more tools for all of you guys to enjoy enjoy. And it really does take a lot of the stress and legwork out of figuring out your own portfolio or stocks that you're considering. So make sure you go check out
- [47:19]
Austin
wall street favorites.com thanks everyone and we'll see you tomorrow for our Friday episode, the Rich Habits Radar.
- [47:51]
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