Q&A: $325K in META, Budgeting For A Vacation Home, & Direct Indexing

Summary

Rich Habits Podcast – Q&A: $325K in META, Budgeting For A Vacation Home, & Direct Indexing

Hosts: Austin Hankwitz & Robert Croak
Date: April 30, 2026
Episode Focus: Listener Q&A on managing concentrated stock positions, real estate planning, aggressive debt repayment, risk-taking for entrepreneurs, and the nuances of direct indexing vs. ETFs.

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Episode Overview

In this Q&A jam-packed episode, Austin and Robert take six highly-detailed listener questions about real investing decisions and tricky situations: from planning for a future vacation home using real estate and market returns, to managing a large, concentrated META stock windfall in a newly blended portfolio, to whether aggressive student loan paydown should come before investing. They also dissect what “scared money doesn’t make money” really means for late-in-life entrepreneurs, and break down the true pros and cons of direct indexing compared to traditional ETFs. Both hosts share actionable frameworks, real stories, and plenty of tactical advice—with a down-to-earth, conversational, and sometimes cautionary tone.

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Key Discussion Points & Timestamps

1. Buying a Vacation Home with Real Estate Equity & 1031 Exchanges

[04:43 – 10:08]
Listener Scenario:

• Age 45 couple with $1.9M retirement portfolio, $400K company stock, a $450K rental with $100K mortgage at 4.5% (mortgage: $1,600/mo, rents for $2,400/mo), $1.3M home equity, planning to buy a vacation home in 10-15 years.
• Should they do a 1031 exchange from the current rental into a bigger property, or keep the rental and invest its profits toward the future home?

Robert’s Take:

• 1031s are great to defer capital gains, but:

  “I don’t think it’s the right fit for you right now... you’re not going to be able to buy the dream home [with the exchange], then you’re going to be doing it again later. I think you’d be wasting an extra step and leaving a lot of money on the table.” [06:10]

• Instead, sell when ready for cash, invest the proceeds in a taxable brokerage for growth/autonomy, then use that money later.

Austin’s Math:

• Sells: $350K net, after estimated taxes ~$300K to invest.
• $300K compounding for 15 years at 8.5%–10% = $1–1.2M nest egg for the future vacation home:

  “That’s real cash money... much more flexibility, more wealth built.” [07:23]

Key Insights:

• Current rental cash flow is under 1% on equity; money could work harder in the market.
• Don’t do extra work with 1031s now if your timeline is long and your target property is undefined.

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2. Managing $325K in META: Marriage Blending & Concentrated Risk

[10:08 – 15:20]
Listener Scenario:

• Couple (29 & 28) with $1.4M invested; one partner owns 500 META shares bought in 2012 ($10K → $325K, ~25% of portfolio).
• Concerned about concentration risk and sensitive about jointly managing the money.

Austin’s Playbook:

• Marriage advice:

  “Just to make sure, the number one reason for divorce is money fights... both have a say in what the money does.” [11:14]

  • Don’t just “manage”—collaboratively decide.
• Covered calls on META to capture extra yield before selling.
• Staged sales: Sell in tranches if worried about taxes or risk.
• Tax tip:

  "Keep household income (plus gains) below $613,000 for 15% capital gains. Beyond that, you pay 20%—so, definitely talk to a CPA." [13:40]

Robert’s Suggestion:

• Dollar-cost out (10–20% per year) to smooth tax hits and re-weight gradually.

  “Get the amount... in line with your core portfolio strategy but also not take the tax hit all in one year.” [14:43]

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3. Student Loans vs. Investing, Aggressive Debt Paydown

[15:20 – 21:47]
Listener (Jenna, 24):

• Two-person household, one with $140K of loans (interest 3.5%–7.5%); both saving/investing without 401k match.
• Should they pause Roth 401k/taxable investing to aggressively pay down the 7.5% loan ($45K balance)?

Austin’s Approach:

• Don’t pay aggressive student loan balances (even for the partner) until legally married:

  “Do not do anything... until you are married. Had a friend pay it off—she divorced him and took the degree.” [21:47]

• Build investments to the level of the debt before aggressive paydown:

  “Student loans can only go to zero. Money in the market can compound into infinity.” [20:55]

• For the 7.5% loan: build up an equivalent investment, then focus on payoff.
• Lower-rate loans (3.5–6.5%): Pay off more slowly, after investment base established.

Robert’s Cautionary Tale:

• “A friend of mine paid off his fiancée's school... then she left him and took the car, the degree, and everything. Be careful—marry first, then combine finances.” [21:47]

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4. Scared Money Doesn’t Make Money – Entrepreneurial Risk vs. Prudence

[22:15 – 32:16]
Listener (Skip, 63):

• Saved $400K since age 55, torn between “scared money don’t make money” risk and prudent, frugal slow growth.

Robert’s Wisdom:

• “Scared money doesn’t make money,” usually comes from gamblers/Yolofinance types—taking wild risks, often on credit or debt.
  “Don’t stop investing for the future, but maybe open up a little, try some new things. Be tactical—at 63, it’s not like being 33. Risk and age matter.” [23:18]

Austin’s Take:

• The danger is not calculated risk but leverage:

  “Charlie Munger: ‘Smart men go broke from ladies, liquor, and leverage.’ It’s the leverage part that’s scary.” [24:25]

• Cash investment risk = only losing what you put in.
  Leverage = going underwater, owing even after failure:

  “No one wants to start business ownership in the hole. At least if you used cash... oh no, my hot dog stand didn’t work, I lost $30K and tried. Versus, I owe the bank $80K and have nothing.” [24:25]

• Emphasizes core/satellite approach for investments; warns against “funding” as debt pushed by internet “gurus.”

Robert’s Business Story:

• Bought used equipment/no debt; competitor with new trucks owed $26K/mo and went bankrupt in a downturn.

  “Fancy gear; heavy debt, gone in one bad season. I survived, he didn’t.” [30:49]

Key Advice:

• Take measured, calculated risks. “Hybrid” approach—try new ideas, but don’t risk what you can’t lose, especially not with leverage or late in life.

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5. Direct Indexing vs. ETFs: When/Why to Choose Each

[34:14 – 44:19]
Listener (Arturo):

• $100K taxable base, DCAing into VOO, QQQ, VDE, VYMI; considering switching more to direct indexing on Public.com for tax advantages.

Austin’s Breakdown:

• Direct indexing = buying all 500 stocks of an index (e.g., S&P500), not just ETF wrapper.

  “You can do tax loss harvesting on every name, not just the ETF—offsetting gains from losers directly, possibly ‘free money’ if you reinvest appropriately.” [35:07]

• Minimums: Usually requires tens of thousands, not suitable unless you have enough capital to buy fractional shares of every component.
• Not for retirement accounts:

  “I don’t think direct indexing makes sense in your retirement accounts... only a taxable brokerage.” [41:39]

• Mix is fine:

  “I have both—I like having my ETFs and my direct indexing. No perfect answer—do what suits your risk, tax, and investment style.” [40:11]

Robert’s Reminder:

• “If you were to sell VOO and QQQ to migrate, that’s a tax event... Don’t lock in capital gains you don’t need to.” [41:39]
• Advantageous for new/taxable dollars; keep existing ETFs unless there’s a reason to change.

Final Philosophy:

• Obsessing over minor optimization isn’t worth it for most—just stick to broad strategies, don’t chase perfection at the expense of steady wealth-building:

  “Get it 80% right, you build tremendous wealth over your lifetime.” [44:19]

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Notable Quotes

• Austin: “Both have a say…that is how you have a foundation of a successful marriage from a financial perspective.” [11:14]
• Robert: “Scared money doesn’t make money is generally the phrase from your gambler friends… you’re on the other side of the spectrum.” [23:18]
• Austin: “Charlie Munger… Smart men go broke from ladies, liquor, and leverage… The leverage part is what’s really scary.” [24:25]
• Austin: “Student loans can only go to zero. Money in the market can compound into infinity.” [20:55]
• Robert: “Don’t lock in capital gains you don’t need to. Direct indexing is great in taxable accounts, not in retirement.” [41:39]

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Segment Timestamps

• [04:43] Budgeting for a vacation home—real estate, 1031 or invest?
• [10:08] Managing $325K in concentrated META stock in marriage
• [15:20] Student loan debt vs. investing: order of operations
• [22:15] “Scared money doesn’t make money”—risk in entrepreneurship
• [34:14] Direct indexing vs. ETFs—who, when, why?

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Tone & Style

The conversation is practical, relatable, and sometimes anecdotal—making financial advice feel accessible. Austin balances analytical math and stepwise frameworks; Robert offers seasoned, real-world caution. Both are transparent about personal mistakes and wins, emphasizing joint decision-making and caution against risk (especially leverage). They close with a reminder: focus on the 80% that matters, and long-term, habitual investing is the foundation of wealth.

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Key Takeaways

• Be strategic, not reactive, with property and equity—think long-term, consider opportunity cost.
• When blending finances in marriage, communicate openly, divest concentrated positions prudently, and be aware of tax brackets.
• Aggressively pay off ultra-high-interest debt after building up an equivalent investment base; don’t rush to pay off a partner’s debts before marriage.
• Entrepreneurial “risk” should be calculated, not filled with leverage or YOLO tactics; a measured hybrid approach wins out.
• Direct indexing offers real tax advantages—but for large, taxable non-retirement dollars. No need to replace your ETFs.

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For more listener questions and deep-dive Q&A, stay tuned every Monday, Thursday, and Friday.

Transcript

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[Austin]

Hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition brought to you by public.com these are our Thursday episodes where we answer your questions as if we were in your shoes. If you have a question to ask us, you can email us at rich habits podcastmail.com or you can DM us on Instagram at Rich Habits Podcast now. Robert Curveball before we jump to this episode, I've got a friend, fellow entrepreneur, he's got a really cool business that he's spent the last half decade building, but he's ready to exit, he's ready to sell. And I told him that I would talk about his business on this episode of the show. So if anyone listening, so we got some entrepreneurs out there, we got some business owners out there, people who are interested in acquiring other businesses, things like that that are listening to this episode right now. So I'm going to talk about this business for about 90 seconds and if you think that this is something that you're interested in buying yourself, I think probably between the one and a half to two and a half million dollar range is where someone will end up buying this business for I'll tell you details on how to do that. So the business is a well love brand growing in popularity among men. They're known for their unique reinvention of traditional shampoo. They've got a best in class repurchase rate with a high returning customer count. Six years old now, the business has continued to gain traction as well known comedians, musicians and athletes have begun using the product. They did about 1.8 million of sales last year. They should do about two and a half million this year. Gross margins are between 83 and 94%, as low as 65% if you sell on Amazon and their adjusted EBITDA for 2026 will be about $300,000. If you are interested in purchasing this business, email Christian Wits VC that is C H R I S T I A N Christian W I t z.v c so send an email, say hey, I'm really interested in learning more about this business. I can secure one and a half to $2 million of financing to acquire this business. Maybe you've got the cash laying around, maybe you're going to go raise debt, maybe you've got investors, who knows. But I've got a good friend who started this business like I said a half decade ago. It's been really cool time for him. But he's not interested in it anymore and I'm trying to help him out and hopefully one of you can jump in here and if you're interested in the CPG stuff and you like to be selling things online and you know you've got the influencers and the marketing know how and you want to blow this up into something awesome, definitely reach out via email and we'll try making a connection there.

[Robert]

Yeah, it's definitely a really cool business. Thanks for bearing with us you guys. We just wanted to share this. It's a good friend of Austin, very cool company. I wish I had the bandwidth to buy it either myself or through Vest Funder. But definitely send that email if you're interested and we can walk you through the entire thing. But let's get into the episode.

[Austin]

Excited to jump in Robert. But before that got to give a shout out to public.com the investing platform for those who take it seriously. On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI.

[Robert]

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[Austin]

Generated assets are like ETFs but with infinite possibilities. They're completely customizable based on your thesis, not someone else's. So go to public.comrichhabits and earn an uncapped 1% bonus when you transfer your portfolio. That is public.com rich habits paid for by Public Investing.

[Robert]

Full disclosure in the podcast description all

[Austin]

right, Robert, so our first question is coming from Sean B. Sean says, I love the podcast, especially your Q and a episodes. We're 45 years old. We have $1.9 million in a retirement portfolio and 400,000 in company stock. We own a rental property worth 450,000 and owe a hundred thousand on that property. It's at a 4 1/2% interest rate with 14 years left on the term. The mortgage is $1600 a month. We rent it out for $2400 a month. We also have a 2.5% interest rate loan on our primary residence. We owe about 400,000 on that with roughly 1.3 million of equity. We'd like to buy a vacation home in the next 10 to 15 years, but we're wondering if it makes sense to 1031 the rental into something more expensive to drive a higher basis and apprec appreciation and of course take on more debt along the way. Or should we just lean into that current rental, take those profits of 4, 5, 600amonth and invest that so that when we do 1031 exchange the property in 10 to 15 years we can take the profits and the 1031 appreciation and use that to buy the vacation home? If we did the 1031 exchange now, we'd either buy something local or consider purchasing something in a warmer climate where we want to eventually have the vacation property. Robert, your real estate guy, can you one explain what a 1031 exchange is and then to give your take here on Sean B. And their situation?

[Robert]

Yes, I would love to. I look at it this way. A 1031 exchange is great, but I don't think it's the right fit for you right now. Because when you want a 1031 exchange, you want to take this property, sell it, and then kick the tax man down the road by buying another like property to avoid paying those capital gains taxes. So that's one thing. I don't think it's a good fit for you right now. And I think you should continue building your wealth because of the window of that 10 to 15 years you mentioned. And being at 45 years old, let's say you do it in 10 years. I would rather see you take all of the money from the rental property, sell it, put that into a traditional brokerage account and grow that account because then you'll have autonomy to be able to use all of those funds or whatever portion you want to buy the dream home later to do a 1031 exchange property right now doesn't really make sense because you're not going to be able to buy the dream home, then you're going to be doing it again later. And if it just doesn't really work out for you over the next four or five, six years, I think you'd be wasting an extra step and leaving a lot of money on the table by not taking the funds from the current rental property and investing them straight into the markets for the next 10 to 15 years.

[Austin]

If you were to sell this rental property, you said it's worth about 450 and you owe 100,000, that's $350,000. You would owe some long term capital G. I have no idea what that looks like for your situation. Everyone's different here, but I'm assuming you would pay some sort of taxes on that. Let's say 50,000 of that 350 goes towards the tax man. So now you've got about 300, maybe a little bit more, a little bit less. That is real cash money at closing that you now have in your checking account because you sold this rental property, that $300,000 invested in the markets at eight and a half, nine and a half, 10% per year averaged over the next, call it 15 or so years, you know, gets you really close to 1, 1.1, $1.2 million of actual portfolio value that then you could take and go use to buy cash if you want for a vacation home in that 15 year period of time. When it comes to actually thinking through this rental property, taking the profits, things like that, you're renting it out for 2400 mortgages, 1600. I don't know if that includes insurance. I don't know if that includes property taxes. I don't know if that includes maintenance or vacancies and things like that. So we're really talking about 400 bucks, maybe 500, 600 bucks a month of cash flow. That is, I mean generously, $3,000 a year on 350,000 of equity. That's less than 1%, right? So I would much rather see you if you're really locked in on how to be a vacation home owner in 10, 15 years from now. I'd love to see you exit this rental property, do everything you can to lower your tax liability on that rental property and then deploy that in a taxable brokerage account on a public.com or any other taxable brokerage account you like. Park it into the ETFs and index funds. We talk about average 8, 9, 10% per year for the next 15 years come out of this with one to maybe one and a half million dollars, depending on how the markets do, or a little bit less, maybe 800k again, who knows what the markets are going to do in 15 years from now. But then now you've got a massive nest egg that you can go look at and say, cool, I want to go buy this 900,000 or this million or million two or vacation home and you just go do it. It's all right there for you.

[Robert]

Yeah. Sean, let's get one thing straight. Austin. Great breakdown. You guys are killing it. But I also want to make sure that your money is working as hard for you as you work to get it. So I would really consider selling the rental property because do you get some leverage and some other cool things with doing a 1031 exchange now while building towards the, the, the dream home later. But I think you're better off selling it because it's not cash flowing very much and your cash on cash return is very low. Get that money in the market. Do it like Austin said, because I think you'll be way better off 10 to 15 years down the road.

[Austin]

So our next question comes from Bradley. Why Bradley says hi, Robin. Austin. This question revolves around balancing a portfolio and managing assets gained through marriage. I'm 29 years old and my fiance is 28. We're getting married next month and I've gone through our finances to create a net worth tracker. We talk about our financial goals and we've made a game plan as to how we can reach and a good financial future between the two of us. We're very fortunate to have awesome jobs where we make $325,000 a year combined. Before our bonuses, the following are totals between the two of us which are actually split pretty evenly. I have slightly more but our current retirement accounts think 401k Roth IRA and traditional IRA total about 275,000. Our traditional brokerage accounts total 1.1 million. Early on, I made some really lucky risky bets that worked out in my favor and but now 80% of that 1.1 million are in ETFs and only about 20% in individual stocks that I personally really like. My fiance and I both dollar cost average into V for all of our contributions. All in, we have about 1.4 million invested in the markets. The question here though is regarding my fiance's portion of our net worth. She owns just under 500 shares of Meta stock which she purchased at the tail end of 2012, essentially the lowest price in the public market. She's held onto those shares since, and that original 10,000 DOL investment has now turned into $325,000. My main concern is that her shares in Meta are almost 25% of our shared portfolio and that really scares me. She trusts my judgment and we both agree that I should be the one to manage our money. We both are going into this marriage with about the same amount of money and we're both very open and fluid financially. I don't know what to do. If this is my money, I would sell it and put the majority of the proceeds in the V. Do you have any suggestions about how to go about this? Should I invest it into other assets, Maybe rebalance the portfol? What is your perspective? So this is great. Love y' all are getting married. Love that you all have thought about combining finances and portfolio and net worth and all that fun stuff. Quick call out. She trusts my judgment and we both agree that I should be the one to manage the money. You could be the one to physically click the buttons on the computer or in the app to like physically manage the money, but you both, as a collective here, are managing your money as a whole, right? You both have a say in what's going on. If you physically want to be the one to click the buttons, cool. But just to make sure, the number one reason for divorce is money fights and money problems. And when one person feels like they're in the dark or the other person is too overbearing about money. And just like that's a recipe for disaster. So going into a marriage knowing that you both have a voice and are heard and have a perspective as to where the money goes and what the money should do, that is how you have a foundation of a successful marriage from a financial perspective. So yeah, what would I do? I would probably start selling covered calls 100 shares at a time on the Meta stock, have a strike price that you're comfortable with, earn some premium, and then just take the long term capital gain, hit on selling these shares and then reinvest it into your sort of 8020 split there. Sounds to me like you've got 80% into the S&P 500, the NASDAQ, the Dow Jones, other ETFs. That's probably what I do here. And the only reason I mentioned the covered calls is to hopefully make just a little bit more before you go out and sell them. Right? Maybe there's a little bit extra you can make there, a couple thousand dollars, who knows? But that's just getting A little bit in the weeds. If you're not really comfortable doing that to just sell the shares, doesn't matter. The only kind of pro tip I can give you here is you all are high earners, right? $325,000 combined income before bonuses. You want to make sure your total married filing jointly income, including the sale of your investments is below $613,000 because that's what's going to allow you to only be taxed at a 15% tax rate for your long term capital gain versus a 20%, which means literally if you have 325,000 of combined income plus let's call it 100,000 of bonus, now you're at 425 and you've got another, you know, 300,000 of Meta stock. That's 725, right. You that portion above the 615,000, which is about 100 grand, will be taxed at a higher rate, about 5% higher there than if the whole thing was under that 613,000 combined income. So that's the only kind of tax advice I can give you. Not a cpa. Go talk to a real cpa. That's. I'd be approaching it.

[Robert]

Yeah, I think that's a great breakdown. And the only thing I'll add to this if you didn't want to do the covered calls would be maybe just do stage sells where you could go out and sell 10, 15, 20% of it each year over a 3, 4, 5 year span. So that way you can get the amount that this takes up of your portfolio in line with your core portfolio strategy, but also not take the tax hit all in one year because there might be other years where you have losses that you can write this off against to kind of offset some of those taxes that you're going to sell with these long term capital gains that you're going to have. So that would be the only thing I would add.

[Austin]

Our next question comes from Jenna S. Jenna says, I've been listening to your show since I was a student and I appreciate all your advice. Now that my partner and I, 24 years old, are about to be engaged, we're beginning to approach financial goals together and want to tackle student loans and investing the smartest way possible. Neither of our employers offer a 401k match. My partner has $86,000 of student loans between 7.5%, 6.5% and 5 1/2% interest. They also have another 50,000 at about 3 1/2% interest, total of $140,000 of student loans here. So just make sure we're on the same page, Robert. 140,000 of student loans between like three and a half and a half. So all over the place. Jenna says I don't have student loans and currently save 30 to 40% of my take home pay. I max out my Roth IRA. I contribute 2,500amonth to my Roth 401k, 20,000 over there. Right now I invest extra into my taxable brokerage account, about 18,000 in there. My partner's paying down their student loans aggressively and contributing to his Roth 401K. But again, neither of us get a match. Based on the interest rates of 7.5% and 6.3%, does it seem smart for us to invest in our Roth IRA is. But reduce or pause our Roth 401k contributions and my taxable brokerage contributions so we can aggressively pay down that 7.5% interest rate loan. It's got a balance of about $45,000. Thank you so much for any advice you have to share. Jenna. Great question. Robert and I, off camera, had to talk through this one very delicately because it's, it's very different than our normal, like, student loan questions. A lot of the student loan questions we get are like, hey, I've got 140,000 of student loans and I've got, you know, no money, or I've got whatever. Invest. Like, how do I approach it? We always tell people, go get an equivalent amount of money, invest in the markets as you have of student loans before you start aggressively paying down your student loans. But the hard part about this is you've got a seven and a half percent interest rate. And like, historically speaking, that is really what the stock market does after inflation, right? Call it 9, 10% before inflation. We just had a 3% inflation print. You're talking about a 7, 7 and a half percent return, right? So like real returns, 7 to 8% here, which is the interest on your student loans. So this is a little tricky. Here's my perspective. One, do not do anything for their student loan stuff until you all are married, engaged, cool. Don't care. Talking about marriage, you guys go to the courtroom. Actually married, married, filing jointly on taxes. Like y' all are actually married. So don't do anything financially before you guys are married. You can have these conversations, which is really healthy. I've had these conversations with my fiance. But don't actually do anything until you're married. Now here's where I would start to like, actually be kind of tactical Here you are maxing out a Roth IRA and you're contributing 2,500amonth to your Roth 401K. Your partner is paying down their student loans aggressively and contributing to their Roth 401k without a match. If I were in your partner's shoes, I would stop contributing to the Roth 401k because there's no match. And 401ks are very rigid and you might actually be underperforming the markets depending on what investments you have given to you. Right. Afforded to you. So I'd stop the Roth 401k contributions for a little bit here. I would do a Roth IRA contribution if I were your partner. Right? So go open up a Roth IRA on public. You can contribute up to 7,500 a year, but you don't have to, right? Maybe you can only afford to contribute a couple hundred bucks or whatever it might be. But I would do that Roth IRA contribution if I were your partner. And if I was like aggressively trying to pay down student loans, that's okay for the seven and a half percent interest rate, for the 6.3 and the three and a half percent interest rates, like, I would let those marinate a little bit just because they have lower interest rates on them. But that seven and a half percent is really sticking out to me here because like that, that's. It's pretty legit. So if I were in your partner's shoes, I would get, as quickly as possible 30, 40, $45,000 invested in my Roth IRA, maybe a taxable brokerage account, whatever. And then once I've got 30, 40, 50,000 invested, which is really close to that 45,000 balance that they have, then I'd flip it. I'd flip the switch. I would go all in on paying down that $45,000 balance. I'd still do, of course, those Roth IRA contributions and. But any extra work I can find, there's no extra investments on top of the Roth ira. I'm trying to pay that down very aggressively there at that seven and a half percent interest rate. Now, let's pretend you all are married. Fast forward a year, too, and we've got Jenna here, who is contributing $2,500 a month to her Roth 401K with no match. And her partner, her spouse now, is also trying to pay down aggressively. Jenna, if you want to do the same thing, right, because you're not getting a match in your Roth 401k, if you're saying I've got 2,500 bucks a month, now that is freed up. I can now start to aggressively pay down that high interest, seven and a half percent loan, myself as well. And we're bringing that down, down to zero now. We, we paid it off. It's a couple years later still. Now you've got the 6.3% loan, which you tell us is a balance about 41,000 and another 50,000 of loans between three and a half to five and a half. If you now wanted to start getting that base built up, up as well to that hundred 150, you know, whatever amount here for your student loans. Because again, you really want to have about equivalent amounts invested in the markets before you go all in on paying off these student loans. Because again, student loans can only go to zero. Money in the market can compound into infinity, right? It doubles every seven years. And so if you spend $140,000 trying to pay off these student loans, congrats, your net worth went up by 140,000 over this period of time. But that same 140,000 can turn into a million dollars over your lifetime. And that's why we think it's really important to like, have money invested to an equivalent amount as to what you have in student loans. But that's seven and a half percent student loan balance at 45,000. That one's intimidating. So I do want to knock that one off as soon as I can here. But the 6.3 and the 5 and a half and the, in the 3 and a half interest rate loans, like you can, you can get after those, after you've built up that hundred 150,000, whatever you kind of have here going on that feels comfortable for you, where you don't feel like you're missing out on future gains, compounding at that 8, 9, 10% rate.

[Robert]

I think tactically that was fantastic. And it reminds me of a story. A friend of mine was dating a woman. She was wonderful. They got engaged. He paid for all of her school to go through nursing school. They got married. A year later, she divorced him. She got the car, she got her degree, she got everything. So just make sure, like Austin alluded to, get married first before you start paying off all their bills. Have the hard conversation and make sure you're both on the same page of where you're going financially.

[Austin]

So our next question comes from Skip H. Skip says, hey, guys, I found your podcast yesterday and I love what you're doing. Let's go, Skip. Welcome to the show, my friend. Awesome to hear. Skip says, my entrepreneurial friends of mine say that scared money don't make no money, meaning that it takes money to make money. The frugal side of me says to invest, diversify, and grow my money wisely. But I find that I might be too frugal. So here's my question. How do I find a balance between crazy business growth, throwing caution to the wind, and being so frugal that there is no business growth? We have $400,000 in investments. We didn't start investing until I was 55 years old and I'm 63 now. So it's amazing how much we've accomplished in just eight years. Years. Hoping to retire before 85, but only time will tell. Thanks so much, Skip. H. Robert. Skip is. I feel like he's. He's definitely not a minority in asking this question. I think a lot of people, the majority of people hear this. I've heard this phrase, right. Scared money doesn't make money. So maybe explain what that phrase means and what it means to you.

[Robert]

Yeah. Scared money doesn't make money is generally the phrase that comes from your gambler friends that are always out there yoloing every dollar. They have a lot of credit card debt and a lot of debt in general because they're trying to throw things at the wall and see what sticks. You seem to be on the other side of that spectrum where you're very cautious, you're very tactical, and all of that. My takeaway for you is, yes, it makes some sense. You have to get out there and spend money to make money. But I would do a hybrid. Don't go crazy, don't go spending everything, and stop investing in your future and maybe open up a little bit where you spend a little bit more, you try some new things. But you do practically like you've done your entire career, because I think you will get there in a much better fashion. Because right now, looking where you're at at 63 years old is a big difference than you being 23 or 33. I used to do the scared money doesn't make money tactic, and I would go all in on projects back then, but I would never do that now. Because you don't want to go back to zero because you took a risk that didn't work out. So that's my take.

[Austin]

Yeah, this. This phrase, scared money doesn't make money, I think is a excuse that people give themselves when they do something really foolish and they're like, well, I had to do it or I'd never get rich. Right. It's like, no, no one. No one Says, says that. So let's think through this for a second. When people say, scared money doesn't make money, they're essentially saying, I need to put up capital to have some sort of big financial windfall in the future. What that financial windfall might be is profits of a business. Maybe it is, to Robert's point, gambling. Right? Some people like to use that phrase in gambling. Other people might use that as a phrase to trade stocks or trade options or be kind of risky in the stock market. Charlie Munger from Berkshire Hathaway, he unfortunately passed away, but you know him as Warren Buffett's partner. He says smart men go broke from ladies liquor and leverage. And I think that last l. The leverage part is what's really scary. And it's something that I take to heart. And it's something I think Skip should also take to heart. It's okay, Skip, in my humble opinion, if you said, listen, guys, I've got 50 grand, I've been saving it for a while here, and I believe I'm going to make the best hot dog stand Broadway in Nashville has ever seen. And I'm going to make so much money selling these hot dogs. And it's going to be an awesome business venture and I'm really excited about it. And my name's Skip, and I'm saying scared money doesn't make money. And my 50 grand, I'm going to put it to here on this business. Skip, that's awesome. I love that. For anyone, go try things and, and be as thoughtful about how you deploy capital as humanly possible. But the, the leverage part that Charlie Munger was alluding to is how people can really mess up. And I think that is sort of a synonym there with the scared money doesn't make money. People think, oh, I got to go get an SBA loan of $400,000. I need to go take a HELOC out on my home. I need to go get a second mortgage. That's the money I'm going to use to go buy the car wash. That's the money I'm going to go use to double down on Amazon stock. That's the money I'm going to go use to make some of these, like, riskier type of investments or bets. Like, no one wants to start business ownership in the hole. Right? Where you, even if it goes belly up, you still owe money. Like, that sucks, right? At least if you used cash or some money that you've saved for the last however many years. Oh, no, my hot dog stand didn't Work out. I lost 30 grand. I tried. I gave it, I gave it my best, but it didn't work out versus I owe the bank 80,000 and I don't have a hot dog stand, right? Like, it's just. So that's the perspective I can share here is like, when it comes to business ownership and making moves and things like that, you hear scared money doesn't make money, which is true. But a lot of that comes from leverage. And I think is a very, very, very bad way to think about building wealth is like truly going into leverage and debt and trying to lever up and like do whatever you can. Now, when it comes to investing, very different here, let's talk about that. We believe people should have this portfolio structure of core satellite, right? 65 to 85% of a port should be made up of the index funds and ETFs that we know and love. The blue chip Voos, QQQs, Dow Jones Industrial Average that go up into the right over a long period of time. The other 15 to 35% could be diversified into real estate, precious metals, maybe some cryptocurrency, some artwork, some wine and whiskey. Some other alternatives that make sense for you and your risk profile. Which means again, if your risk profile is like, hey, 60, 40 portfolio and you've got 80% cash, then like, yeah, maybe you should be a little bit more invested in the markets, right? You're 63, you got another 10, 20 years of you. But when it comes to actually like buying a business or like trying to do that, going into leverage to invest, going into leverage to, to start something, that to me is too risky. And I don't, I don't really encourage anyone to do things like that.

[Robert]

That's a great call out because I think a lot of people get it twisted that they think investing in these tried and true index funds that we talk about that just churn out money year over year versus taking a high risk bet later in life in your career to try and get ahead and, and yolo your money. It totally different things. So I agree with you tactically, 100%. We love this for you, Skip. Keep rocking and rolling. Maybe find a hybrid where you take a little more risk to build that business higher, but also not so much risk that you could go back to zero. We don't want to see anyone do that.

[Austin]

Yeah, let's. I want to talk about that a little more, Robert, because I see Instagram and TikToks about open up these four credit cards and you'll get 40,000 of business funding overnight and it's 0% interest for eight months or like whatever it might be. And I think people hear the word funding and forget that funding is debt and forget that in the, in eight months your debt is going to be 26%. And so like whenever you think about and Robert, you're an entrepreneur, business owner. I'm an entrepreneur business owner. I've been doing this for a lot of, you know, years now. And I've invested a lot of money back into my business, you know, to start this podcast. We had to come up with a lot of money to just like build it out. And you know, there's a lot of things that I've had to say. Cool, I'm going to take tens of thousands of dollars and like go invest it to hopefully see a return on that in the future because it's back into a business or something I'm, I have control over. And the advice I can give you if you find yourself in that situation and this could be Skip or anyone else listening, is like, be as calculated as you possibly can. What dollar for dollar are you investing and what are you getting in return? Is it software, is it equipment, is it inventory for your business? Take the rosy glasses off. Off. What is that actually going to be? Take your base case and cut it in half, right? So it's like, oh, I'm going to go spend $4,000 on this new software for my business as a CRM tool or something. Or I'm going to go, you know, purchase this new equipment because I think it's going to speed up production in my junk removal business or whatever it might be, right? What's the actual ROI on that? And if you don't know the answer, like talk to AI, talk to Chat, talk to Gemini, talk to Claude. Like they're going to help you think through it. But I really want everyone to not just think and jump into, oh, I could go buy an excavator for $30,000. And that's going to help my, you know, junk removal business by, I mean it has to, right? I'll be able to move so much more money. Like that's a no brainer. And then you forget about like, well, what's the interest rate? What's the monthly loan amount? Is that loan amount absolutely going to be covered by the increase of efficiency? Like you have to be thoughtful about how you're investing money back into a business if that Skip is in this situation for you or anyone else listening, because you want to see a direct ROI that can Also mean employees. Right? So, Robert, I mean, talk about that for a second.

[Robert]

Yeah, I have a great story. Exact on that point. You are on fire today. And this was a construction company that was a friend of mine, the founder of my construction company, but also a competitor. He came to a job site where we were building out these apartments and he said to me one day, he goes, man, he goes, why do you have all those older trucks and trailers? And I looked over at his team and they had all brand new trucks, brand new equipment, brand new trailers. I said, well, the reason I do that is because I own all of those. I have no debt and no payment payments. I said, what is your monthly nut just for your trucks and trailers and equipment? It was $26,000 a month. He thought he was so cool because he had all these newer trucks. I had my older trucks and they were all the same. And so literally within a year and a half of that, he filed bankruptcy because the market dried up during COVID He couldn't withstand the pressure because they had all that overhead. We didn't miss a beat because I didn't have any overhead. So I think it's a great call out Austin that so many people, people get caught up in. I'm going to grow, grow, grow. They take on all this levered debt and then they find out as soon as they go through this bump in the road for a few months or something happens with their company that they can't withstand it and they go back to zero. So I think it is a tremendous call out. And when you said that, it immediately brought me to that story of here. This guy's making fun of my equipment which does the job. Meanwhile, he has all this levered debt. So great, great call out.

[Austin]

Now before we jump to our final question from Arturo, got to give a shout out to public do again for those generated assets. I'm telling y', all, if you are still on the fence, you're like, listen, guys, you talk about generated assets on the show. I get it. Whatever doesn't apply to me. You don't know that. Go log into public, click the generated assets button and say, I want to invest into companies that are going to profit from peptides. I want to invest into companies that will profit from looks maxing. I want to invest in companies that are going to profit from. Profit from. I don't know, Meta overtaking Google with their ad revenue. Right? We talked about that on a Radar episode recently. I want to invest in companies that are going to profit from people traveling to Japan and That's like a new fun thing that people are doing for the last couple years now, right? Like I don't know. But come up with any idea that sounds interesting to you. Talk to it, tell it what you're interested in, why you're interested in it. It's going to find you stocks that align with that and then Generated Assets will back test that strategy against the S&P 500 so you can see if it's a historical winning strategy or not. Literally. It's so cool. I'm in there all the time. Every day. I feel like I'm just coming up with new stuff and it's like, oh, and then you can just like invest into whatever it is like automatically. It's super simple. You don't have to go find the stocks. It'll just build an index for you. It's plug and play. It's like building your own ETF from scratch. It's really, really cool. Generated Assets is the name of it. Go to public.com rich habits get a 1% bonus when you transfer portfolio to public using our refer. Go check out Public and the Generated Assets product. It is really, really cool.

[Robert]

We have been working with public.com for a very long time and in my opinion they have the coolest tools. They simplify everything. And Generated Assets is one of those things you have to go in, it doesn't cost you anything. Set up your account, check out Generated assets. Because we all have different strategies that we want to implement in investing and I think public makes it easier, easy for people that are just getting started.

[Austin]

Our final question comes from Arturo C. Arturo says. Hey guys, thank you so much for the amazing content. Here's my question. With Direct indexing available on public.com should I move away from the usual ETFs like Voo and QQQ and instead go Direct index their underlying components like just do Direct Indexing instead. Could you please tell me why or when this would be a good idea or the opposite why or when? Direct Indexing is not as smart as just buying shares of the ETFs. I'm steadily approaching a hundred thousand dollar base being built. I continue to dollar cost average into the markets. My monthly investments into bridge accounts range from about 2,000, sometimes up to even 5 or 6,000 depending on my income. I've invested into Voo, QQQI, VDE and Vymi. Thanks so much. Good question. So let's talk about this.

[Robert]

This.

[Austin]

We've got a lot of cool products available to us as retail investors now that weren't available to our parents 20, 30, 40 years ago, right? Robert? I can only imagine how hard it was to place a trade back when you were 30 years old. My age probably had to pick up a pay phone or click some buttons or talk to a broker and hey, buy this ETF. Hey, ETFs don't really exist, right? What are you talking about? ETF, like just buy a stock or an index or mutual fund or whatever, who knows? So it's really cool to know that we've got so many products out there and public does a really good job of like helping us use those products, understand them and make it accessible for the everyday investor. So what is direct indexing? The NASDAQ 100, the S&P 500, the Dow Jones Industrial Average. These are indices. These indices are essentially strategies that were created by companies, right? Investors that say, hey, for the s and P500, we've got very specific terminology, we've got very specific parameters, but it's essentially the 500 largest, most profitable companies in the United States. So what we're going to go do is identify who those 500 companies are. Every quarter we'll get rid of the losers, we'll add in the winners and that's going to be the index's strategy. So you can replicate that strategy by buying shares of the etf. V V will literally do exactly what the s and P500 index does. And it will make it super simple for you to just own that index through a tax efficient wrapper that is the etf, right? ETF price goes up, ETF price goes down, follows the index index. Direct indexing is a little bit different. You're still owning the index itself of the S&P 500, but instead of buying one share of an ETF, Voo that's got that index, those basket of stocks, those 500 shares wrapped up inside of the ETF, that one share of ETF, you are individually buying all 500 shares of the S&P 500. So all 500 of the underlying components constituents those 500 stocks. You're buying shares of their company one by one, 500 of them, right? But you're doing it automatically with the help of public in the exact same proportion as you would if you bought VOO because it's all market cap weighted. Hopefully you guys are following along here, right? So direct index, you're directly investing into the companies, you're going to buy all 500 shares of their stock versus ETF. You buy one share moves up and down with the index index Austin Why on earth would I go out and buy 500 shares? That sounds like a headache. Well, one public does it automatically. Not that deep, super simple. But here's why you might want to consider it. With direct indexing, you have the ability to do something called tax loss harvesting on every single name in the S&P 500, whereas you cannot do that when you only own one share of an ETF. You could tax loss, harvest that single ETF. If it goes down, you could sell it for a loss and, you know, roll those losses, whatever. Or on the flip side here, when you direct index, maybe you look at Atlassian or unity Software or MongoDB, who are all in the S&P 500 and their stocks are down 60, 50 and 40% year to date. Technically speaking, what would happen is public would automatically tax loss, harvest your position in MongoDB because again, you're following the index. You have a position in MongoDB because it's in the S&P 500. They would sell it at a 40% loss. You would book that loss in your brokerage account, use it to offset gains elsewhere in your brokerage account. Public would take the money it had invested in MongoDB, automatically invest it into another company that historically had a similar volatility. Index beta is what it's called there, a similar volatility to MongoDB. So you're not losing out on gains in the future per se, and now you've got a booked loss that offsets gains elsewhere while also having essentially the same performance as everyone else in the S and P. I don't want to say it's free money by any stretch the imagination, but this is the closest thing in my opinion to free money that I get in my own portfolio. I've got probably $50,000 now direct indexed against the S&P 500. And I get thousands of dollars of losses just handed to me because they're tax loss harvesting automatically. Super, super simple that I use then to go book thousands of dollars of profits elsewhere in my portfolio that I now don't have to pay taxes on because it's a profit that offset a loss. It's really cool.

[Robert]

I just want to click back Arturo ask, should I move away from the usual ETFs like Voo and QQQ and do the entire direct indexing route? So I want to get your take on that because I don't believe they should, because there are balances and things that are advantageous of the ETFs we talk about versus direct indexing because they both have their positives. Touch on that for a moment of why you think or don't think people should move away from having their basket of ETFs and just having the direct indexing.

[Austin]

So here's the first big call out. The first call out is you need a massive minimum investment to direct index the S, P or the nasdaq. Like tens of thousands of dollars. You don't need a massive investment to buy one share of Voo. You can fractionally buy one share VO for 10 bucks, 100 bucks, right? So, like, very different, Very, very different from a minimum investment perspective. But I mean, listen, I've got hundreds of thousands of dollars in the ETFs we talk about, and I've got tens of thousands of dollars direct indexes into the exact same indices. So, like, that's how I've approached it. I don't think there's any framework I can share. I've got no rhyme or reason for it. I just, I just like knowing that I got some direct index, I got some ETFs, I've got. I got everything I kind of want here. I'm actively buying more direct index S and P, just like I'm actively buying more VTI and dia, right? It's just like, for me, there's no, like, rhyme or reason. There's no perfect answer here. I'm sure there can be an argument made around mathematics and returns and tax loss harvesting or drag on those returns with the difference of the beta and the reinvestment. Like, I'm so sure someone can do a whole Ph.D. you know, paper on this. But at the end of the day, for me, a little bit of both is cool. That's how I've done it. I've got some cool free money, quote unquote, from having some losses that offset gains elsewhere. Just like I've got some ETFs that go up in value that I can do some covered calls on if I want. Like, it's totally up to you, but that's how I've approached it personally.

[Robert]

The only thing I'll add to that is if you were to sell the vo and the QQQs of the world, that is a tax event, if you were migrating that money. So I would keep rocketing and rolling in that standpoint. But also look at it this way, because I don't think direct indexing makes sense in your retirement accounts as much as it does if it's in a taxable brokerage account because you want to be able to take advantage of that tax loss harvesting. So that's the only other thing I would mention here in my opinion. I agree with Austin 100%. I do both. I don't have a rhyme or reason. I just want to make sure that I have some advantages with this tax loss harvest harvesting, but also keep rocking and rolling with the Voos and QQQs. They're low cost, easy to maintain, and you can just make so much money that way. That's how I do it.

[Austin]

Yep. 100. This is only taxable brokerage because that's only where you pay taxes. Right? On your taxable brokerage account, not in your retirement account. On the trades. Only on the trades and taxable brokerage account. So good call out there, Robert. And yes, if you've got a hundred thousand dollars of VOO, that's up $30,000 of unrealized gains. There's no reason in the world world to sell that, pay taxes on those gains just to redeploy it in the same thing through a different vehicle. Like don't do that. So if you've got the money, let it roll in those ETFs and rise over time. But if you want to say, hey, I want to put 500 bucks a month net new capital into a S P direct index or whatever, like makes sense for you. Like who knows what that minimum is but like maybe that's what you want to do. Totally up to you here. No rhyme or reason. Want to just reiterate that for your Arturo? Personal finance is personal and that's how I've approached it. And again, I'm sure there's some like crazy math we can get into and things like that also goes back to I had this conversation over the weekend and then we'll wrap up the episode. Robert, there's always somehow some way that someone can optimize, you know, the 2% perfect whatever in their portfolio to oh, if I just did this, I'd have made an extra eleven hundred dollars last year. If I did this, my portfolio would be up 0,82 more percent or like whatever. Right? I can't time the market. I'm not trying to perfectly optimize every penny of my net worth. I think if I just continue to make broad stroke investments into the right things over a long period of time, my wealth will compound and multiply. And that's all we're trying to help you all understand is you don't have to perfectly know every little bit and piece of the perfect optimization strategy. Buy, sell, whatever the heck going on. If you do three or four things right. If you get it like 80% right, you are going to build wealth, tremendous wealth over your lifetime time focus on the 80% more so that perfect optimization of the other 20% in your life.

[Robert]

I agree with that 100%. What a great episode this was. So many incredible in depth questions. Thank you all so much for bringing these questions. Hitting us up in the DM, Spotify, Instagram, wherever you can find us, LinkedIn, I don't care. Just get the questions off to us.

[Austin]

Thanks everyone again for a great episode and we'll see you tomorrow for our our Rich Habits radar.

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