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Rich Habits Podcast
Q&A: Cashing Out The College Fund, Discretionary 401(k) Match, & Shopping Financial Advisors
00:43:12
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- [00:00]
A
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. Most of these questions are just off the dome. You guys are getting our raw thoughts in real time here. You ask us questions via Instagram dms or you email us questions@rich habits podcastmail.com and we look at em, we find the best ones, we answer them. I mean this is just us hanging out, having some fun here.
- [00:27]
B
Yeah, we love these episodes, we love filming them and it's just so cool to see the depth of the questions but also the variety of the questions because personal finance is personal and everyone has different blind spots, different pain points. So these episodes are the best. And so if you're following along right now on this episode, share with a friend. Everyone has issues and just make sure you get them involved in these episodes because they're so fun and so informative.
- [00:56]
A
And as a quick reminder before we jump into the episode, if you want to invest into SpaceX, XAI in perplexity as well as Beast Industries and Graza and Acorns and a bunch of other companies alongside Robert and I, and you're an accredited investor, which is probably a lot of you considering your incomes and your net worth, you are invited to invest alongside of us. There's a link in the show notes below. You can go to Republic's website, we'll have it all linked out right there to learn more about the opportunity. But essentially what we've done is we've made it easy for our podcast listeners to invest alongside Robert and myself into these awesome late stage companies like SpaceX XAI and Perplexity as well as some of the more earlier stage growth names like Graza, Beast Industries, Katy Perry's Desoi, there's a bunch of other names inside of what's called the Cashmere Fund. It's kind of a cool 5050 split there. Awesome, awesome. Illustrations and breakdown in the show notes below. Be sure to click it, read all the disclosures, read all about the opportunity. I mean this is an investment, right? So investments can go down. So just make sure that all that's understood. But it's, it's pretty exciting Robert.
- [02:01]
B
Yeah, definitely. Very, very cool to see us be able to put together this multi asset portfol and make it really affordable for people. So if you're accredited, the minimum investment is $7,500 to be able to invest in some of these really incredible companies that we all hear about. Every day. So I'm really excited about this one. I think it's the coolest one we've ever done because there is a buffet of incredible companies all wrapped up into one spv, making it a really incredible opportunity for everyone.
- [02:30]
A
And we only have $10 million of allocation. We've already raised several hundred thousand from obviously you guys and Robert myself, we've already invested our 7,500 bucks. So if you want to participate, feel free to do that. I'm not saying that we'll run out of allocation, but it's. I don't, I don't know. Right. We got to. You do it or you don't. Don't get left behind if you're interested in something like that. So again, link in the show notes below. Go check out that. And Robert, speaking of investing, you got to make sure people understand this reality that if you are not investing towards your financial future, you won't be able to retire. Right. You'll still work that 9 to 5 job unless you have a nest egg that's growing for you over a long period of time, allowing you to then take some of that portfolio income and supplement your monthly lifestyle.
- [03:13]
B
Yeah. And the easiest way anyone can begin investing towards their Future is on public.com they make it incredibly simple to build a multi asset portfolio including ETFs, stocks, bonds, crypto options and more. They also offer access to industry leading yields of up to 3.8% APY for that emergency fund.
- [03:34]
A
And for a limited time you can earn a 1% match on all of your IRA deposits, IRA transfers and 401 rollovers, which is a thousand dollars of free money for every hundred thousand you roll over into their platform. So if you've got an old 401k on some random broker that you don't use anymore, roll it over, get it on public, get your free match.
- [03:54]
B
You can fund your account in five minutes or less by heading to public.comrichhabits to claim your 1% match today. Paid for by Public Investing. Full disclosures in the podcast description.
- [04:06]
A
All right Robert, let's now jump to our first question coming from Jim G. Jim says guys, thanks for taking my question. I'm a 50 year old small business owner from New Hampshire seeking an exit strategy for my business and retirement in about 10 years as doing so. I am a finance podcast junkie which is how I landed on your show and I believe you guys are the best to do it. So thanks for all you do. We have a high school senior who is no longer wanting to go to College. He says he liked to work for the family business and maybe one day take it over. We've saved up almost a hundred thousand dollars in a 500-20-29 plan for him. We like to use that money and invest it in the stock market on his behalf to help him build his base. As of right now, he has about 15,000 in a Roth IRA which has been fully funded every year. Started that a couple years ago. When he comes to work for the company full time, he will put 10% of his income into the Roth 401k company. Match all the good stuff. So we'll plan to leave about 7, 500 in the 529 plan for maybe a small business or local community college course he wants to take at night while working full time. But after paying taxes at my son's rate and that 10 penalty on, on the gains, he'll be left with about $85,000 to invest. After listening to your suggestions and doing some research myself, we plan to put 60% of that into VTI, 30% into QQQ, and 10% into Bitcoin. What are your thoughts on the allocation and if you would do the same thing if you were in our shoes. So Robert, I'll kick this one off. So, so just to make sure we're on the same page, right, the 529 plan is a college savings account that essentially you can deposit money into, have normally some sort of tax write off when you deposit money into it, that money invested and then grows for you over time. And once it grows, you're now able to spend those investment profits on tuition, books, trade, school, anything related to education. Right? So it's a way for you to have some nice tax advantages for the contributions and spend those, those investment profits on education. So like literally no tax, it's like positive from a tax perspective here. But what you're saying is, hey, we got 100k in here and we don't want to spend on education, which means that's fine, you are able to take that money out, but you do have to pay a penalty on the gains. So let's, let's, let's walk through that. Robert, you can withdraw your contributions completely tax free, penalty free. Everything's fine from that perspective. So Jim, make sure you're doing that if you decide to do this, withdraw. And just remember that you're only paying taxes and penalties on that gain that's being made. So if you do plan to do that one, I would somehow try and strategically take the money out when my son is Having a low, you know, taxable income year, maybe he's not making that much yet with the family business. So, you know, this will count toward his taxes making him, you know, be in a lower tax bracket. So just be cognizant of what those tax brackets look like and try and spread it out over a period of time that make most sense to you guys. What's really interesting about the 529 plan is you are able to change the beneficiary of the plan pretty much at any time, and that then allows that new beneficiary to enjoy those investment profits and be spent how they want. So, like even our friend Jim here, if he wants to be the beneficiary and have some of this money paid toward him to learn how to paint or something fun for his own retirement, right? He could do that. Or maybe that you got some nieces and nephews, or maybe you want to do something for the grandchildren that haven't been born yet, right? There's a lot of different ways that if you wanted to just take out the contributions tax free and penalty free and invest that rock and roll, but if you want to keep those profits in the account, so then that money can now be, you know, given to someone else. If it's a grandchild that's not around yet, or maybe a niece or a nephew, a brother or sister, even you J or maybe your wife. Like, there's a lot of different ways where you can do this, where taxes and penalties aren't a part of the equation and you're still enjoying a lot of the money.
- [07:58]
B
I love that breakdown, and I'm really on the fence on this. Part of me wants to say, jim, just take out the contributions, invest those. I love the ideas of what you want to invest in, in the waiting. And then part of me says, it's 10%, take it all out, get it invested, because you're going to outperform probably with these investments and be able to make that 10% back pretty quickly. So I'm kind of on the fence on this, but I think either way works. But I'm leaning towards agreeing with you, Austin, that maybe they just take out the contributions, get those invested, leave the gains in there so there's no penalties, there's none of that. It just keeps growing and growing because down the road there might be another solution of where this money goes by switching out the beneficiary or something like that. So I think it's a great position to be in. I would probably take out the contributions and reinvest them and leave the rest and avoid the penalty. But either way I think is fine.
- [08:53]
A
Yeah, I think that's a cool way to help Jim's son here build his base more quickly. Right. Take out those contributions penalty and tax free ensure that Jim's son is now investing those tens of thousands of dollars. Right. And then you're rocking and rolling toward building your base. Jim, your son will be a net worth millionaire by the end of his career, I'm sure. And you're doing a really cool thing as a father. So love the breakdown and it seems like you guys are in a pretty cool situation. And yes, the allocation of 60, 30, 10. Perfect. Rock and roll. So our next question comes from an anonymous listener. They say, hey Austin and Robert, thanks for what you do. I would like to remain anonymous. No problem. Happy to do that. My employer offers a discretionary match. So they choose to contribute to my 401k or not, and only if I'm investing into their company stock. Would you still follow the order of operations in that case of match beats Roth, beats taxable. I'm worried I might leave money on the T. Throwing all my eggs into the company's basket here. But I'm already maxing out my Roth each year. I'm 45 years old. My combined retirement accounts is just over about a hundred thousand. And this new 401k only has 3000 in it because I just started. I do have my family's emergency fund, fully funded, no high interest debt. Just started renting out our old home, which is about 150k of equity and bought a new house at about 320 grand. I've been a listener since 2023. You guys have changed my life. I now help other women in my town get financially fit based on things I've learned from your show. Let's freaking go anonymous list. But with that being said, I do need some advice. So Robert, how would you help our anonymous listener here who by the way is just a rock star helping out other women in their town get financially fed. How cool is that? First and foremost, that's pretty cool.
- [10:32]
B
I would start by really doing a deep dive into the company. We don't know the company's name unfortunately, but I would look at the last three to five years of performance with that company's stock and I would also forward look to think ahead. Where is the trajectory of this company right now? Is it looking up? Is it stagnant? Do they have something new releasing that could really propel the stock upwards in the future and Then go from there because you don't want to be in a situation where you are leaving money on the table, especially because you said you feel like you've been behind a little bit on where you're at for retirement. So I would really look at the performance of the company and then decide based on its past performance, future performance, proposed performance, and then go from there as to whether or not you should put that money in. Because if they're not doing the match and you don't know when they're going to and how much, it's a little bit tricky to put your money and your faith in the company if they're not going to do the same for you. So that's how I would approach it first and foremost, because at your age, you still have a long window to invest and build wealth. And we want to make sure that is optimized as best as possible. And it starts by understanding, is this a good deal to do, this stock investment?
- [11:44]
A
So here's my take. I think if our anonymous listener is telling me, hey guys, I love the idea of match beats Roth beats taxable, which for those of you that might be new means that that's the sort of priority of investing dollars, right? You invest up to the match in your 401k to get the free money, no matter if you have autonomy over that investment or not. And then you max out the Roth IRA of 7,000 or maybe $8,000 a year, depending on your age. You then go back to that 401k and invest up to the maximum there, depending on if you have autonom, you can choose your investments. Of course you want to get more money invested. But if you can't choose your investments, no autonomy, then you put your money in the bridge account. Because investments that you get to choose, aka the ETFs and index funds that we talk about on the show, normally outperform these target date funds and sleepy mutual funds that some of these 401ks are invested in. Well, most of these 401ks are invested in, so it's okay to do it over there. That's sort of the breakdown explanation. Now, if this anonymous listener is saying that they can invest in the 401k with the money is only matched in company stock, that to me is fine because even if the stock goes down a ton like cool, it's still a match. Assuming that the money that this person is able to invest into their 401k, they can choose how it's invested. Now they're saying, my employer offers A discretionary match. So they can choose to contribute to my 401k or not. And only if I'm investing into the company stock. So what if you don't invest in the company stock, right? What if you don't want to invest in the company stock? Do you still get a. A potential match? And if the answer to that is no, I would say that's probably still fine, assuming you can choose what you are investing into. But if you're telling me there's no match and there's no autonomy, right? So you get put in some sleepy mutual funds and target date funds that are underperforming and you get no match of free money along the way, then what's the purpose of investing in this anyway? Right? That means rock and roll to the Roth ira. Max that out as much as you possibly can every single year and then everything goes into your bridge account where you full autonomy over those investments. Like that's how I would play that game. Because like, what's the alternative? Oh, you're telling me not to invest my 401k? Well, let's say you did invest in your 401k. You are now invested into things that are dramatically underperforming. Right? So the opportunity cost on that money invested over here is detrimental even compared to some of the different ways that you could invest freely in a bridge account. Right? The markets do 1012 percent on an annualized basis. Maybe the funds they got you in are doing 2 or 3%. Like I don't care about taxes at that point. Let me go get the other 10% over here. That compounds dramatically. So, anonymous listener, I love what you're doing. I appreciate you sharing our show and helping other women in your town get financially fit. If I were in your shoes, that's what I would do. Those are the questions I would ask and the considerations I would have.
- [14:33]
B
Yeah, my only clickback on this is. It's kind of crazy if you think about it. I wish we knew the name of this company so we could look up their market cap. Because what if it's a mid sized company with 3, 4, 500 employees and they're basically forcing them to invest in the company's stock so then they can give them their match. That seems crazy to me. I don't, I don't like that at all. And it seems like a red flag. So I like your breakdown though and.
- [15:00]
A
You know, good luck does seem kind of weird. I agree. But I will say I did work for a company out of college that was publicly traded and they had a match. They'd let us invest in anything we want. But they matched our investment in company stock, which I think was probably advantageous for them because like they had a lot of stock on their balance sheet and so, so they can just like match it like that way. Which also was cool because the stock 10x while I was working there, not saying anything to do with me, but during that period of time it was a really big turnaround story. So the stock went from like 30 bucks to 300 bucks. And it was, it was a great time to be, you know, to have that in your 401k. And I know that. I remember in one of our like town halls the CEO talked about how there were millionaires made in that three to five year period of time because of the company match and the stock that they had in their 401k. So it was pretty cool to see that. But I don't think that's what's going on here. So our next question comes from Matt C. Matt says hi Austin and Robert. I'm in my late 30s and have a net worth approaching 1 million. Along with owning a profitable side business, I've been using a financial advisor for quite some time. But after listening to you two, it's pretty clear to me that my interests probably aren't their top priority. After a portfolio review, he has me invested in products that have high expense ratios and high fees. I'm curious about the process of moving financial advisors to someone else. I know I'm looking for a fiduciary, which my current advisor already is, but will the new advisor just assume ownership of my existing accounts? Current advisor about half my net worth is with this current investor. So I'm looking to get sage advice on how to proceed. Thank you so much, Matt. Robert, I'll let you kick this one off.
- [16:31]
B
Matt, I love this question and being in your late 30s, I wish more people kept an eye on things and asked this question of themselves and in the podcast because I think it's so important when you get an advisor that is putting you in these high fee things and they're kind of setting it and forgetting it, it really puts you in harm's way. Because assuming, let's say you're 38 years old and you've got 25 more years of investing, if you didn't have your eye on the prize and you left 4, 5, 6% on the table every year because of either underperformance or these high fees that could add up to million dollars in your lifetime of lost Opportunity. So I love what you're doing here. I think you definitely need to look elsewhere. My family, Crow Capital is a fiduciary as well, but we do quarterly reports and monthly emails to every client because we want them to know exactly where they stand with their money. If you'd like me to set up a free call, you let me know, but otherwise go find somebody else. I always say it this way, if you're going to get eye surgery or heart surgery, you're not going to just go to the first person and stick with them. If you don't know exactly what the situation is, you're going to get multiple opinions. You should do that with your money as well. Go meet with other people, ask them about past performance, what is their average performance been for their clients over the last three years. Ask what their fee structures are and really deep dive it. So, you know, are they putting you in target date funds and mutual funds so they don't have to do any work, or are they actively managing your money to grow it as best that they can? Because remember, a lot of financial advisors want to protect your money. They don't necessarily want to grow it. And that's why they're happy telling you that you got 6 or 7% a year rather than 12 or 15 because they don't want to get fired. So I hope that helps.
- [18:19]
A
Matt, this is a great question and a great breakdown from Robert. I think y' all could be calling me crazy here, but I genuinely believe Matt at about half a million dollars with this financial advisor, right? You said you're approaching a million net worth and half your net worth is with this advisor. So call it half a million. I genuinely believe you are smart enough to manage this money by yourself. If you wanted to, you could obviously roll it over into public, get some sort of a match, whatever. But here's what I would do if I were an issue. I would say, okay, cool one, do I like the current strategy they have me in, which means maybe like you've got some bonds, you've got some international, you got some S, P, some nasdaq, some. Like, are you diversified? Like. Like if you like the strategy you're in, right? But you don't like the products themselves. All you have to do is clearly outline the portfolio weightings into each sort of sector of the portfolio, right? So how much of my money as a percentage of total invested is in international much? My money as a percentage of total invested is in bonds or in the S and P or in the nasdaq, whatever it might be here and then say, okay, cool, hey, thanks for the help. I genuinely don't enjoy this relationship. I don't like the products you have me in. I'm paying way too much. I'm going to now transfer this money over into either a taxable brokerage account, which maybe you're already in a taxable brokerage account and you can just do that easily, or maybe it's in some sort of IRA and you can just do that easily. But like transfer this over. Once it's transferred over, all you do is now find the low cost ETF equivalents of the exact same thing you were invested into, assuming that you liked the strategy, and then rock and roll that way. Congrats. You're now saving a ton on the expense ratios and fees that you're paying to this advisor and you're managing the money yourself, which means if you want to rebalance or make a change, like you can do that on your own. Now the downsides are not a lot of people have the stomach for managing half a million dollars. They see their portfolios go down by 50k because the markets go crazy because a trillion trump China trade deal fell through or whatever and now they're like, oh my gosh, I'm down like $50,000. I need to sell everything. And I. Yeah, so there's like pros and cons to all this. But Matt, you got a million dollars to your name. You're a smart guy. Obviously, if I were in your shoes, I'd highly consider what it would look like to be in a situation where I'm managing this money on my own. And to your point, let's say maybe you didn't like the strategy they had you in. There's a lot of research you can do along the way that's going to help you maybe build a strategy of your own. Go listen to our recent episode with talking about ETFs and how he thinks diversification should work. But there's a ton of different ways you can build a portfolio strategy that matches your risk tolerance. I think what is the problem here though are the fees and expense ratios. If you want to solve for that specifically, just manage the money on your own using low cost ETFs.
- [21:06]
B
And one last thing for any of you considering this same situation, understand this. Migrating your money from one advisor to another other is a simple docusign. You'll get a packet of documents, you'll look through it, you have that introductory call like I alluded to. Hey, what is your performance been? What are your Fees, how do they match up and really understand that? But it's that simple. They're going to send you a document. When you say, yes, I'm ready to move my money, you look it over, make sure everything is what was stated and you sign it. Your money gets transferred, you give them access to it, and you're good to go. Each company, just like Crow Capital, is going to have their own app so you can look at everything in real time every single day. But it's not difficult. So never stay with an advisor you're not happy with just because you have fear of moving. It's very simple.
- [21:56]
A
So our next question comes from a anonymous listener. Our listener says good morning to your both. I'm kindly requesting to remain anonymous. I have a bit of a dilemma on my hands right now. I'm currently renting my grandmother's house that is fully paid off. Unfortunately, she passed away and my mother is going to be putting the house up for sale around May. I don't know the exact price for what they plan to list it at, but it should be between 700 and 750,000 as that is what Zillow is suggesting. My question is, how can I be able to buy this house at such a young age with so little money? I'm 26 years old. I have 21,000 in my brokerage account. I make 85 to 90,000 a year. Should he even bother with this offer or should I just move out, rent for a few years, save up more money, and then buy a different house when I have more cash on hand? Please let me know what you think is the best decision. If I do buy the house, my plan was to live upstairs and rent out the bottom half to help pay the mortgage. Thanks so much. Keep up all the awesome work. Robert, this is a cool question. What's your take here?
- [22:53]
B
My take is do not buy this house. You don't have your base built even though you're making really good money. And that is awesome for your age. You just are not in a situation. You're going to be housebroke almost immediately because I know it sounds affordable and you can make it happen, but at the end of the day, get your base built. I'd like to see you have a hundred thousand, two hundred thousand dollars saved and invested rent for a couple more years, then buy a house that's affordable for your budget. You have to understand that a lot of people will buy a house up to what will be loaned to them and that's a terrible idea just because they'll give you the credit doesn't mean you should use it. So I think it's a bad idea. Idea. I wouldn't even consider buying this house at your age, at that price point and based on what you're making because you're just going to put yourself in harm's way and prevent yourself from being able to continue investing and building your financial future.
- [23:47]
A
Couldn't agree more. I think our anonymous listener should move out when the time comes. I think they need to go rent something modest, maybe get some roommates, maybe some housemates, right? Something that's affordable to you. So you're not paying more than, let's call it 30 or 35% of your net take home pay in total housing expense there and then from there just build your base, right? You're very young, you're 26 years old. Try and get a hundred thousand dollars invested by the time you're 30, right? How can you, you know, get an extra, what is it here? Let's call it 79,000 into your brokerage account, right? One, this is going to grow automatically because it's invested. But two, how do you get that much money invested over the next three or four or five years? I think it's a wonderful goal to have. Now. You're in your early 30s, you've got your base built, you're probably making now a hundred to 120,000 because we know, we fast forward three, four years here you're already making 85 to 90 and now you can say, okay, cool, I'm going to buy a house from a place of authority, from a place of strength, not from a place of desperation of oh, this is where I live right now. I want to just buy this because it makes sense. Like doesn't make sense. Don't do this. We think you're in a great situation. I'm really sorry to hear about the passing of your grandmother and I hope your mom is getting through that as well because I'm sure it's just as hard on her as it is you. But I don't think this is your sort of move at 26 years old.
- [25:03]
B
I agree totally. And before we get into our next question, listen up folks. You can lock in a 6% or higher yield with a bond account on public. But remember, your yield isn't locked in until the time of purchase. So you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only@public.com rich habits.
- [25:26]
A
Our next question comes from Samantha L. On Instagram, Samantha says, I'm 59 years old and will be 60 in a couple of months. I have a 403B worth $900,000. 41,000 in my high yield savings, 155,000 in my bridge account, 210,000 in my Roth IRA. My husband is not good with money and he bought a condo in the Philippines that we're paying this through combined HELOC 7% interest and pay our own money every month, about 500amonth. Wow, this is really hard to read, but we'll get through it. Okay. Samantha L says we currently owe HELOC 4k. Hey, I know I can pay this in full, but I want to teach my husband to be responsible. Here are my questions. Since I'm planning to retire at 62, what is the best time to take out my 403 money and do I just roll it over into a traditional IRA in increments yearly? My second question is, should we sell this condo in the Philippines, take a loss on it since no one's renting it? I'd like to hear your thoughts and I appreciate your guidance. You guys rock. Robert, what do you think Samantha l should do here specifically? Let's start with the condo in the Philippines.
- [26:32]
B
Sell, sell, sell. We need the Jim Cramer button. I would get rid of it. You can't manage it well from the Philippines. He shouldn't have probably bought it in the first place. Who knows how he even got to that point to buy something like this. I would sell it, take the loss, get the write off and move on. That's where I'd start. But I would also be careful when you're Talking about the 403B you're coming up. You can probably start migrating that money out now at 59 and a half. Half. So just be careful because if he's willing to make bad investments like the Philippines, he might try to do something else like this with your 900k. So make sure you have protection here with him. At the very least, you have an important talk with him and say, look, I'm getting ready to migrate this money into a traditional brokerage account so we can make more money for our future. You can't go make these types of investments without discussing with me, but that's where I'd start. You've done a wonderful job getting where you're at at and you do need to teach him to be responsible because he shouldn't be. Especially if you're the breadwinner out there flinging money around on these investments without Your recognition and approval. I just think it's a bad idea.
- [27:40]
A
Yeah. From the perspective of the 403B, if you plan to retire at 62, I would, you know, once you are not working at the company that offers the 403B anymore, I would definitely transfer that 403B over into a traditional IRA. Maybe you're able to get a 1% match on public's plat. That'd be cool. But again, that's a couple years into the future. But have autonomy over that investment. Maybe meet with a financial advisor that's going to help you sort of craft a portfolio that's going to aid you into, you know, retirement, wealth preservation, income generating stuff, things of that nature. So yes, moving that over is a good idea. But when it comes to the condo. Yeah, get rid of that. Sell, sell, sell. I would do the exact same thing. I think, I think a lot of people misunderstand and under estimate just how hard it can be to be a long distance landlord. I know landlording is like cool, you know, oh, I got all these properties, all this stuff I got. It's one thing to be like, yeah, I've got some properties in the town I live in or the town I used to live in. Right, you're pretty familiar. You've got some contacts, things like that. But maybe by your English, here it is. You maybe are in the Philippines. But I would argue you're probably not having a condo in a country that is like way far like that to me just sounds like a headache waiting to happen. And you did this HELOC thing at 7% like just get out of it. This isn't worth it. Even if you have to take a haircut, haircut, it's okay.
- [28:57]
B
And for everyone else listening that thinks real estate is cool, have a plan. Understand your buy box. We were talking about this yesterday with my partner Ron and so many people will go buy rentals that cash flow 300amonth and they're like, wow, I'm cool. I have this rental and I'm making $300 a month. Understand why you're doing that? Because the $300 a month you might think of as profit. But then every year or two when you have a vacancy or a hot water tank or a roof needs repair, replaced, that eats up that 300amonth immediately for that repair or that upgrade. So just make sure you understand why you are buying these properties. Because you have to understand the total ownership cost and your benefits, whether it's tax or write off or whatever it is before you make these investments.
- [29:45]
A
Our next question comes from Gabriel E. Gabriel says, hey guys, my name is Gabriel, I'm 18 and I love the show. In the past few months, I've started my first full time job and I've been studying cybersecurity. Just this week, I've opened up a Roth ira, a brokerage account through public, and I've set up a high yield savings account. I only make minimum wage, which is about 12 bucks an hour at this point, and want to make my money work its hardest for me. So my question is, what should I be investing in inside my Roth ira? What stock should I be investing in in my brokerage account? And what else can I do to achieve financial freedom? Look at this. This is so cool. I love this question. 18 years old, asking all the right questions. So I'll kick us off. What should investing in your Roth ira, your brokerage account, all that fun stuff. The goal here is to get your first $100,000 saved and invested as quickly as you possibly can. Now, on average, this takes about seven to eight years. So don't think that you're going to have 100 grand in your brokerage account in the next 24 months. Right? It takes a long time to achieve. So, Gabriel, what I would do if I were you is I would be contributing some sort of like amount of money automatically and systematically in this Roth IRA. You don't have to max it out making 12 bucks an hour here. I know thousand dollars a year is a lot, especially at that type of wage that you're making here. So if you can commit to saying, hey, I'm putting 50 bucks a month into this or I'm going to put a hundred bucks a month into this. Like have a goal number that you just hit every time. You don't go out with your friends because you got to hit this goal number. But don't make it so you know hard that you're never going to achieve it. So high that you're never going to achieve it. You won't be able to actually do it and like stick with it. So maybe it's 50 bucks, maybe it's a hundred, 150. I don't know your financial situation, situation, but if I were you, I'd give myself a gold number every month to contribute to the Roth ira once it's in there. What do you do with it? If you want to split it up 50, 50 between Voo and QQQ, right. The S&P 500 and the Nasdaq 100, which again, the S&P 500 is the 500 largest most profitable companies in the United States. And the Nasdaq 100 are the 100 largest companies by market cap listed on the Nasdaq. Wanna do that? Rock and roll. You'll be just fine in the long term. But Robert, what. What other sort of tips and tricks do you have for Gabriel here as it relates to achieving financial freedom?
- [31:53]
B
I applaud you, Gabriel. 18 years old. I feel like it brings me back to memories when I was 18 years old and everyone thought I was crazy. And at that time I was putting away $20 a week. So I love your breakdown, Austin, but here's the deal. You have to go make more money. I'm glad you have the accounts open, but you're not going to get very far very fast making $12 an hour hour. You just aren't. So I want you to really seriously consider, can you upgrade your job that you currently have, and if not, and you like the job and you see upward potential for it, I want you to get a side hustle. There's a side hustle out there somewhere in cyber security or something computer related that you can do on nights and weekends, right from your laptop or your phone that you can make more money. And I want you to take every dollar from the side hustle, hustle, pretend it doesn't exist and dump that into public. Get your, you know, low cost ETFs going in your Roth, get some stocks going that you like. Maybe you're really following along in the cybersecurity space. That could be a great place to start with two or three stocks there. And then I would look at maybe taking a little bit of money as well, getting into Bitcoin, Ethereum and Chainlink. And I would do that three pronged approach with every dollar I can get. I remember when I was 18, I had three jobs and everyone made fun of me. But guess what? At 22, I already had almost $30,000 saved and invested and I bought my first 4 Plex at 22 years old because I had the diligence from 18 until then to keep socking away money and investing it. So I hope this helps.
- [33:28]
A
Yeah, the $12 an hour that you had mentioned, I agree. Like, I'm pretty sure you can like scoop guacamole at Chipotle for more than that, which again, if you are in a path, a career path where 12 turns to 16 turns to 22 turns to 35 by the time you're in your, you know, let's call it early to mid-20s, rock and roll, Right? You're on a path to go make 70k a year working full time doing cyber security. I think that's awesome. But if you're on a path that doesn't exactly show that sort of upward mobility, then to Robert's point, you should totally figure out the best way to start earning more money. If it is with a side hustle, if it's with a career change, like, whatever you got going on there. So good job. Gabriel. You're young. Young. Don't take this as, like harsh advice by any stretch of the imagination. You're doing an incredible job. We just want to make sure that you're trending in the right direction. There's a philosophy that I like to think about, and Robert, I want you to chime in on this because this actually really helped me when I was Gabriel's age, which is it doesn't matter how fast you climb up the ladder if the ladder is leaning against the wrong wall. Right? It doesn't matter how fast you climb up the ladder if the ladder is leaning against the wrong wall. Which means the. That if you feel like you're doing a lot of cool stuff and like, whatever, like, oh my gosh, you got fast and great. But like, if you're working toward the wrong goal, it doesn't matter how fast you're going to achieve that goal because it's. It was the wrong goal to begin with, which, like, I'd much rather climb up the right wall slower, knowing that it is the right wall.
- [34:55]
B
I love that. Because here's my problem. I think about right now, my mind is racing about all of my small businesses around the country. Country. I don't have anyone that makes minimum wage, not even close to minimum wage. At the restaurants, we pay way above national average and we do tip sharing. And then at the construction company, nobody's close to minimum wage. And same with the warehouses and all the other businesses. So I would start with a different ladder. I don't like even hearing that you're working and you're this smart person that's working towards financial freedom and you're making minimum wage. There's gotta be a better ladder. And I would start there.
- [35:30]
A
Yeah, I just looked it up. Here's another Warrant Buffett quote that's pretty similar. His quote is, it's not about how hard you row, it's about what boat you are in. Right? If you're in the wrong boat and you're rowing really hard, you're going in the wrong direction to begin with. And we're not saying Gabriel, you're going in the wrong direction. We're just saying do everything you can at this young age to understand what direction you are going in, what that career path could turn into, the sort of networking and things of that, that nature that are going to unlock, you know, an awesome career for you in the future. So you can then make an educated decision as like this is where I want to go and what I want to be or hey, this isn't going to cut it for me. I'm still young enough to make a change in a decision that's going to really impact me positively in the future. So our final question comes from Felipe S. Felipe says I've got a few questions. So what would you recommend? Should I go and contribute to a Roth 401k or just a regular pre tax 401k? And additionally I do want to get in the real estate game. And so I guess my question also is how do I know when I'm ready? I understand that building my $100,000 base is important, important but I want to make the jump as early as possible. But I also don't want to put myself in a bad situation. I live in Minnesota. The markets for multi family homes seem kind of far fetched and more of a pipe dream. I plan on becoming an electrician to help my income problem, but I won't be making the big bucks for the next few years. I currently make between 55 and 60 as a route driver. That's a good question, Felipe. So I always want to encourage people to invest and contribute toward the ride. Roth component slash variant of whatever the account is. Right. So Roth IRA, Roth 401k, things of that nature. Unless they're like really close to retirement. Right. Because at that point then you're probably optimizing for taxes and, and things of that nature. And of course speak to a CPA and financial advisor to ensure that you're making the right choices there. But generally speaking I always encourage people to go with the Roth variant versus just that pre tax variant. So I would do the Roth if I were in your shoes, especially as to like I'm assuming you're kind of young by the way you're talking here. So younger the better when it comes to the Roth stuff. Robert, what's your take on the multif family home and sort of way that Felipe here is going to be able to achieve his dream of maybe house hacking and getting into real estate?
- [37:43]
B
Yeah, I think you need to put the dream off. I like where your head's at. I love that you asked this question, but I feel like you're kind of all over the place right now. I would get dialed in as an electrician. I know you said it's going to take a while for your income to catch up. That's a. Okay. Because even if you start whatever it's called, the intern level or junior electrician level, whatever it's called, it doesn't matter because you've got your brain already thinking like an investor and not a consumer. So whatever you can put away right now into that Roth variant. But I would also look at having building your emergency fund. I would make sure, I'm assuming you're younger, that you're going to get some money into crypto. I would like you to start with just the basics, like Bitcoin, Coin, Ethereum, maybe xrp, Chain link, something like that. All of those things can come at a smaller level because once you start making really good money as an electrician, you're going to be able to accelerate all of this. That might take two or three years, but guess what? It would be worth it for you to wait two or three years rather than jumping into a real estate project right now and then going backwards financially. Because every real estate project, whether it's a fixer upper or a flip or whatever it's going to be or you're going to live in, it, is going to take more time, it's going to cost more money, and it's going to drain your ability to be able to continue investing. So that's my take. I would get your base built, just like you mentioned. I would get the electrician job up and running so you can increase your income and rock and roll and keep doing what you're doing.
- [39:12]
A
I think it's great advice. Staying focused on one thing at a time is the way that wealth is built, right? Our friend Felipe here, he's got to stay focused on. On becoming this electrician so he can get his income up. Then once that is complete, he's gonna get focused on getting that 100k. And then once that's complete, he's gonna get focused on the real estate. But having that, that focus is really important. So I appreciate your answer there. Robert, everybody, thank you so much for tuning in to this week's episode of the Rich Habits Podcast, Question and Answer Edition, brought to you by public.com. if you've not yet joined the Rich Habits Network, what are you waiting on? We've got over 800 people now, now inside of the Rich Habits Network that join us Every Tuesday night for our weekly zoom call live streams where Robert and I sit in front of the camera just like we're doing right now for two hours, sharing our market updates, our portfolio, trades and holdings, and answering any and every question you could possibly come up with both in the chat. And then obviously people come on, you know, cameras on, microphones on, and ask questions as well. Just like we're having a conversation here, Robert. So if you are a super fan of the show and you want some more tailored help or advice from Robert and myself as it relates to personal finance, investing or just whatever you got going on in your life, small business ownership, entrepreneurship, all that fun stuff, join the Rich Habits network. It's the place to be. Oh, and you get to invest alongside of us into some awesome cool companies. Just this year, Robert, we've invested into Merkor, Fluid Stack, Lambda, AI Capacity, Apptronic, Paradromics, Fizz is a lot of these really cool companies that, to be honest with you, you know, you look back like even a year or two ago and I'm just like, man, I'm so grateful that I have like exposure to this asset class of like these privately held names. And that's actually a great segue into a reminder on the multi asset spv if you also want to invest alongside Robert, myself into SpaceX, Xai in Perplexity, as well as Mr. Beast's Beast Industries, which is his Feastables company company, Katy Perry's Desoi Graza, the olive oil company and everything else that's inside the Cashmere Fund. You are more than welcome to join us as an accredited investor using the link in the show notes below.
- [41:22]
B
Yeah, my biggest takeaway for the community is it's exactly that. It's just not another group. Yes, we talk about stocks, we talk about crypto, we talk about business, but it's more than just that. It gives you access to not only Austin and myself and Christian and our team team, but it gives you access to so much more because there's lawyers and doctors and real estate agents and mortgage lenders and all these people in the community that are leveling up their finances. So if you're serious about getting involved with the community, I think this is the best community that can do it. And you know, I'm obviously biased because it's Austin and I's community, but I just think it's a great way really quickly for you to get in the know and really get to be able to have these opportunities like Austin just alluded to, to which you wouldn't have normally out on the street or even in some of these other communities, because they just don't have the access that we do.
- [42:14]
A
And we're over 800 people, which, like, to me, is crazy to think that 800 people are in this community hanging out with us. So if you want to join us before we hit a th000, feel free to join us, because we inevitably will hit a th000, which is really exciting, probably sometime here in early 2026. But with that being said, everyone, thanks so much for tuning into this week's episode of the Rich Habits podcast, Question and Answer edition. And we will see you tomorrow for our episod the Rich Habits Radar, our new Friday episode that is solely focused on talking about the biggest headlines and happenings that are impacting you and your money. So we'll see you then. Sam.