Q&A: Forex Trading, Peer-to-Peer Lending, & Cashing-In on RSUs

Summary

Rich Habits Podcast: Detailed Summary of "Q&A: Forex Trading, Peer-to-Peer Lending, & Cashing-In on RSUs"

Release Date: January 23, 2025

In this engaging and informative episode of the Rich Habits Podcast, hosts Austin Hankwitz and Robert Croak delve into a series of listener-submitted questions, providing expert advice on a variety of financial topics. The episode covers everything from investment strategies and refinancing loans to career pivots and managing stock options. Below is a comprehensive summary of the key discussions, insights, and conclusions drawn from each question.

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1. Investment Strategies: IUL vs. Roth IRA vs. Forex Trading

Question from Sakura

Sakura, a nurse new to the United States, seeks advice on optimizing her monthly investments. She currently maxes out her Roth IRA, contributes to her company's 403B, and invests in an Indexed Universal Life (IUL) account. With an extra $500 each month, she's contemplating whether to continue investing in her Roth IRA or venture into forex trading by opening a foreign currency account.

Key Insights:

• IUL Concerns: Both Austin and Robert strongly advise against continuing with the IUL due to high fees and commissions, which often outweigh the benefits. They highlight that IULs can consume more in fees than they generate in returns, especially in the initial years.

  Robert (03:59): "I would love to first and foremost get rid of the advisor and get rid of the IUL. IULs may or may not make 6, 7, 8% but it doesn't matter because the fees are so incredibly high."

  Austin (07:07): "Remember this, if you invest in the S&P 500 through a fund like Voo, if you stop investing, the money keeps growing. You own it, it's your money and it just keeps growing and compounding. If you stop making payments on the IUL, they keep all your money."

• Cryptocurrency Recommendation: Robert suggests allocating a portion of the portfolio to cryptocurrency, emphasizing its potential as part of a diversified investment strategy.

• Forex Trading Skepticism: Both hosts express reservations about forex trading, citing the unpredictability and high risks associated with currency markets. They recommend sticking to proven investment vehicles like index funds and ETFs.

• Actionable Advice: Focus the extra $500 on bolstering existing Roth IRA contributions and consider diversifying into cryptocurrency rather than exploring forex trading.

Conclusion: Sakura should eliminate the IUL, continue maximizing her Roth IRA contributions, and cautiously consider adding cryptocurrency to her investment portfolio instead of engaging in forex trading.

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2. Peer-to-Peer Lending: Evaluating Opportunities

Question from Manuel R.

Manuel R., an immigrant investing in real estate, seeks guidance on peer-to-peer (P2P) lending platforms like Lending Club and Prosper, which offer seemingly attractive returns.

Key Insights:

• Risk Assessment: Both hosts caution about the inherent risks of P2P lending, emphasizing the uncertainty of returns and the potential for default, especially in economic downturns.

  Robert (08:46): "Peer to peer lending has been around for a long time. It can be highly lucrative. But I just want to make sure you understand there are risks there."

  Austin (09:30): "Peer to peer lending doesn't do that [provide liquidity]. Real estate doesn't do that."

• Liquidity Concerns: They highlight the importance of liquidity in investments, noting that P2P lending can tie up funds with limited access in emergencies.

• Alternative Recommendations: Instead of P2P lending, they advocate for traditional investment methods that offer greater security and liquidity, such as diversified index funds available on platforms like Public.com.

Conclusion: Manuel should steer clear of P2P lending platforms due to their high risk and lack of liquidity, opting instead for more secure and liquid investment options.

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3. Career Pivot to Financial Advising

Question from Anna S.

Anna S., an independent contractor in the film industry, has successfully grown her investment portfolio but is considering a career shift to become a financial advisor. She inquires about the viability and opportunities within this field.

Key Insights:

• Challenges of Pivoting: Robert and Austin outline the significant challenges Anna may face, including the difficulty of building a client base from scratch and the time-consuming nature of becoming fully licensed.

  Robert (19:20): "Pivoting to be a financial advisor, if you've had no prior experience in the field, people do not know you in any way... building a book is going to be the hardest thing you do."

  Austin (21:28): "I would also argue that it's a dying industry... more people want to begin self-managing, flat fee, you know, pay me by the hour type."

• Industry Trends: They note a shift towards self-managed financial solutions and flat-fee advisory services, suggesting that traditional financial advising roles may be less lucrative and more challenging to enter.

• Alternative Pathways: Austin mentions the potential of selling term life insurance as a more accessible entry point into the financial sector, which may offer quicker returns through commissions.

Conclusion: While Anna is passionate about finance, the hosts advise caution, highlighting the substantial effort required to establish herself as a financial advisor and suggesting alternative roles within the financial industry that may offer more immediate benefits.

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4. Selling Pre-IPO Stock: Maximizing Returns

Question from Katrina H.

Katrina H. contemplates selling a portion of her pre-IPO stock holdings in her tech startup. She is considering selling 1,000 shares at a significant profit and seeks advice on whether to proceed and how to utilize the proceeds.

Key Insights:

• Sell Strategy Endorsement: Both hosts strongly recommend selling the shares to realize the substantial gains, citing the unpredictability of IPO timelines and market conditions.

  Robert (24:09): "I love your situation and I think it's sell, sell, sell, because you have 100x return on this stock."

  Austin (26:24): "Just like what Robert said. Take the $63,000 or so of profit. ... it's okay to sell shares of stock that you got as compensation."

• Tax Considerations: They advise setting aside funds to cover potential tax liabilities resulting from the sale.

• Investment of Proceeds: Suggested uses for the proceeds include saving for a down payment on a house, reinvesting in diversified index funds, maxing out retirement accounts, or funding a personal vacation.

Conclusion: Katrina should proceed with selling her pre-IPO shares to lock in her impressive gains, ensure she accounts for taxes, and strategically invest or utilize the proceeds to further solidify her financial standing.

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5. Auto Loan Refinancing: Is Now the Right Time?

Question from Brad K.

Brad K. is considering refinancing his $30,000 auto loan, which currently has an 8% interest rate. With rates purportedly dropping to around 6%, he wonders if refinancing now is advantageous or if he should wait for potentially lower rates in the future.

Key Insights:

• Pros and Cons Analysis: Austin and Robert discuss the benefits of lower monthly payments and interest rates but caution against extending the loan term, which could increase the total cost despite lower monthly payments.

  Robert (27:30): "The pros are lower payment... but you have to make sure you understand one thing before you sign the dotted line."

  Austin (30:58): "Make sure you totally understand the numbers and the total ownership cost over the life of the loan."

• Loan Fees and Total Cost: They emphasize the importance of factoring in loan origination fees and how these can diminish the benefits of a lower interest rate.

• Strategic Repayment: Instead of refinancing, they suggest accelerating loan repayments through double payments or side hustles to reduce interest costs without extending the loan term.

Conclusion: Brad should carefully evaluate the total cost of refinancing, including fees and potential loan term extensions. If the overall savings are significant and do not substantially extend the loan duration, refinancing could be beneficial. Otherwise, focusing on accelerating payments might be more advantageous.

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6. Managing Personal Debt and Planning to Buy a House

Question from Henry C.

Henry C., a 30-year-old married father of three, seeks advice on managing his current debts and planning to purchase a home within the next two years through the NACA program. His financial profile includes existing debt and investments across various accounts.

Key Insights:

• Debt Repayment Priority: Both hosts stress the importance of eliminating high-interest personal loan debt as a foundational financial step before pursuing further investments or a home purchase.

  Austin (33:58): "First thing I want to do is get rid of that personal loan debt."

  Robert (35:06): "Be in a rush to set yourself up. Make sure your credit score is really good, make sure you have the base built."

• Building a Financial Base: They recommend increasing investments in index funds and ETFs to establish a solid financial foundation before committing to a home purchase.

• Emergency Fund Importance: Emphasize the necessity of maintaining an emergency fund to safeguard against unexpected financial setbacks, ensuring investments remain intact.

Conclusion: Henry should prioritize paying off his high-interest personal loan using available funds, temporarily reduce or pause retirement contributions to free up cash for debt repayment, and focus on building a robust investment portfolio and emergency fund before proceeding with purchasing a home through the NACA program.

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7. S&P 500 Investing: Addressing Concerns of Overvaluation

Question from James W.

James W. raises concerns about the current valuation of the S&P 500, particularly the dominance of the "Magnificent Seven" stocks, and questions the sustainability of the average returns Austin and Robert advocate for.

Key Insights:

• Long-Term Perspective: Both hosts reaffirm their belief in the long-term growth potential of the S&P 500, citing historical averages of approximately 12% annual returns despite recent volatility.

  Robert (40:09): "The easiest way to get invested and grow your wealth over a long period of time is by owning American capitalism, aka the NASDAQ and the S&P 500."

  Austin (42:10): "Building their base... they start investing... Roth up and running, get the Voos and the QQQs of the world in their portfolios."

• Market Anomalies: They acknowledge recent years' exceptional gains and losses but maintain confidence in the market's resilience and continuous growth driven by innovation and economic activity.

  Austin (40:09): "There's always a way to make money in equities if you know where to look."

• Investment Strategy: Emphasize dollar-cost averaging and maintaining diversified exposure within the S&P 500 to mitigate risks associated with market fluctuations and sector dominance.

Conclusion: Despite current high valuations and market concentration among a few large-cap stocks, James should continue investing in the S&P 500 with a long-term horizon, utilizing strategies like dollar-cost averaging to benefit from the market's historical growth trends while remaining aware of short-term volatilities.

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Final Thoughts and Takeaways

In this episode, Austin Hankwitz and Robert Croak provide candid and experience-based advice on a range of financial topics, emphasizing the importance of building a solid financial foundation, understanding the true costs of investment products, and adopting a long-term perspective in investment strategies. Their practical approach, combined with real-world examples and honest assessments, offers listeners actionable insights to enhance their financial literacy and decision-making.

Notable Quotes:

• Robert (03:59): "Keep that in mind. So your investments deserve a platform that takes them as seriously as you do."

• Austin (07:43): "Sophisticated people never invest in IULs."

• Austin (26:26): "The last two years were anomalies. The market doesn't go up 25% per year like that normally."

Recommendations for Listeners:

• Evaluate Investment Fees: Always assess the fees and commissions associated with any investment product to ensure they align with your financial goals.

• Prioritize Debt Repayment: High-interest debts should be addressed promptly to avoid eroding your investment returns.

• Maintain Liquidity: Ensure you have adequate liquid assets for emergencies before committing to long-term investments.

• Adopt a Long-Term View: Focus on sustained growth through diversified, low-cost investment options like index funds and ETFs.

• Stay Informed and Skeptical: Approach high-return investment opportunities with caution and conduct thorough research.

By following these principles, listeners can navigate the complexities of personal finance with greater confidence and effectiveness.

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For more insights and detailed discussions, be sure to listen to the full episode of the Rich Habits Podcast on your preferred platform.

Transcript

[A]

This episode is brought to you by Amazon Business. We could all use more time. Amazon Business offers smart business buying solutions so you can spend more time growing your business and less time doing the admin. I can see why they call it smart. Learn [e-mail].

[B]

Hey everyone, and welcome back to the Rich Habits Podcast Question and Answer edition. You guys know the drill. You ask us questions and we answer them. You send us emails at rich habits podcastmail.com you send us Instagram dms, rich habits podcast on Instagram or you ask them inside of the Rich Habits Network. More information about that in the show notes below. Robert, we've got eight really good questions teed up for today's episode. Talking about selling pre IPO stock, talking about auto loan refinancing, talking about, I mean, so many cool things we're gonna be talking about in today's episode. So I'm excited. We're jumping in. And as you guys know, we do these kind of off the dome, right? We're not really scripting anything. We're not really strategizing on answers. It's Robert and I in real time having a conversation as to how we'd approach this situation that you're asking us as if we were in your own shoes.

[A]

Yeah, that's why I love these episodes so much, because we can move the needle and provide so much insight and value rather than what we see a lot of podcasters do where they get these questions or they get these scripts and someone puts it through grok or chat GPT and tries to come up with what to say. This is all off the dome from our experience and our knowledge to make sure you guys get the best answers we can provide.

[B]

Now, before we jump into our first question, Robert, I need people to listen up. We're talking to the serious investors right now. If you are a serious investor like Robert and I both are, you need to know about Public.com. public.com is where you can invest in everything. Stocks, options, bonds, and even cryptocurrency. They offer some of the highest yields in the industry. Like on their bond account, it's paying 7% right now and that remains locked in even if the Fed cuts interest rates. Now, what sets Public apart is how they give you the tools that you need to make informed investment decisions. They have a built in AI tool called Alpha. And it doesn't just tell you if an asset is moving, it tells you why an asset is moving. So you can actually go out and understand what's driving your portfolio's performance on a daily, monthly and quarterly basis and.

[A]

Public is a FINRA registered SIPC insured US based company with a customer service team that actually cares. So the bottom line, your investments deserve a platform that takes them as seriously as you do. So fund your account in five minutes or [e-mail] rich habits and get up to $10,000 when you transfer your portfolio. That's public.com rich habits paid for by Public Investing. Full disclosure in the podcast Description so.

[B]

Our first question comes from Sakura. Sakura says hi Austin and Robert. My name is Sakura. Thank you so much for your podcast. I learned a lot from it, especially as someone originally from another country. Now I do have some questions. I'm a nurse and I just moved to United States in February of 2024. I'm matching my company's 403B and I'm maxing out my Roth IRA every year. I'm also putting $500 a month into an IUL account because my financial advisor says that the returns are usually 8% and I'm excited about that, but I'm not sure if it's the right thing to do. I still have about $500 of cash every single month that I can invest after my exp expenses. I of course want to be able to retire one day, travel and enjoy my life. So here's my question. Should I continue to invest this money into my Roth IRA or do I go open a foreign currency account so I can exchange this USD for some Japanese yen and try and trade it and make some money? Or any other advice from you guys would also be very much appreciated. Robert, you want to kick this one off?

[A]

I would love to first and foremost get rid of the advisor and get rid of the IUL. IULs may or may not make 6, 7, 8% but it doesn't matter because the fees are so incredibly high. So you have to remember that ask your advisor one thing and that is how much of the fees and how much are the commissions on this iul? And you will find that in the first three, four, five years they are making way more money off of the IUL than you are. So keep that in mind. Secondarily, I didn't hear anything about cryptocurrency. I would always want to make sure everyone listening has a small portion of their portfolio in cryptocurrency. So I would keep an eye on that. And I love the idea of having the traditional brokerage account, the bridge account like we always talk about. So those are the things I would do. Get away from the IUL get that money invested, make sure the Roth is maxed out like you said, every single year, and get the cryptocurrency up and running in your portfolio. Public.com is a great place to do it.

[B]

I love that answer. I totally agree. You don't need an iul. Sakura. I don't think it's a great idea by any stretch of the imagination. Now, is there a 1% situation where some people could use IULs for tax reasons or inheritances? Like? Like yes. You can get sold on anything by someone who knows what they're doing. I'm sure there's a possible situation out there that someone might need one. But for 99 of people, IULs, which are stand for index Universal Life Insurance, it's essentially whole life insurance that's invested into an index. You don't need it. To Robert's point, you're paying a lot of fees, you're paying a lot of commissions. You are also like building up this savings account that the only way you can access the money is to borrow against it and go into debt to get your own money. That doesn't make any sense. I just, I don't like this one bit. So get out of the iul, surrender it, take that cash value, go invest it into the bridge account like Robert was talking about. And then to answer a couple more questions here. So the first one is with this extra $500 a month, what to do with it? Make sure you're maxing out your Roth IRA every year. Once you've maxed out your Roth IRA and you've matched up to the company's 403B, if you have autonomy over those investments in that 403B, this extra money could be used to invest more into that employer sponsored retirement account. Assuming again it's not into some crazy international stocks or bonds or weird things like that, but it's all just invested normally into the index funds and ETFs. We talk about like the S P 500, like the NASDAQ, things of that nature. And then finally this foreign, foreign currency account. Sounds like a gamble. I wouldn't do it. I don't know how to trade forex. I don't know what the yen's gonna do to the wand's, gonna do to the ruble, gonna do to the USD. I don't know any of that stuff and I'd be very surprised if you do. So if I were you, I would not dabble in the dark arts of foreign exchange trading and instead invest your money over a long period of time in blue chip single stocks and or these awesome tried and true index funds that we talk about in public.com and.

[A]

One more thing that I want to add that you sparked the thought is remember this, if you invest in the S&P 500 through a fund like Voo, if you stop investing, the money keeps growing. You own it, it's your money and it just keeps growing and compounding. If you stop making payments on the iul, they keep all your money. So keep that in mind. It just goes away. It doesn't keep earning money. You can't just stop. So keep that in mind and make sure you understand that. And that is why we say that iuls are just not a real investment and sophisticated people never invest in Iuls.

[B]

We are the biggest proponents of term life insurance. If you want to go open a term life insurance policy, I have one. Robert has one. I've got a million dollar policy through Prudential. I was recommended to Prudential through shuriance. Go to shuriance.com rich habits. You'll meet with Russ and their whole team. Really nice people. So go get yourself a term life insurance policy, Sakura, and get rid of the Iuls and the whole life insurance and all the other crazy stuff. So our next question comes from Manuel R. Manuel says, hello, Austin and Robert. Thank you for all the information you share. As an immigrant, I'm not familiar with all the investment opportunities in this country, so I'm very careful on everything I see online. I'm already investing in real estate, my company stock plan, the Roth 401K and the traditional Iraq. Let's go. Okay, Very cool. So Manuel says, I found platforms like Lending Club and Prosper that offer peer to peer lending and some of the results look good, maybe too good to be true. What is your opinion, Austin and Robert on peer to peer lending services? Robert, you want to take this one?

[A]

Manuel, great question. Peer to peer lending has been around for a long time. It can be highly lucrative. But I just want to make sure you understand there are risks there. And I think there are better places at this part of your journey to be investing your money. Because at the end of the day, peer to peer lending does well, especially in tough economic times and like right now where there is high credit card debt and everyone is financing everything but me personally, I don't put my money in these platforms. I don't think you should either. If you had millions and millions of dollars and you were looking for ways to make extra money, then yes, maybe that would work. But in this Instance, I think there are just better ways to invest your money at this part of your financial journey.

[B]

I like that. Robert, I'm right there with you. I mean, here's what you're doing. You're essentially saying, hey stranger on the Internet, I'm going to lend you 12, 15, $20,000 to do what you're claiming you're going to do with my money. And you're hoping that this person on the Internet is going to pay you back. That is essentially what peer to peer lending is, right? Peer to peer. So like, hey Austin, my name's Robert. I need $100,000 at a 10% interest rate. Can you lend it to me? Sure. Here's your 100,000. Pay me 10% over the next 12 months. And like, like that is how peer to peer lending works and like how people make money doing it. The problem with that, and I'm not dogging on Lending Club or Prosper or any other lending peer to peer lending platform out there. I'm sure they work. I'm sure they've got tons of great reviews for very specific situations. But I just would rather have the liquidity that comes with investing into the stock market and other, you know, real companies. And if I want a 6, 7 or 8% yield, I'm just going to go buy a bond account on public.com and make 7% that way. I'm not going to try and, you know, lend it to a stranger on the Internet and make 12% like that. Just the risk doesn't add up for me there. So Manuel, I appreciate the question. I love that you are so skeptical about investment opportunities on the Internet. I think everyone should be skeptical, especially now after we have Trump Coin, Melania Coin and all these other crazy meme coins that are coming out of the woodwork. Skepticism is key when it comes to these types, types of euphoria type markets that we're entering right now. But Manuel, the biggest piece of advice I can give you is to think more about the liquidity of your money, your access right to that money in case of an emergency or something happens. Peer to peer lending doesn't do that. Real estate doesn't do that. You know, owning a small business doesn't do that. So just think a little bit more about that liquidity aspect.

[A]

Yeah, I agree. Coming from experience and speaking from experience, you know, most of the people that are using these sites either have somewhat dinged up credit or they just can't get money traditionally. And that's why they look to these sites for help. So Just keep that in mind. I totally agree with what Austin said and I think it's better just invest traditionally. It's much safer. And like Austin stated, you will have the liquidity you may need yourself.

[B]

So our next question comes from Matt B. Matt says. Hi, Austin and Robert. My name is Matt and I've been listening to the podcast for about nine months and it's made a monumental change in my life. I've taken the funds that I've had in a 401k target date fund and I' move them into the S P500. I've also started investing into my Roth 401K, also in the S P500. And I convinced my wife to move $80,000 of dead money in a bank account into Voo as well as opening a Roth IRA for her and maxing them out for 24 and 25. Let's go. Matt B. That is awesome.

[A]

Wow. This is mind bending. I love it. And Matt, thank you for listening. Thank you for taking notes and taking action. This is what we want to see.

[B]

So here's my situation. I'm 47 years old. I currently have 155,000 in a traditional 401k, 5,000 in a Roth 401k 20,000, and an ESOP account from a previous employer, which is essentially dead money. But I can only distribute $5,000 out of it per year. Now, in 2024, I did this $5,000 distribution. I rolled it over into my traditional 401k so I could kick the tax man. But this year I want to do something different Inspired by episode 99. I thought it might be a better idea to take my 5,000 distribution, eat the taxes on it, and then invest the rest into humanoid robotics and nuclear energy like the two of you. I completely believe in these technologies and I think they're both going to snowball tremendously in the coming years. And I want to be ahead of the curve. What do you all think about this plan? I think this is a great idea. I mean, if you want to take that $5,000, pay your taxes on it. So let's call it a 20% effective tax rate. Just make sure that you have that extra $1,000 sitting in an emergency fund or doing something sitting somewhere where when you have to file for taxes and Uncle Sam says, hey, you owe me an extra thousand, then you set aside. You don't have to go into any sort of like high interest debt to come up with that money, which I don't think you will since you have so much Money. That's the only piece of advice I have for you. I think it's a great idea. Go for it.

[A]

Great question. Matthew and Austin totally agree with everything you said. So a couple things that I'm investing in for these categories that are available. Number one would be Tesla. They are going to crush, crush, crush it in the humanoid robotics and there's a bunch of pre IPO companies coming up that we'll be keeping an eye on. But then also in nuclear, I really like Constellation Energy I think is great you could check out the fund ura. I think it's going to do very very well in the coming years as well. And lastly NXE which is next gen Energy I think is a really strong as well. So I like this strategy because obviously getting that money working and getting it optimized so you have hopefully much higher gains is the way to go. And I'm glad you see what we see in the markets moving forward because like I always say, you don't have to be first to an investment or an investment sector, you just have to be ahead of the masses. And with humanoid robotics and nuclear there is a long way to go.

[B]

So our next question comes from Anna S. Anna says hello Austin Robert, I started listening to your podcast a few months ago and I'm a really big fan. You guys are my financial teachers. Oh I'll take that. I like that.

[A]

I love that. Educators baby.

[B]

So Anna says I'm originally from Europe and I moved directly to LA nine years ago. Oh my gosh Anna, I hope you're safe and all your loved ones are safe as well. I know the wildfires have been tragic for a lot of people and I just my thoughts and prayers with everyone that's going through that I couldn't imagine. Anna says I work primarily as an independent contractor in the film industry and I don't have a 401k. In mid 2023 I started self educating and investing in the stock market. I began conservatively with $15,000 but by the end of 2024 I had invested a total of $200,000. My portfolio is now up 125% but with the recent market pullback my gains have dropped to only 114%. Oh no. Run for the hills.

[A]

Oh my gosh.

[B]

Okay. She says I'm in a pickle and would greatly appreciate your advice. I'm 54 years old. I'm a single parent with two kids. One is in college and the other is working full time and planning to start her mast very soon. I'm divorced and I am the sole breadwinner with no alimony. I have no debt and my only savings are tied up in the stock market, including 8,000 in a Roth IRA which is worth $188,000 as of today. I manage my portfolio myself, and I find the process fascinating. With the film industry facing significant challenges, I've decided to pivot careers and pursue becoming a financial advisor. Do you think this is a good decision and are there any sufficient opportunities in this field? Based on my research, I understand I need to take the SIE Ex first, followed by additional licensing exams after that. Should I aim to work with a bank or a financial company? I'd highly appreciate any advice. Okay, good questions, Anna. Let's dig in. So it seems like you invested originally 15,000, and by the end of 2024 you had $200,000 invested and the portfolio was up 100 and call it 14% now. So you originally probably invested like 85, $95,000 and it's grown to this 200,000. I think that's amazing. You mentioned that you have no savings and that it's all tied up in the stock market. That to me is a big red flag. I want you to take some of this $200,000 in this brokerage account, call it 30 to 40,000. I want you to get rid of it, sell it, turn it into cash, and park it in a high yield savings account. This is your emergency fund. Everyone needs to have three to six months of expenses sitting in emergency fund in case an emergency happens. That might be a death in the family, that might be wildfires in Los Angeles where you live. That might be anything in between, right? There are so many things that are unpredictable that could cost us 8, 10, 12, $15,000. Think of medical bills. Literally anything that would wipe out a retirement account cause you to go into high interest credit card debt. And that's not what we want to do. The emergency fund is insurance against our investments. We want to make sure we can keep our money invested. So congrats on growing your money so well over the last couple some of those profits and beef up that emergency fund. Now, to answer your question specifically about becoming a financial advisor at 54, you're on the right track. The SIE exam is what you have to take. You then have to get like your series 7 and your series 63, I think is what it is to sit for these exams. I believe you have to be working at or represented by some financial company that might be a bank, that might be a, you know, Financial advising firm, there's a ton of them out there. But you have to be working at one of these firms or represented by or something along those lines to take these exams is how I understand it. So that's your first step is figuring out what firm I could make minimum wage at as a calendar person or, you know, maybe executive assistant, something, because, like, you don't provide value to these companies until you're licensed. So you're not going to make much money in the beginning until you get licensed. And then once you get licensed, Robert, obviously with Croak Capital, you know a little bit more about this than I do. But I believe once you get licensed, you're then able to start building what's called a book of business. So what this means is people come to you and say, hey, I have a million dollars. Can you help me manage it? And you will take a half a percent to 1% annual management fee on that money. So let's call it $10,000. So now you're making $10,000 a year by managing this person's $1 million. Now you get that up to 50 million, 100 million. Well, now you're making a good chunk of change. But if you can't get that money up, then you're not really making that much. So maybe, Robert, you can talk more about that side of the equation.

[A]

Yeah, I'm going to go back to the beginning on this entire strategy, and I want to lay the groundwork as it is. I love the idea of pivoting in your career, even at 50, but I want to spell it out to you that pivoting to be a financial advisor, if you've had no prior experience in the field, people do not know you in any way, your personality or your being as being a financial person. And if you don't have a big audience through maybe social media or you've built a big database of people over the years for other jobs, it's going to be really tough to pivot. Pivot. Here's why. You can go get the licenses. Yes, you're going to need to work for a financial firm during that period. Let's call it one to two years. But keep in mind, building the book is going to be the hardest thing you do. It's like going out on your own to sell real estate. Everyone thinks it's easy. You get a license and you go out and sell a bunch of homes. Normally what happens is you get two family members to buy and sell with you. Then you're stuck until you find other People, people. Because you have to remember everyone already has a real estate agent, everyone already has a barber, and everyone already has a financial advisor. So I want to make sure you totally understand that if you feel you are in a good enough position financially to withstand possibly two years of very little if any pay, then go for it. But I want to make sure you understand it is not as simple as taking the test, getting the job and building a book. Book. Building a book is very, very difficult in the financial world and sometimes people go backwards for years before they can go forward. So I just want to make sure I spell out all the stuff you guys all know. I'm a very positive person, but I'm also here to tell the truth, to educate people because I have experience in this explicitly over the last 30 years and I want to make sure you understand that. I'm actually walking one of my dear friends through it right now who's in the licensing phase, the testing phase and I had to make sure he understood that he is quitting a high paying job and just did to embark on this. But it's going to be a while before you start making real money.

[B]

I would also argue that it's a dying industry. I mean of course we're going to have them for the Next, call it 15, 20 years. But I think more and more people want to begin self managing, flat fee, you know, pay me by the hour type. Financial advisors are becoming a lot more popular too. I mean, I don't know, something that I think would probably suit you better, Anna, still staying in this financial realm is term life insurance. Selling term life insurance. I mean I'm sure you know a lot of people that probably need term life insurance and it's a lot more affordable than anything else that's out there. 25, 35, $45 a month. You make a commission when you sell it from like the Prudentials of the world. There is some money in selling term life insurance. So maybe that could be something to explore instead. But if you want to embark on this, you know, journey of bec a financial advisor to Robert's point, just know that it's going to be a long one and that it does not come with a lot of upfront success usually. And the people that do see upfront success are the ones that have multimillionaire friends that they can just take $50 million from and start advising and start making half a million dollars a year assuming a 1% fee, which by the way I think is highway robbery. So like there's just so many things about this that, like, are kind of icky, but then also, like, like just don't make that much sense in the long term. So not here, like what Robert said. We're not here to sugarcoat things. We're also not here to discourage you. We're just here to shoot you straight. Make sure you know exactly what you're getting yourself into and, you know, understand.

[A]

What'S going on 100%.

[B]

So our next question comes from Katrina H. Katrina says hi, Austin and Robert. My wife and I are big fans of your show. We started listening to you about a year ago and it's really helped us with analysis paralysis and taking action with our finances. I have a question for you that we're not sure about. About. I work for a tech startup that's doing very well, but by my estimates, we're probably five to 10 years away from an IPO. This morning, our head of finance offered those of us who have been with the company for a few years the option to sell our shares in the secondary markets. We can only sell up to 30% of our vested shares. They do not have to be exercised, just vested. Now, personally, I've exercised a little bit over 3,000 shares so far, and I'd be willing to part ways with a thousand of those for this offer. The sale price is $63.65 per share. So if I sold all of my 1,000 shares, I would get $63,650. I bought these 1,000 shares at 69 cents per share. So I would profit $62.96 per share if I sold all 1,000 of them. So here's my question. Should I do this? And if I do do this, what should I do with the extra money? Robert, you want to take this one?

[A]

Yes. I love your situation and I think it's sell, sell, sell, because you have 100x return on this stock. Stock. 5 to 10 years before an IPO is a long time and a lot can go wrong. So for me, when I'm seeing returns 10x50x100x like this, I would sell, put that money somewhere safe, let it make the 10, 12, 15 a year and call it a day. Because you never know. Industries change, companies change, leadership change. And sometimes stocks go backwards. And right now, now you're in the catbird seat. And I would sell it all day long.

[B]

Robert, I'm right there with you. Get your bag and run it to the bank. I think that's a wonderful idea. You are up 100x on your 69 cent per share investment. Now. It's just unbelievable to see this. That's again, like, back to this, like, theme, this underlying theme that Robert and I talked about several episodes ago, which is like your stock options, your, you know, vested shares that come with your annual compensation. It's part of your annual compensation. So, like, don't think that you have to keep this sitting in shares for the next five, ten, whatever years until an ipo. Like, if you have the opportunity to liquidate this stuff, like, that's what it's for. It's okay to sell shares of stock that you got as compensation, which is what it was in this situation here. I'm right on board with Robert here. Take the $63,000 or so of profit. Make sure you set aside money for taxes. If you've not already done that, you might have done that. Considering what's been vested here, I'm not too sure if your company will set that aside for you or what's going on. But just make sure you're not hit with a surprise tax bill and then the after tax money. Maybe it's time to save for a meaningful down payment on a house. Maybe it's time to park all that into the s and P500 and begin to materially build your base. Maybe it's time to max out some old retirement accounts. Maybe it's to pay off some high interest credit card debt. Or maybe it's time to just go on that vacation that you and your wife have been dreaming about for the last three years and go spend ten grand in Europe. Right? It's like, who knows? Personal finance is personal, but this is a really cool situation to be in. We totally agree. Sell the stock.

[A]

Yes, 100%.

[B]

So our next question comes from Brad K. Brad says. Hi, Robert and Austin. My name is Brad and I've been listening to the podcast since you started it nearly two years ago. Let's go. Brad, thank you so much for listening for such a long time. Oh my goodness. Brad says, I, I was wondering if you could do a Q and A topic on auto loan refinancing. If you need an example, I'll happily be one for you. Because I owe $30,000 on an auto loan at 8% interest. I'm thinking about refinancing as auto loan interest rates seem to have gone down quite a bit since I bought the car eight months ago. Most recent estimates are around 6% online. But never having gone through an auto loan refinance, I wanted to get a better understanding about this process from YouTube and the best approach that I should take, I do not have an early repay fee with the original loaner. So is now a good time to refinance or should I continue to wait and see if the Fed reduces interest rates further, allowing me to refinance it at an even lower rate? Is there anything else you would consider doing before refinancing based off of what I've laid out, or is now a good time to do it? Robert, I'll let you take this one.

[A]

Yeah, I think this is a great question and it comes up a lot in my DMs, and so I'm going to give you a little bit of the pros and cons. The pros are lower payment. So I love that. If you can refinance and get a lower payment, awesome. Lower interest rate. If you can go from eight, eight and a half down to six, six and a half, that's 2% a month on this $30,000 that you're going to save. But you have to make sure you understand one thing before you sign the dotted line. What is the total ownership cost and how much does it change based on the new loan structure? Because if you were to extend the loan, that would cause you to end up paying more on the car than you currently are. So by saving on interest rate, you'd actually be paying more for the totality of the ownership of the car till the loan is paid off. And then I would say secondarily would be understanding all of those fees, because a lot of these refinance companies have all of these loan origination fees for the new loan not included in the interest rate. So if you were to calculate those fees along with the interest rate and find out what the blended amount would be, you might end up finding yourself at seven, seven and a half percent percent, which in that instance, you're only saving maybe a half to 1% on the interest rate. And then I don't know that it's really worth it on $30,000 to go through all of that work and all of that time to be able to do it. So make sure you understand all the pros and cons before you make the decision.

[B]

I totally agree. The things you have to look out for here are the loan origination fees. So if it's a percentage, right? If it's 1%, if it's a flat fee fee, like, what does that look like? And now bake that into the total cost of that loan. So if it's like $2,000 for a loan origination fee and you're refinancing it over the next, let's call it four years. That's not really $2,000. It's really an extra $42 a month. Right? So, like, understand that. And the other thing to understand, which Robert talked about, is like, you're restarting the clock, right? So, like, people forget this whenever they refinance their mortgages. They're like, oh, yeah, I got a 30 year mortgage. And. And then like six years later they refinance it and they're like, okay, cool, I've been paying on my mortgage for six years. That means there's 24 years left. Well, no, when you refinance it, you start back again at 30 years. So the same thing with an auto loan. Whenever you're, you know, doing this and you refinance it at a seven or five year shot clock, you're restarting it back now at that five years. So you might have been paying on this for the last 18, 24 months. And if you just kept with it, you'd have had to pay it off in another 24 months. But you're now restarting, starting on that five year shot clock. So if you understand those things and you think it's a good deal and you can approach this with a point of, you know, lower total cost of ownership, which I think is what's really important here, then, heck, yeah, refinance it. That's a great idea. I'm a bigger believer in just saying, hey, it's at 8% right now. I get it down to 6. It's still kind of high. Like, what can I do to just like, pay this off sooner than later? Right. Not saying go crazy intense and pay it off in the next four months, but maybe can you start doing double payments every other month? Maybe can you start a side side hustle that'll make you an extra $5,000 in 2025 and chunk that over at it. Assuming you've already built your base and invested things like that. And for anyone out there that's thinking about refinancing an auto loan or going out and buying a new car, things like that. Episode 95 of our podcast titled how not to Buy Depreciating Assets is a really good tool for you to figure out the best way and strategy to actually put money into a depreciating asset like a car.

[A]

Yeah. And I would say that the number one takeaway for anything like this, when you're looking at ref financing or buying these big assets, whether they're depreciating or not, make sure you totally understand the numbers and the total ownership cost over the life of the loan because so many people do not do it. Just like when they do their budget. We always call it the honest budget because they leave so many important things out. If you understand the total ownership cost and the math of it all, then you're going to be great. But if you don't, you might end up doing all this work and gaining nothing. So listen up folks, time could be running out to lock in a 6% or higher yield at public.com you can lock in a 6% or higher yield with a bond account. But remember, your yield isn't locked in until the time of the 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 at public.com forward/rich habits.

[B]

Public.com forward slash rich habits. Go set up your bond account, your stock account, your crypto account, your options account, everything in between. It's all on public. We love public. Okay, our next question comes from Henry C. Henry says hello Austin Robert My name is Henry C. And I want to start off by saying thank you so much for everything you guys do. You've helped me so much with my financial literacy and I very much appreciate it. I'm 30 years years old, married, and a father of three. I'm currently making $61,000 a year, but in about four years I'm scheduled to make a base salary of $120,000 per year without any overtime. I currently have some debt, which is about $8,000, which is a personal loan I took out a couple months ago. I also have $23,000 in my 401k, 7000 in my 457 plan, and 1500 in my Roth IRA. IRA in Robinhood. This Roth IRA money is invested into the ETFs you guys talk about. I also have $5,000 in my bridge account on Robinhood. With companies like Nvidia, Palantir, Sofi and others, and some cryptocurrency, I'm looking to make passive income and hopefully within the next two years be able to buy a house with a NACA program. Can you guys give me some advice on how you would go about handling my situation? Thank you so much and God bless you. All right, Henry, first thing I want to do is get ready of that personal loan debt. I mean you're probably at 9 12, 15% interest on that. I would use the 5,000 you have in your bridge account and start tossing that off at that debt because you cannot keep around high interest debt and a personal loan is likely at that again, 10, 12, 15%. So I would use that money, pay off some of that debt and then get super, super focused on working overtime or doing whatever I can could to get the personal loan debt figured out by the end of this year. Now once you've done that, you've got so much ahead of you when it comes to this buying a home in the next two years with the NACA program. So I'll let Robert break down exactly the strategy there.

[A]

Great question, Henry. And I think you're in a really good situation. I like what you have below for what you have in your Robinhood account. But I want to make sure you understand, and we backtrack this a little bit, that we always want to make sure you build your base first before you get too far ahead of yourself. Buying the primary home home, doing all of these other things. And I would say your holdings look really good. Although I don't like the yield max ETF that you have, I think I would get rid of that and keep everything else that you have. But I would really work on building the base. Now the NACA program is really, really good for mortgages and it's been very successful over the years by helping people with their first home loan. But I don't think you're there yet. I would like to see one, two more years, years of really stockpiling as much money as you can, getting you to that higher income rate first before going into debt for the home loan. That's what I would do. Just because so many people get ahead of themselves before they're totally financially stable with their base built. And I don't think you should do it. I think you should hold off a little bit. There are always really good mortgage programs for first time home buyers. So you're in no rush to do that.

[B]

Yeah, I agree. I'm looking at about 35, maybe $40,000 total here invested. And you got all these single stocks. We don't want people to have single stocks until they have their base built, which means $100,000 at least invested into the index funds and ETFs that we talk about. Plus you've got this $8,000 of personal loan debt that I called out. Right. So I'd get rid of that. I also think too maybe pausing investing on the 401k or the 4, 5, 7 plan, whichever one that you're participating in right now, pausing those contributions so you have more every month to knock out this high interest debt. Because again, you cannot out invest high interest debt. It just doesn't work. So please, Henry, knock that out, get rid of it and then start building that base. And then once you have, you know, 100, 150, $200,000 in the markets in these index funds and ETFs, then you go back and say, okay, cool, now it's time to buy that first house. Do what I got to do with this NACA program that Robert was alluding to.

[A]

Yeah. And keep in mind, Henry and everyone else considering this buying that first home. Once you do it, your down payment is tied up, your credit is tied up, and you can't pull any of the equity out of the home until you sell it or if you had to get a HELOC loan against the equity that you would gain in the property, if there is equity. So don't be in a rush to buy the first property. Be in a rush to set yourself up. Make sure your credit score is really good, make sure you have the base built, and make sure you have all your ducks in a row before you buy the house. Because the house can always come, but setting yourself up for financial freedom can't.

[B]

I love that. That's amazing, Robert. Now our last question comes from James W. James says hello, Austin or Robert. Here's my question. A lot of the advice you guys give is to get money into the S P 500 via Voo or into the NASDAQ via QQQ, even to put it before paying off debt with 5 to 8% interest rates. Because you guys say the S and p can do 10, 12, 14. That makes sense. But there were a few years that the S And P did 2%, 1% negative, 4% negative 18%. So it really is more of a long term average. And every year is different with different situations and different economies. And now you're saying for people to still invest into the S&P 500 despite the Magnificent Seven taking a 31% weighting of it. A lot of people say The S&P 500 is overvalued right now and that a lot of the massive returns are already priced, priced in. Those stocks have done really great and have pushed the S P higher, which is why we've seen two years of over 20 gains. But the rhetoric you choose sounds like a 10 to 12% gain is a guarantee. Just what it sounds like as a listener. But after two consecutive years of 20% gains in the S P500 and the Mag 7 now representing 31, waiting to suggest to new investors to put a majority of their money into the S P 500 sounds irresponsible, don't you think? That there's some risk? And if not, why are you still so bullish on it in 2025? Thank you so much. I really enjoy your podcast. I'm bullish as well, but I just. I need to get this figured out. Really good question, James. No hard feelings. We appreciate the pushback. So we are firm believers that the S&P 500 over a long period of time is going to average 8, 10, 12%. Since its inception back in like a hundred years ago, The S&P 500 has averaged 11.9% percent. That's not me making up a statistic. That is what it has compounded annually for the last 9,100 years. Right? So that's where that 12% range comes from. Of course, you've got years like the last two that have delivered 20, 25%. Then you have years like 2022 where it goes down by 20 or 25%. But I am someone that is not approaching investing, looking for the Black swan events. I am looking for the optimistic side of the equation. I am investing my money knowing that American is going to wake up on Monday morning and we're all going to work toward making more profits for our businesses and pay ourselves more and then spend that more money on awesome experiences and services and products and everything else. And that's just how America has been for the last couple hundred years here. And I have reason to believe it'll continue to be like that for the next couple decades at least, especially now with AI and all the cool advancements in technology recently. So, yes, I think people should. Dollar cost average. That's the key word, right? Dollar cost average into the S&P 500. I think it's an easy way for people to compound their money throughout their lives. And I think it's a wonderful way for people to have a diversified exposure, despite the Mag 7 being 31% to American capitalism with these 500 plus names, inside of the S&P 500 are valuations high in 2025? They are, yes. But on the same token, earnings are high, profits are high, free cash flow has never been this high. So maybe these valuations are warranted. Maybe these valuations could be justified, at least in the short term. So that's my take, Robert, I want to hear yours.

[A]

Austin. Phenomenal response, James. We love the pushback because we want to add perspective to this pushback collectively. Austin and I have millions of followers and tens of thousands of people every single week that look to us for guidance, education and advice. Because personal finances is personal. So when we're talking to the masses, we want to make sure that they understand to build their base. And that means keep it simple. So many people get investing wrong. They start out with really complex things. They want a forex trade or crypto trade or day trade, or they want to buy complex penny stocks and try to figure it all out. And they spend years going backwards. We try to flip that around and make sure that when people start investing, investing, get the Roth up and running, get the Voos and the QQQs of the world in their portfolios, because if we know that they have that base building and it's safe, I am happy for people to make 8, 10, 12, 14 a year while they're building their base and throughout their careers, then we can get into more complex things. So to answer your question, is it overvalued? Maybe. Is everything high right now? Yes, absolutely. Like Austin said. But that doesn't matter because we're looking at this from a long term lens. We're not here to educate people how to get rich quick or how to make a quick buck. We are here to help people strategize and set up their financial situations to be bulletproof for decades to come. And that starts with the S P 500 and the NASDAQ. So I hope that helps you answer your question. And yes, I am very bullish on 20, 25 and beyond because I look at, at it this way, anyone that follows along with Austin and I is going to know every single thing that's happening in the markets and whether it's good or bad. There's always a way to make money in equities if you know where to look.

[B]

And let's just be clear too, Robert, the last two years were anomalies. The market doesn't go up 25% per year like that normally. Right. So I want to make sure people understand that. But on the same token, I want people to look back and we'll post about this. Actually, let's, let's make this, we're going to post a chart that will show you the historical returns of the S&P 500 in our newsletter on Thursday. So everyone listening right now, Go check out the newsletter, subscribe to it and get that chart sent to you for some perspective. But there were years where it would go down. But there are also years where it go up. Right? And so like in my opinion, to Robert's point. The easiest way to get invested and grow your wealth over a long period of time is by owning American capitalism, aka the NASDAQ and the S&P 500 and all the cool companies that come with so thanks everyone for listening to this week's episode of the Rich Habits Podcast Question and Answer Edition. If you learned something, comment on Spotify below what you learned. If you have any feedback, share that as well. And a major shout out to the 22 of you who left us comments on last week's Thursday episode about the mistake we made as you listened on Monday morning. I corrected our mistake and we figured out what that was and we were moving past that. So as you guys know, we are not perfect. We are not Albert Einstein. I'm Austin, this is Robert, and all we have to offer you is our experience and our perspective. And we do make mistakes sometimes. So thank you so much for your patience and I can't wait to continue to deliver countless amounts of episodes to you guys in 2025 and beyond.

[A]

And I also want to put it out there that if you know someone who maybe has high credit card debt or they're not doing a budget and they're living beyond their means, share the Rich Habits podcast with them. It is a way that is free to help your friends and free to help help us because as we grow, we can give you more and more value over the coming years. And we're so excited. And also give us that five star review. You guys have done an incredible job. We are now consistently in the top five or 10 on Spotify as one of the biggest podcasts in the country for business and finance and we couldn't do it without all of you and we are so, so grateful. And make sure you check out the Rich Habits Network newsletter newsletter. I believe it is one of the most valuable free newsletters in the country and getting better every week. So thank you all for stopping by.

[B]

Thanks everyone and have a great rest of your week.