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Rich Habits Podcast
Q&A: Going Broke Paying For College, Outsmarting Term-Life Insurance & Living Abroad
00:46:51
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- [00:01]
Austin
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- [00:16]
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- [00:45]
Austin
Hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes where you all ask us questions and we answer them as if we were in your shoes. You can ask us questions on Instagram at Rich Habits Podcast or email us questions at rich habits podcastmail.com We've got seven awesome questions teed up for this episode and we can't wait to dig in.
- [01:09]
Robert
Yes, we love these episodes. You guys know it and it's really been great to see these episodes grow and just really get so many of you engaged in getting these questions answered. Because personal finance is personal. Everyone is going through things, life gets in the way and we're here to shed as much information and light on things to help you guys figure it all out. So we appreciate you each and every week.
- [01:35]
Austin
Yeah, we are super grateful to have so many of you all come back every single week to listen to our normal Monday episodes, our Thursday episodes, which is this one, and our new Friday episodes. If you've not yet tuned into a Friday episode, they are all about breaking down the biggest headlines and happenings impacting you and your money. So be sure to tune in to those now. Before we get started, I think it's really important that we all make sure we understand this reality. Investing toward your financial future is the only way you'll ever be able to retire. Period. If you want to stop trading time for Money in your 9 to 5 or your hourly job, you need a nest egg that's growing for you over time.
- [02:12]
Robert
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 up to 4.1% APY for your emergency fund as well.
- [02:33]
Austin
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- [02:56]
Robert
In 5 minutes or less. Head to public.com rich habits to claim your 1% match today. Paid for by Public Investing or full disclosures in the podcast description so our.
- [03:07]
Austin
First question is an email actually from an anonymous listener. They say, hi Austin and Robert. I'd like to stay anonymous please. I'm a new listener, but I really appreciate the transparency and wealth of knowledge you share to help us become financially sound. I want to know if I'm balancing my retirement and rental property goals in the right way. I'm 33, I work in federal law enforcement and I make about 120,000 a year. My goal is to retire after 20 years of service at age 51. Currently I contribute 7% to my T DSP which has about $30,000 in it. I also have a Roth IRA with 63,000 that I try to max out every year, a traditional brokerage account with $12,000 $10,000 of cryptocurrency where I dollar cost average monthly and I have a 457B from a previous employer with $70,000 in it. On the debt side, I own a home with a 2.9% interest rate and a $1,500 a month payment. I recently bought a car with a $500 a month payment, owe about $25,000 on that at 4 1/2% while also having $5 of credit card debt. My main goal again is to retire at 51, but I really want to get into rental properties over the next one to two years. How do I go about doing that while also balancing retirement investing? This is a really good question and I will let Robert give our anonymous listener his first take.
- [04:26]
Robert
Well, you definitely have your base built at 33, so we love to see that. I like the fact that you're interested in getting into real estate sooner than later, so that's good as well. And I just want to make sure you understand though, if you're going to get into real estate in the next one to two years, make sure you're not depleting the base. We want to make sure you're thinking ahead getting extra money set aside in a public high yield savings account or whatever vehicle you want to use to make sure that money is there, but also defining your buy box so it is within your price range and your budget range overall. Because you don't want to deplete your base. You've done such a Good job at 33 years old, we want to keep it that way because so many people, they build up the Roth, they build up the traditional brokerage and then all of a sudden they have high yield savings built up. They go buy a property and they take from all of those accounts to buy the property and they're back to zero. Because remember, investment properties, everyone should own them, but they are tying up your money for the long term and there is no liquidity. So keep that in mind, keep crushing it. But that is what I would watch out for and that is how I would handle it. Build up another fund that is going to fulfill your needs for the buy box you've set aside for yourself to get into real estate.
- [05:40]
Austin
So as it relates to what to prioritize next, the first thing I'd prioritize is getting rid of this $5,000 of credit card debt. Obviously high interest debt, can't out invest it, no reason to keep it around. So if you have an emergency fund of three to six months of expenses, which you should have, use that money, pay off the credit card debt and then build that emergency fund back up to that three to six months of expenses. If you don't have an emergency fund, love the idea of cashing out the 12,000 in your traditional brokerage account and the 10,000 of cryptocurrency, that's 22,000. You can use 5,000 of that to pay off this credit card debt. And then the other, whatever's left after taxes to start your emergency fund again, three to six months of expenses is where we like to be for that. Now a couple things that you need to consider in my opinion as it relates to what Robert said. If you're wanting to get into some rental properties, the first one is make sure as what Robert said, as you begin to prioritize building up a down payment for these rental properties, that the numbers make sense to begin with. I just watched a video pretty much detailing why real estate right now just doesn't make sense. I mean, there are some, some people, when you think about, you know, the median home in America is $410,000. So I'm assuming, you know, you'll probably be somewhere around that range if you end up doing the house hacking thing or getting one of these like duplexes or triplexes it'd be much more than that. And you can put a lower down payment into the mix. But let's just say you are going to put 20% down on this $410,000 median home in America. That's $100,000. Pair that with about $20,000 a year of interest, another $4000 a year of taxes, another $4000 a year of upkeep, another $2000 a year of insurance. I mean, you now have to really, really think about the opportunity cost of tying up well over 100, 20, 30, 40, $50,000 in that first year against what that money could make in the markets or perhaps Neo's funds or you know, different real estate, maybe a REIT or something on, on the stock exchange or whatever else that exists out there for that passive income that I'm sure you're looking for. Now again, real estate is one of those long term things. So maybe you're over here thinking, hey, I don't care about the first couple of years, I care about the next two or three decades. You know, I'm only 33, I want to retire. So I'm looking at this as a two decade play, which very well could make sense and could make a lot of money by then. You just got to make sure you run those numbers and you're not shooting yourself in the foot. Now whenever you think about how do I now save for this down payment? You want to invest up to the match and you want to make sure to get the free money right and you want to make sure you're maxing out the Roth ira. Those are the bare minimum things you need to be doing. Any money above that needs to go be set aside for this down payment or invest it or something so it can grow for the next 2, 3, 4, 5 years as you sort of save for a large down payment there, call it 5, 10, 15, 20% depending on how much you want to buy. Tens of thousands of dollars is likely what that will be, right? Make sure you don't stop the Roth IRA and you don't stop getting the free money. But everything above that, save for it. And that's how you should be saving for it.
- [08:32]
Robert
I love this breakdown, Austin. And the only thing I'm going to click back with is start small. So many people think they need to go out and buy some big fancy property. I do it in Ohio all the time. There are homes in Ohio for under $100,000 that make great rental properties. You can go in and buy them for 80, put $30,000 into them, rent them for 12, $1,300 a month. So just make sure, like I said and Austin alluded to, know your buy box, stick within your buy box and prepare ahead of time so you don't deplete any of the retirement accounts.
- [09:06]
Austin
So our next question comes from John L. This is a good one, Robert. It's very in depth and very thorough. John's 53, lives in Colorado and has been working in IT for the last 28 years. He's married, has two kids, with one finishing up college this fall and another one starting next week. He says he's becoming an empty nester. And they've just finished paying off the college, but will be funding their son's tuition of 15,000 per semester for the next four years. Historically, they've spent their money on experiences in travel with their children and they've got to visit all 50 states with some foreign countries. They even lived in a foreign country for a few years during that time. He says they didn't invest much, but they did manage a budget on one salary. So they'd live off one salary, spend the other. John says he currently makes a little over a hundred thousand in his current position and works for a government entity. After being laid off two years ago, his wife now makes 20,000 a year in her current part time job. They have 210,000 in traditional IRA, 4,000 in a brokerage account and he also has 25,000 in his pension. John says he has 1,000 in a high yield savings account, a few hundred bucks in some equities and crypto. John also says he's tried some options trading but wasn't very successful. He says I'm in the process of starting a side hustle, doing some vending machine work to start bringing in some passive income and hope to scale that over the next few years. We have a car coming off lease in September which will free up 330amonth paid cash for our other car which is worth 36,000. When my son leaves for college next week, I'll drive his old forward runner. Our mortgage payment is 800 bucks and our town home is about 180,000 left on the mortgage. John says he wants to focus on minimizing expenses so that he can retire gracefully over the next decade or two. Robert I feel like we see this a lot. You know, they're in their 50s and they enjoy, they enjoy. John enjoyed the last 20 years of his life right from 33 to 53. I mean, it seems like living off one salary, spending the other just Having a good time. And I'm not saying, John, that having $200,000 invested at 53 is bad by any stretch of the imagination. You'll still be able retire a millionaire. We'll give you some numbers on that. But specifically Robert, I want you to talk toward how in their current situation, working to ensure that the kids college gets paid for coming off a lease. Right now They've got an $800 a month mortgage. Right. What are some maybe strategies that John can implement to ensure that he's retiring gracefully in the next one to two decades?
- [11:23]
Robert
Yeah, what I see here, and I'm guilty of it, and a lot of people are, is John is trying to add income, but always by swinging for the fen these entrepreneurial journeys. What I would rather see John do is get these retirement accounts built up further because can he get to be a millionaire by the time of retirement? Sure. But what happens if like the options trading, he goes and buys these vending machines, works them for a few months, they're not passive, he loses money, he sells them at a loss, then he's right back to ground zero. So what I'd love to recommend John and anyone like him in this situation is, is go out and get a side hustle, go get a second job. Don't start a side hustle because then you're basically starting another business. And I'm all about entrepreneurship, but I'm not about telling people to be entrepreneurs if they don't have a big enough safety net going into retirement. So that's the key factor here. Don't think I'm changing my ways. I'm sticking to the entrepreneur lifestyle. But I don't want to see John or anyone else go out and invest this money, invest the time two years down the road. They haven't done any more investing towards retirement because they're trying all of these side hustles. I go find a job, Maybe it makes $1,000, $2,000 a month on the side because with the government job, I'm assuming it's a 9 to 5, you have weekends off, so you have all this spare time to where you could go work somewhere else. Take that $2,000 a month, put it all into retirement and really set yourself up for financial freedom.
- [12:55]
Austin
I also, I really don't want to say this, but I think you might have to have a hard conversation with your son and let him know, hey, I can't afford to give you $15,000 per semester for the next four years. I mean, let's think about that. That's $120,000 that you are gifting your son via college tuition, which is after tax money. First off, that $120,000, you need that much more than he does, in my humble opinion. Let's say you can't afford the 120, and you can still afford to invest a thousand a month after taxes toward your Roth ira, your wife's Roth ever here combined as a household, a thousand a month for the next 14 years until you're 67, you will have just at $1 million, assuming an 8 and a half percent annual return, which includes that 2 and a half to 3 and a half percent inflation rate over the next, again, 14 years or so. If you can't afford to do a thousand a month, and you can afford to gift your son $120,000 over the next four years, which comes out to another $2,500 a month on average, assuming you spread it out over the summertime and, you know, the winter and things like that. That is, that's a lot lot, right? We're talking about $3,500 a month after taxes on 120,000 a year salary. We're talking about $3,500AMONTH. That needs to. Now, 2500 of that goes to your son for his college. And another thousand bare minimum needs to get invested for you to retire a millionaire in the next 14 years. And that is for a household bringing home $7,000. So if you can bring home 7,000 and literally 50% of it can just get moved over and you can live off of $3,500 a month. I mean, you do have a low mortgage payment and your lease is coming up. So maybe you, if you can do those things like, that's how this all comes together. And my humble opinion, with only. What was it here? A thousand dollars in your high yield savings account. I don't see much of an emergency fund. I would be surprised if you guys don't have credit card debt or some sort of personal loan situation. Like, it just seems to me like the numbers aren't going to shake out. If you are choosing to fund your son's $120,000 of college for the next four years, I would say, you know, and this goes back to what Robert and I, I think we mentioned this on a previous episode, which was like, whenever the plane is crashing, they always say, put your mask on before you help other people put their mask on, right? Like, you got to put your mask on, which means you have to focus on your own retirement, your own financial well being, because if you don't, then fast forward 14, 15, 20 years, you guys, let's say, worst case scenario, aren't able to invest anything over that period of time, or maybe very minimally, and you only have a couple hundred thousand or you know, 3, 4, 500,000 in retirement with which it's not as much as you would like. And maybe you're now a burden to your children financially. And so that might have a weird rocky relationship because of it. So, John, I guess what I'm trying to say here is please consider your situation when it comes to your son's tuition. If you can't afford to give him 2,500amonth, or again 15,000 per semester. So that's two semesters a year, 30,000 a year for four years. If you can't afford that, that's wonderful. In my humble opinion, you can't. I would much rather see that money invested to you and your wife's retirement, which if you did end up investing it, your 1 million would turn into 1.8 million, which is a much better situation to be in.
- [16:07]
Robert
Yeah, to me, the numbers just don't add up. The math ain't mathing. All I can think about in my head right now is the song Living on the Edge. I think it's Poison or one of those bands because this really highlights the headline that we've been seeing a lot of the last couple years. That over 60% of households making over $100,000 a year living paycheck to paycheck. And this is that situation. I just don't think the numbers shake out. I would find a way to get the college paid for by student loans and put some of the onus on your son. Because I just feel like Austin alluded to, you have to take care of yourselves first because there's no one else.
- [16:46]
Austin
To do it for you and also for your son. Dad, I don't want to go 120,000 into student loan debt. What the heck? He shouldn't. He shouldn't go 120,000 in student loan debt. He should maybe go 40 to 60 thousand dollars into student loan debt, assuming he's studying something that's going to pay him 60, 70, 80,000 doll. His first year graduating. Your son can go to a community college for two years, take that associate's degree, lateral that into a bachelor's at a state sponsored school. It did that at the University of Tennessee all the time. You go to Pellissippi Community College, you pay a thousand or two thousand dollars a Semester for classes. You're still living at home. Who cares? You're saving money. And then now you pay cash for that. It's a couple thousand dollars every semester. So four, I mean that's 500 bucks a month essentially. And then you go to the University of Tennessee. Assuming you live in state now, your state tuition is probably 5 to 6,000, I think is about where it was per semester back then, which, I mean, I graduated about 20,000 of student loans because I was living in state. That's about what it was for me. Something like, there is a world where your son can absolutely go from 120 way down to like 30, 40 or 50, depending on how your son plays this game. Please encourage them to do some research into this. And please, I'm encouraging you to reconsider paying $120,000 over the next four years for college tuition. Tuition. So our next question comes from PR. PR says. Hi, Robert Nassen. My name is PR. I'm 35. I work a regular 9 to 5 job and I'm a big fan of your podcast. I'll soon receive $300,000 before taxes for my employer's acquisition, plus possibly an additional 120,000 from selling my apartment. My gross annual income is 250,000 a year. I live in a multi family home, occupying one unit and renting out the others. My current portfolio is $200,000 of investments. 35% in ETFs, 64% in stock, percent in crypto. I have $80,000 in a high yield savings account. I'm exploring ways to deploy the new capital to balance growth, diversification and tax efficiency. Possibly adding a legal ADU to my property, which could net another 1700amonth after the mortgage. Or by increasing my ETF allocation beyond 50%. I'm also wondering if I should lean into a more aggressive investment mix given my age at 35. Right now the acquisition funds are sitting in a high yield savings account earning 4.5% percent. I'd love to hear your perspective on the smartest next moves from here. I love this. I think you should completely chill on the rental stuff. You already have probably 2, 3, 4 units here, depending on how you know multifamily homes. Let's call it, you know, two or three units. One, two or three units. So your real estate stuff's good. I don't, I wouldn't do the ADUs. I would take the 300,000 before taxes. I'd pay my taxes on it and then I'd put all of it in the ETFs I'd get that much closer to that 65, 75, maybe 80% ETF range. If you guys listen to Monday's episode, we talked, talked about having the core satellite portfolio strategy. So 65 to 85% of your portfolio is in these well, diversified ETFs. The other 15 to 35% is in single stocks and other diversified things. So in this situation, I would beef up that those ETFs to get closer to that 65% at least. And then if you wanted to, if you sold some money left over and you were at that 65 and you wanted to get a little bit more aggressive, perhaps it means shifting out of individual stocks and into some thematic ETFs like AIQ or chat or Ko ID or some of these other thematic ETFs, or maybe want to beef up some crypto via Bitcoin and have a long term outlook on that. It's totally up to you on that one. But I don't think I would dabble any more into, into real estate.
- [20:13]
Robert
I love this take Austin, and I think you're spot on. I would flip flop this portfolio and have less individual stocks in my waiting and more ETFs. I would up and get myself in your position to 5 or 7% of your total portfolio investable capital in cryptocurrency. Because for the long run I think that's a better place to be. And just I want everyone to understand Austin and I love individual stocks, but when you're just getting started out, you're not a multi millionaire. You shouldn't be so heavily weighted in individual stocks. And the reason for that is you can't control what happens to those companies and those individual stocks like you can with an ETF. ETFs may have volatility, but not nearly as much as individual stocks. And if you pick wrong in an individual stock, you can deplete all of your money and pretty much go to zero if you pick wrong. And I'm not saying don't buy stocks, I'm saying just be careful, have a higher portion of your portfolio and ETFs. Because even if you think back the last five years, if I had a heavy weighting in Nvidia, I'm a genius. But if I did the same with Peloton, I'm an idiot, right? Because Peloton's down whatever 98% on their stock price since COVID So you just have to understand that is why we talk about ETFs and why we love them so much. For people. And I agree with Austin. I would pause thinking about the ADU just because they do go down in value. I don't think you need the headache of having an individual renter on your property, another one. And I think you're just in such a really good spot lot. I would focus on what you're doing, make the changes to your waiting like we discussed, and keep rocking and rolling.
- [21:58]
Austin
Yeah, I mean, you make $250,000 a year. I don't know how long you've been making this much money, but go get half a million invested. Go get 750,000 invested. Right. Once you have those big milestones hit, then you can say, yeah, maybe I do want to diversify into some real estate with an adu, or maybe I want to be a silent business owner or, you know, something else. But, like, I think people, especially high earners, they go, oh, I'm making 20, 30,000amonth here. I need to get sexy and smart and with my strategies and, you know, I gotta be able to do these things. And in actuality, it's like, no, just go put a couple hundred thousand more in the markets. Let it ride up for the next couple of years, like. Cause it's. It's so funny, Robert. I even, you know, I think about this for myself. The stock market since the bottom of, like, October 2022, what is it up? Probably a hundred percent at this point. Let me just look it up here. So Voo, since the bottom of 2022, just price action, not even total return. Price action's up 80%. And the N, same deal, since the bottom of 2022 is up just about 120%. Just price return, not even total return, including dividends. So it's like, okay, all I had to do if I'm a high earner, was put money in the NASDAQ and in the S&P 500. And I had doubled it over the last three years. Literally three years, where instead some of these people like, oh, I'm gonna go start this business. I'm gonna go write this angel investment check for my buddy Bob, who's gonna start this app about cows and the milk. And so it was a really cool idea with, like, thought it was going to work, but it didn't work, or like, whatever excuse they can come up with to not just invest. And I think it's because the more money we make, the more inflated our egos get and the smarter we think we are, which makes us think, like, oh, I need to do smarter, more sexier. Riskier strategies to make money when in actuality, the more money you make doesn't change how smart you are when it comes to investing. Nine times out of ten and all you need to do is the boring stuff. Literally. Just park your money in these index funds and take your 200,000 in investments BR and grow it to 750. Or, you know, take this 300,000 before taxes, pay your taxes and dump it all. I wouldn't dump it all. Dollar cost. Average it over probably a three to six month period of time because it will make up such a big chunk of your net worth. But regardless, like dollar cost, average it in this boring stuff and you'll double your money in the next three, five, seven years.
- [24:12]
Robert
Mathematically speaking, I think that's an incredible take. We should just probably pause the Internet for 24 hours just to give you the grace you deserve for that takeaway. Because we see it every day in the Rich Habits network. We see it every single day where people think that as soon as they make a little bit of money, they got to get fancy. You don't have to get fancy. Sure, you can add real estate over time. Sure you can add precious metals and crypto and diversify further, but there's no reason to get fancy. The wealthiest people I know do not get fancy. They make the money money. They diversify the money and they let it build. That is it. So I really appreciate that takeaway.
- [24:50]
Austin
So our next question comes from Eric G. Eric says. Hey, Austin and Robert, I've been listening to your show for two years and your advice has been so helpful to me in growing my personal portfolio. My question has to do with the money I recently put aside for my two sons. I had a $1 million term life insurance policy with 12 years left on it. I lowered the death benefit down to 250,000, figured out what the premium savings would be over 12 years. Turns out that number is 8,200. So I took 8,200 that I had in my savings account and I just invested it. And I'm hoping that it grows much more than what the term life insurance benefit difference there would be of $750,000. What advice do you have for me to help it grow better and keep it safe? Thank you so much. Keep up the good work. Eric, I love where your head's at. I think that what you did was a smart move on the surface, but I'm gonna ask you to undo it. And here's why. What happens, Eric, not to be morbid, if you die in November of This year, your two sons get a death benefit of $250,000 versus a $1 million death benefit. And they also get, let's call it your 8,000 went up 10%, now it's worth 9,000. So all in, they get $259,000. Compare that to a $1 million death benefit which would have supplemented their income via, you know, just investing the money, taking 4%. Right. It would completely offset the loss of their father in supporting of them and financially. So I guess what I'm trying to say here is I understand why you did it. You're like, okay, cool. Like after these 12 years, the death benefit goes away completely. So all these premiums go down the drain. So I should just take those premiums and invest it. And then, you know, it'll, it'll just go up forever and I'll never have to get rid of the money and like all that stuff. Like, you're right, that is how the contract is written. But in my opinion, you're sacrificing $750,000 in the. It's a very short sighted way of thinking about this. I would much rather have you have a million dollars of a term life insurance death benefit for your sons for the next 12 years so that if you die before that 12 year period of time is over, God forbid they have a $1 million payout. Your premiums on a million dollars. I think my premium, I think I've got a $2 million policy myself and the premiums are like 40, 50, 60 bucks a month. It's, it's not so minuscule compared to how much you would have to invest and set aside for such a big payout over that period of time. I would really encourage you to flip flop this back. I know you just probably jumped through hoops to lower it and do all these things. I'd really encourage you to put it back, have that million dollars on your life over the next 12 years and then continue to invest along the way so that if you did die, you can sort of after this 12 years is gone and you no longer have the $1 million term life insurance and you did die without a policy. You're what's called self insured. You have hundreds of thousands, if not millions of dollars invested that you could pass on to your children to ensure that their financial future and financial well being is, is set up pretty well there. But Robert, what's your take? Did I get this one right or wrong?
- [27:57]
Robert
You got it definitely right. I think back to when my father passed away. It was an absolute nightmare for me. We won't discuss the whole story, but the main thing is I feel like we've been focusing on this a lot lately and it's really good for our listeners is so many people don't think ahead for the what ifs. And I think that's really unfair, especially if you have a spouse and children because you have to make sure you're thinking about setting them up the best way you can. So I think your take on this is absolutely perfect because we want to make sure there's enough benefit there that God forbid something happens during this term that you are able to fully take care of your children. So, Austin, I agree with you 100% on this.
- [28:39]
Austin
And it's funny, Eric had a, a follow up question here that he emailed us just to have 10 minutes after he asked this first one. He says, hey guys, quick question. Is now a good time to enter the market or should I wait until it cools down a bit? Robert, can you check your crystal ball real quick and just tell me if the markets are going to cool down over the next couple weeks? That'd be great.
- [28:58]
Robert
Yes, Eric, no one in the world can time the markets, nor should you try. The biggest message we have is dollar cost average into the investments you want to invest in in every single week, every couple weeks or every month. And never sit on the sidelines waiting to time the market. You can't do it. The algorithms can't do it. Everyone says they can do it and they tell you when the bottom is going to be, but they're full of crap. So just invest, please. Everyone listening. Don't try to time the market. Invest when you have money. Make sure your money is working as hard for you as you work to get it and stop worrying about when it's going to cool off. Because guess what, guess what. All of these hot secular growth trends that we talk about all the time, they're always going to be at or near all time highs. So what are you expecting? You expect some 30, 40, 50% crash in these markets and you're going to time the bottom perfectly? That's not how it works and that's not how you should be investing.
- [29:54]
Austin
It's also so funny because like people think, like, let's think Michael Burry, who did time the market perfectly in 2008 and he called. He was, yeah, at once. One of his 15 calls. Right. But it's like, you know, he timed it perfectly. He made a bunch of money for his hedge fund and it worked out great. Whereas if you time the market right and you can be like, oh, yeah, it's going to cool off. It's going to go down, like, whatever, like. And you're right, cool. You've got this nice badge of honor. Maybe go talk on CNBC about why. And people think you're smart for a couple months. If you're wrong, the markets are off without you, and you just lost 5, 6, 10, 12, 15% because you've been on the sidelines the whole time. You know, the S and p is up 11% this year, and a lot of people are like, oh, this AI trade, or, you know, bubble this or whatever's going on, and they don't want to touch it. If you can afford that, sure, that's cool. But, like, I think at the end of the day, what people forget about, and I had to remind this to Ireland recently, which is like, if you are not going to cash out in the next week, month, year, like, what are you trying to time anything for? I don't plan to cash out for several years, if not decades. Like, I don't need this money. I want it to grow. I don't need it in a week for from now. So why would I care about if the markets are up, down, left to right on a week to week, month to month, or even quarter to quarter basis? What I care about is where it's headed over the next 10, 15, 20 years. And if I don't plan to cash this money out for 5, 10, 15, 20 years, cool, it's down 5%. Whatever. That does nothing to do with me. Like, I. I just keep on dollar cost averaging and. And I'm rocking and rolling. Like, everyone else should have that same mentality, especially with their Roth IRA. If you can't touch your Roth IRA to 59 and a half inch anyway, and you're in your 20s or 30s, like, what are you worried about? You know?
- [31:29]
Robert
No, I love this. I'm so glad you're no longer sick, because you are on fire today. This is awesome. I love it. We need a virtual mic drop for this kid today.
- [31:40]
Austin
So our next question comes from Aaliyah D. Aaliyah says hi, Austin and Robert. My name is Faith. All right. I guess it's Faith, not Aaliyah. What's up, Faith? Faith says she's 26, avid listener of the show. I've heard you all talk about student loans quite, quite a bit over the last few years, but now's my first time feeling stumped about my situation since graduating in 2021. I've been in forbearance with no interest accruing until now, which is August of 2025. Every 31 days, my interest will be 93 toward my total of 26,300 across my eight loans. My monthly payment is still $0. My highest interest rate is a 5% loan. I make 45,000 a year. I live rent free. I have no car note or any bill bills. I'm thinking of paying $200 on the first of each month to chip away at this. At the same time I'm trying to save up for a duplex, max out my Roth, and I'm unsure which goal should take priority. Any guidance would be greatly appreciated. Faith, I'm so excited that you are out of college. You're, you're ready to start earning some money here and get excited about, you know, saving and investing and things like that. First thing I want to encourage you to do $45,000 of a salary with a college degree seems low to me. I'm not saying, saying that you should feel bad about it. I'm just saying I want you to be thinking about what a 30 year old faith. A 31 year old faith, right? You're 26 right now. 26, making 45 with a college degree. What's going on? So I just want to encourage you to think, what is five years down the road, right? You're 31 years old. What are you going to be making then? Is it maybe 65, 75, 85? And what sort of licenses or conventions or conferences or like what do you have to do do to put yourself on a career path to be making six figures in your 30s? Because I don't want you making 45,000 for the rest of your life. That's no fun. First off, think about the career for the long term. Now let's answer her question. So you're making 45,000, you live rent free, you have no car note and you have no bills. That's amazing. Sounds to me like you live at home and I'm super excited for you. You're probably taking home an average of $3,000 a month. Call it $3,200 a month. If you want to set aside 500 bucks a month to, you know, put gas in your car and eat out with your friends and do things like, that's great. Let's now say you've 600 left, 2650, that 2650. Let's now figure out what to do with it. So what Robert and I always say is that before you pay off any major debt, if it's a car loan or a student loan or like any, you know, twenty, thirty, fifty, eighty, hundred thousand dollars, you want to have the same amount invested at least. And so Ireland is doing the same thing here, right? My fiance, she's been doing a great job of investing toward her Roth IRA and her emergency fund and her brokerage account account. And she's got I think like 30,000 of student loans. And now I think she's almost close to that 30,000 mark invested before we start, you know, tackling her student loan debt. So in your situation, exact same thing, I want to see you maxing out your Roth IRA every single month, which is about $585. And then with the other $2,100 you have in your monthly budget, go to public.com, open up a normal taxable brokerage account and invest that $2,100 into Voo, O, QQQ and VGT. You want to go 33, 33, 33% on all that. A third, a third, a third. That should be totally fine for you and your risk tolerance and your age. And I want you to get that money invested and let that grow for you to at least that same $26,000. And then once you have that money invested, this is probably going to take. Yeah, you're actually going to be able to do this in like a year. So get this 2,600, whatever I said it was invested. Do it for 10, 11, 12, 13, 14 months. Get that 26,000 invested across your Roth IRA and your taxable brokerage account. And then once it's invested, take that same $2,600 a month. And now instead of investing it, you're going to use it to pay off the student loans. You're good. Now fast forward another year. You have no student loan debt. You've got what's now is probably close to $30,000 because it grew for you over that period of time. And now you've got another $2,600 a month to set forward some way, some which way, whatever you want. In your situation, you mentioned a duplex. If you want to start using that same 2,600amonth to save for a duplex, go for it, go save another 30, 50,000. It'll only take you another year or so, 18 months. Use that as a down payment. You're off to the races. You are in a situation because you have such low expenses on a monthly basis that if you want to just crank out the next four years, you can get 30,000 invested, pay off your student loans of 26,000 and then year three, you're now saving 25, 30,000 and go use that as a down payment. Maybe you want to do this for four years, save another 30,000 scenario at 60 or 70,000. Long story short is you've got a lot of options. Options. The biggest thing is being intentional with your money and not just blowing away this 3,200amonth that you're taking home. And you have no, you know, liabilities against it besides the student loan because you live rent free, have no car note and no bills.
- [36:24]
Robert
Again, great breakdown. The two key factors here are for any one of you that are out there, that are on the younger side, you have to max out the Roth IRA every single year because then it grows for you tax free for life into retirement. Number two, you said that the biggest, the highest interest rate you have on these loans is 5%. That is awesome. We don't consider 5% high interest debt. And that's why investing this money instead of paying down the student loans makes more sense. Because the positive arbitrage of this money being invested, let's say it makes 8, 9, 10, 11, 12%, goes into your pocket not paying down these student loans. So I agree with Austin. I would keep making the payments on the student loans, but I would not pay extra on them. I would get the Roth IRA completely dialed and get the public.com account open and you will be on your way to financial freedom.
- [37:17]
Austin
Our next question comes from Billy. He's 23. This was on Instagram, so shout out everyone that asks us questions on Instagram via dms. Billy got his question answered here. Billy says how should I invest over the next year when my income will be temporary, rarely, very low. I just graduated from college in May, and this September I'll be moving to Germany to teach English for a year with Fulbright. This opportunity is a dream come true for me as I've always wanted to live abroad. But Fulbright does not pay much, only a thousand euros per month plus €2,350 as as a transition fund. So after rent, transportation and insurance costs, I'll be left with about €300amonth, max. My plan is to leverage my Fulbright experience into a job with either the State Department or a German institution. The us. Once I have a normal job, I'll definitely start maxing out that Roth in my individual brokerage accounts. But until then, how can I optimally invest my money if I should invest at all? Robert, I will let you answer this one.
- [38:13]
Robert
Yeah, I love this situation for Billy, I think it's incredible to be able to have a dream and at 23 years old be able to fulfill that dream. So I think it's really incredible. I wouldn't worry so much during this period that you're gone about an investing, you're 23 years old. We love to see people get started investing early and often. But this is a dream situation. I think you should enjoy the ride, enjoy the journey, maybe make the minimum payments on the student loan debt and just ride it out and really enjoy this and make sure you get the most out of it. Because then when you come back to the States and you go to try and get a big time job and a big pay paying job, you have this pedigree on your resume. I love this for you and I think everyone should take a year and do something really special for their lives early on while they still can. So great job, Billy. We love the question. And that's my take on it.
- [39:11]
Austin
Yeah, I, I totally agree. And you know, if you've got this extra €300amonth, listen to our episode. I think it came out 2 or 3 weeks ago called how to 70x your month money. We essentially talk about how every dollar invested in your 20s 70 x's by the time you retire. So if you put in $1, just $1 of your €300 into your Roth IRA, theoretically speaking it'll be worth 70 in retirement. So you're over here like thinking, how do I invest optimally and how, you know, I can't max it out? Like that's fine. You don't, you don't have to do anything. You don't have to max out anything. Put ten, fifty, a hundred dollars into like a public or you know, whatever your Roth IRA is, go put that money in there and let it grow. It's not perfect, but also is a really unique situation. We're excited that you're able to follow your, your dream so early in life and be able to do this. Like that's amazing. I wouldn't beat yourself up about it. You'll be investing by 24, right? It's like it's a season of your life of little to no investing so that you can, you know, fulfill your life dream of teaching English in Germany. Like that's so cool. Invest what you can along the way. That's what we're all doing, just trying to invest what we can and take it one day at a time, my friend. Now our final question comes from Christine W. On Instagram. Again, rich habits Podcast on Instagram. Go check us out. Christine says, hey Gu guys, I love your podcast. It is super informative. My son's heading off to college for his freshman year. Can you recommend the best credit cards that make sense? Starting out? He also wants to start investing. Should he open a brokerage account on public? Where else would you recommend? He's just starting out and eager to learn more about investing into the proper channels based on his age. Any information is greatly appreciated. Robert, what are some of your favorite credit cards for college freshmen?
- [40:46]
Robert
Yeah, I would say the number one credit card, and I think we both started out with it when we were very young, is the Discover it card. It's just a really great secured credit card when you don't have any credit currently and you're trying to build that up. I still have mine. It's, you know, decades and decades old, but I love that secondarily there's a card out there that's pretty cool. That's also a secured card called the Open sky card. I really like this one as well. Also a secured card and 100%. Christine. I agree. Get him to open that public.com account. Get the Roth IRA set up. Show him how to get in, get it started. Get that basket of ETFs up and running within the Roth. I don't care if it's even a hundred dollars a month, because a lot of investing isn't about timing it perfectly or being the smartest, you know, person doing it. It's all about consistency and how soon you can get started. So I love this. I would get the credit card, get the public account, and what this does is really helps people start to think like an investor and not a consumer. So when they have that money coming in, even if it's only $100 a month, they're not looking, where can I spend this? They're thinking, where can I invest it? It's so, so important. So, Christine, I love this for you, and I really enjoy seeing parents guiding their kids in the right direction. When I came up, we didn't have any of these tools. We didn't have anything like public.com to make life easy, easy. So this is a great direction. And these are really two good credit cards that I think anyone can start with when they're young and need a little boost in their credit.
- [42:23]
Austin
Yeah. So a credit card that I want to add to the mix here is the Citi Double Cash credit card. You get 2% unlimited cash back. You also get a $200 cashback bonus after spending 1500 in the first six months. So if you've got, you know, some sort of books you need to buy, you know, talking about, you know, he's headed off to college his first freshman year, maybe you guys can open up this card and use it to do some of his like colle shopping or like expenses you had to pay anyway, right? We're not over here spending money we don't need to spend. We're spending money on things that needed to get spent on. If it was books or if it was meals or, you know, whatever, use it on one of these credit cards and hopefully hit that, that bonus there for $200 cash back. But what also I think is really important is your son does not need to think about, oh, I've got a credit card. I now can buy shots for every one of the bars. I can go buy the new clothes, I can go buy this or buy that. No, no, no. This credit card, all you do. I wish my parents told me this. I didn't get a credit card till after I graduated. I wish they said, Austin, go open up one of these cards. It could be secured. It doesn't matter. Put your Netflix subscription on it. That's it. Or put a tank of gas on it once a month or you know, whatever that thing is that's under 10, 15, 20, 30, 40, 50 bucks a month that he can absolutely afford that he's buying anyway, right? Don't go into more, don't go spend more money. Money that you weren't going to spend just now because you have access to money. That's how people get into credit card debt. Put a subscription or a, a tank of gas or whatever once per month on it. Show that you've got some, you know, you, you have a pattern now of going into this credit card debt on a month to month basis and then paying it off, right? So I run up a balance of $14 or $22 or whatever the Netflix subscription is that gets posted and sent to the credit bureaus. And then you got to pay it off within that three week period, period of time, pay it off. No fees, no interest, no nothing. Like you're just, you're just building credit. You just do that every single month. Four years later, when he's graduating, he'll probably have a high 6 low 700 credit score and he can use that to go perhaps do better rates on apartments or maybe he wants to do something with a home or like whatever else. Like there's a lot of cool things that happen whenever you have a higher credit score. But don't get too crazy with it here. It's, it's a pretty straightforward way to just build some credit. Don't go into credit card debt and make sure that your son understands that.
- [44:37]
Robert
I think that's an awesome point you made. So many people, you know, we see it with the mortgage industry all the time, they work on their credit when they know they're going to use it. And I think this is a mistake. You should always work on your credit for the things you're not thinking of. Like Austin just said, you know, better rates on loans, better rates for apartment rentals, whatever it might be. People want to see that someone is responsible. So just keep that in mind. Don't just think about your credit as something when you need it to get a loan and you're going to try and patch it up at the last minute. Try to keep it in good shape all the time because there are so many benefits to doing so.
- [45:16]
Austin
Everyone, thank you so much for tuning in to this week's episode of the Rich Habits podcast. Couple quick reminders. We're still running a seven day free trial for the Rich Habits Network. We've recently surpassed 700 people inside of the Rich Habits Network. We started that August of last year. Now, one year later, we're already at 700 members. It is unbelievable. You probably saw on Robert and I's Instagram story last week. I'll give you guys the quick breakdown of all the fun things we've accomplished inside the Rich Habits network over that one year period of time. Robert and I hosted 59 live streams during that period of time, 13 exclusive webinars. We offered 11 pre IPO investment opportunities to the people inside that network, which I think we probably raised near four or five million dollars. Like people are investing into these cool things alongside of us and it's just amazing to see. There's also eight hours of video coursework inside of there and we've answered thousands upon thousands of questions posted in the Q A section of the network. So if that is interesting to you, feel free to join us over there. You can kick the tires, hang out with us for seven days, join a live stream, do your thing. So yeah, I want to stick around. This is fun. Or hey, it's not for me. But still support you guys. Like all good. We appreciate it. And then of course the Rich Habits newsletter every Thursday morning, market insight sites, biggest kind of headlines for the economy and stocks and crypto and things like that can be shared over there. And then of course just continue to support the show. We're so grateful that so many of you come back every single week. For our Monday, Thursday, and new Friday episodes. We have a 4.8 star rating on Spotify. I would love it if a couple of you would leave some five stars to get us back to the 4.9. That would be great. And then, of course, sharing these episodes with a friend. If you enjoy the Q and A episodes, they help you get through your workout out or your, your commute or whatever's going on that you're doing right now. We're so grateful, and we just really, really would appreciate it if you would share these episodes with your friends.
- [47:07]
Robert
And thank you all for stopping by each and every week. We appreciate it more than you know. And we'll see you soon.
- [47:11]
Austin
Thanks, everyone. And we'll see you tomorrow. Sam.