Robert (3:08)

Yes, we love Public. We talk about all the time. And for a limited time you can earn a 1% match on all IRA deposits, IRA transfers and 401k rollovers. Let me say it again, 1% match on all IRA deposits or transfers and 401k rollovers. Free Money Fund your account in 5 minutes or less only at public.com rich habits paid for by Public Investing. Full disclosure in the podcast Description so.

Austin (3:35)

Robert, I'm drinking coffee this morning, but cheers to everybody for seeing Bitcoin at a new all time high. And then Ethereum now well over 4350 just rocking and rolling higher. It is so exciting and I get just goosebumps thinking about the thousands, tens of thousands of dollars that people have probably made over the last 12, 18, 24 months by just dollar cost averaging into some of this stuff that we talk about on the show. It just gets me so excited. So let's now jump into our very first question of today's episode. Let's kick things off with Faith. Faith says hi Austin Robert My name is Faith. I'm 26 years old and I'm an avid listener of your show. I've heard you guys talk about student loans quite a bit over the years, but now' first time where I'm truly feeling stumped about my situation. Since graduating in 2021, I've been in forbearance with no interest accruing until now. August of 2025. Every 31 days my interest will be $93 toward my total of 26,300 that I've borrowed across eight different student loans. My monthly payment is still zero and the highest interest rate I have across these eight loans is 5% I make 45,000 a year. I live rent free. I don't have a car note or any major bills in general. I'm thinking of paying 200 do on the first of each month to chip away at this. At the same time, I'm trying to save up for a duplex and max out my Roth ira, which I'm unsure which goal should take priority right now. Any guidance would be greatly appreciated. Thank you so much for constantly helping the public become more financially stable. Faith, we are super excited for you. So my head goes in a couple different directions. The first one is unrelated to student loans. You right now are 26 years old, you've been out of college for four years and you make $45,000 a year. Now I'm not saying that that's not a lot of money. I'm sure you work for your money and you are on an awesome trajectory in your career. But I just want to reiterate how important it is that 36 year old faith is making twice as much as 26 year old faith is making. Right. Faith, I want you to be making six figures. I want you to be making so much money in your career, you've got money burning a hole in your pocket, right? That's what you're capable of. I just want you to know that 45,000 is totally cool right now in your 20s, but I hope you're on a career path or some sort of trajectory in your career to make twice that amount of money by the time you're in your mid-30s. And if you're not on that career path, maybe it's time to figure out what that could look like. Maybe it's time to explore different types of, you know, careers and jobs and skill sets and just start networking, getting out there a little bit more, who knows? But again, making 45k at 26, that's wonderful. We're rooting for you. That's totally fine. Especially rent free, no car note, no bills. But I don't want 35 year old faith to also be making 45,000 a year. So Robert, what's your take here on the student loan situation? She's got eight loans, 26,300 across them, 5% interest rate. How would you approach, prioritize all this?

Robert (6:22)

Yes. First I want to unpack, which you broke down, which I think is incredible for everyone listening to understand is that I think a lot of people get financial freedom and their goals backwards. They think, oh, I'll do it later, later, later. But what they don't realize in your 20s and 30s, you have so much freedom, especially before you're married, before the kids come, before your parents become elderly. All of these portions of your life allow you the freedom to really multiply your money, have the side hustle, build the personal business outside of the 9 to 5 job. Because once you hit that age where you're married, where you have kids, your parents are getting older, then you get into a situation where everything is about everyone else and not your own dreams. So I first wanted to elaborate on that just for a second. So what, how does that relate to the student loan debt right now? I think she already touched on it. You have to get this Roth IRA maxed out every single month. $583. Why is this important? Because you have the money. Right now your student loan debt stinks, but at least it's not high interest debt. So with that, I think you should get that $583 in the Roth IRA every single month. Keep doing what you have to do with the student loan debts, whether it's pay the minimum or what have you when you start having to make the payments again. But I would focus on you first and the student loan debt pay down later. Because at the end of the day, the Roth IRA is going to pay you tenfold over time, whereas paying down these student loan debts is not. And if your student loan debt was 8%, 9% or something like that, then it would be a different story. But right now, even though the debt is high, you still have to get yourself set up for the future, and that is by investing in the Roth ira, getting yourself set up with that basket of index funds. And that way later on down the road, when you do start chunking away further on the student loan debts, you still have money working for you while you sleep.

Austin (8:26)

Let's, tactically speaking, break through this, right? So you've got 45,000 a year is what you make. You're probably taking home about 3,000amonth, maybe a little bit more than that. You're probably living off of a thousand dollars a month, considering you have no car note, no major bills, you live rent free, right? Spend a thousand dollars a month, that sounds about right. Maybe a little bit more, a little bit less. So now let's say you have $2,000 left over thousand, you said 200 of it is going to go to your student loans to keep that just rocking and rolling. So we're going to subtract that out. Makes 1800. Now we've got the 583 per month that we're going to use to max out our Roth IRA. That makes us now $1200 left 1217 specifically now this 1217 you have left. Let's park that in either a high yield savings account so you can begin to build up that emergency fund of, let's call it five to $10,000. And then after you've done that, let's get it invested. Let's put that money every month into a public.combridge brokerage account, right? Normal taxable brokerage account. Invest it into the index funds and ETFs we talk about so that you now have, over time $26,300 invested across all your accounts, which then gives you the green light from the Rich Habits podcast to now make a aggressive payoff on a student loan Remember, a rule of thumb when it comes to paying off student loans, car notes, or any big chunk of debt in general is to make sure you have at least that much invested already before you pay it off. Because again, you can only pay student loan off to zero. But investing that same $26,000 that doubles every seven years and compounds for you throughout your life, especially at the young age of 26. So Faith, we hope this episode gave you some direction as to what to do with your student loans. Our next question comes from Cali Cali says hi Austin and Robert, I'm so glad I stumbled upon your podcast in 2023. Thank you for your dedication to sharing your knowledge with the world with the utmost sincerity. Hats off to you good sirs. My questions are related to high income ETFs. Spyi and QQQI seem to be spoken highly of for income generation, though they've not been around for too long. Assuming someone in their 30s who already has an investing foundation built, would it be a terrible idea to invest $100,000 5050 split between Spyi and QQQ or all of it into QQQI within a brokerage account to generate passive income on top of a full time W2 job. By investing foundation built, I mean I have an emergency fund and I've been regularly contributing to my 403 401k and after using a dividend reinvestment plan calculator to estimate compound growth in annual dividends of SPYI and qqqi over the 10 years, the income generated from these monthly distributions seems too good to be true. When working toward financial independence, what would some concerns be regarding investing a large portion of your overall portfolio to these high income ETFs? What would you do with a hundred thousand dollars if your goal was to replace an average American employee salary over the next 10 years. I really appreciate your time and consideration and I'm super excited to hear your thoughts on this. Well, Cali, thank you so much for the super kind words there in the beginning. Robert and I are just so humbled to have a hundred thousand people come back every single week to listen to us talk about personal finance and investing. And we're super glad that you've been listening to our show for the last couple years now. So let me shoot you straight. The biggest downside to having too much of your portfolio invested into covered call ETFs that are at these 10, 12, 15% annual distribution yields is that they do not grow in price. Okay, so let's talk through that. Whenever you buy a stock, oh, let's just say a normal ETF like the S&P 500. So Voo had a total performance of 24.98% in 2024. So if you invested $100,000 on January 1st into the Voo ETF, your 100,000 would be worth $124,980 at the end of the year. Of that, let's call it 25% total return, 1.2% of that 25% came in of dividends. Because the S, P 500, you know, you're holding the stocks. The stocks pay dividends, right? So 23% of the return came from the price going up. 2% came from dividends. SPYI and QQQI flip that on its head. Their entire purpose is to take that capital appreciation that you would see in a VOO or a qqq, pay it out as monthly distributions, right? Dividends. And then if there is still upside to be had, you will see a little bit of upside in the price. Now why is that important to understand? If you are reinves those dividends back into shares of spyi, then theoretically speaking you are taking the money, which is that capital appreciation translated into money, and then putting it back into the stock, making it kind of seem like capital appreciation regardless. So if you're reinvesting it back into it, I guess there's like not any big red flags. But if you are realizing those monthly distributions and spending them on your groceries or your mortgage or your, you know, gas or whatever you spend that money on, the price of SPYI isn't just going to go up like crazy like VO does or the of QQQI isn't going to go up like crazy like QQQ does. The way you realize the Returns in these NEOS funds is the monthly distribution. So if you take those returns and you go spend them, think about it as synonymously with selling shares of VOO or QQQ to realize, you know, some cash. So in your situation here, the big mistake that people might make with this is thinking, oh, I'll buy all this, you know, stock and SPYI and qqqi and I won't reinvest the dividends back into it and it'll just keep paying me more year, which is true, technically speaking, as long as these index funds continue to trend higher. But the price of these funds are not going to go up at all compared to like, you know, voo. So for example, the price, the price of SPYI year to date is up exactly 1% while the price of Voo is up 8.7%, right? So the price difference there is really important to understand. Now the other 8% difference is paid to you in distributions, right? So that's how you get that total return. But don't make the mistake of thinking, I'm going to put 100,000 into this, it's going to double every seven years. Like Austin and Robert, talk about like Voo does. That won't be the case. You'll get all your money back every seven years. Right? That's how it will double for you, but it's not going to double in price. Your portfolio value won't go up unless you're reinvesting those distributions back into the funds. I hope that made sense.

Robert (14:49)

I think it makes great sense and I just want to double click back at this. So is there a world, Austin? Because my brain immediately goes to if I have $100,000, I've done all the other things and I do generate some income, but I also want to have the upside potential. Is there a world where this 100k could be split 50% in V&QQ and 50% in spyi and QQQI? So then you bridge the balance of both where you're getting growth and upside. But then you also still have some income coming in. And then later on, as you start to age and want to get out of this corporate job, then you could up up the amounts going into the dividend producing products that we talk about, like spyi? Or is there a completely different strategy that I'm not thinking about to give them both income but also give them growth?

Austin (15:45)

No, you're, you're absolutely right. So here's my situation. I've got just north of $55,000 invested across spyi. And QQQI. My goal is to have a hundred ousand invested in spyi and qqqi by the end of the want to say I've also got some BTCI in there and so I've had this going since last year. So I can look at the year to date results for myself here and we can talk real numbers. Robert. So the real return, the real total return on my SPYI year to date, where I reinvest the dividends back into it, is 8.2%. So that 8.2% return versus the 8.7. Right. Half a percent difference here, like that's the price discrepancy that kind of, you can kind of see happening in real time. Now half a percent is not enough money for me to want to say why? Like this doesn't make sense, right? Like I want the income. This actually pays about 800 bucks a month just on 55 grand, which is amazing. So here's the deal. If you are someone who wants to get out of the rat race over the next 10 years, yes, if I were you, I would use Neo's funds to do it. And here's why. Reason number one is NEOS funds holds all of the underlying constituents of the benchmark index. What that means is unlike Jeppy or Jep Q or these other JP Morgan funds that you see people talking about on Reddit or Twitter or whatever, they don't actually hold all 500 stocks, the S&P 500. Right. Or all 100 stocks in the NASDAQ 100. They have sort of like a black box strategy where they try and find, you know, undervalued names and outperformance. Whatever, it doesn't work. SPYI for the last three years has outperformed JE in every single benchmark you can look at, right? If it's total return, if it's tax efficiency, if it's everything, like it's so much better. So one, they've got the same names, two, talk about tax efficiency. They've got return of capital. They also have section 1256 contracts. So very tax efficient if you do this instead of a normal brokerage account. And number three, I understand they haven't been around for that long, but QQQI did just win the best active ETF by ETF.com, right? This was a big award given to them recently. They won that award. They, they beat out the Vanguards, they beat out Fidelity, they beat out Jeffy, like all these different types of massive funds. So despite those funds being around for longer, neo's funds are Making waves and they're being recognized for that innovation.

Robert (18:03)

I get it that people say, well, Neos are new, these are newer funds. Should we trust them? Is it to be true like in this question? And the answer is just understand this. For anyone that follows along in the Rich Habits podcast or the Rich Habits Network, we are always going to be flushing out our new big ideas. The best products you guys can all integrate into your portfolios to help you build wealth. Because that is why we are here to help you through life's journey with mindset, business and finance so you can all live these wonderful lives. And we love Neo's funds for sure.

Austin (18:38)

So our next question comes from Brandon Stuff. See, Brandon says hello. I'm 17 years old and I need advice on what to do at my age. I'm an online student at CCA Academy and I'm currently unemployed but in the process of applying to many jobs. Once I have a base of income, what should I do for my money to grow and to start actually building wealth? I know you guys talk about investing and starting budgeting and all this stuff, but I just want advice from your perspective on what I should do next. I want to be wealthy and be on point as possible with my money. Thank you for taking the time to read this. This Robert. I'll let you this one off.

Robert (19:11)

Well, Brandon, if you've been around for a while, you know that I'm going to tell you on your birthday, the day you turn 18 years old, go open the public.com account, get your Roth IRA set up. And in my opinion, the number one thing everyone should do when they're first getting started, get the Roth set up, start investing as much as you can, even if it's only $100 a month. That's okay with me. And just get it into that basket of funds. We love the voos, the qq, qs. Maybe at your age, aiq, get a basket of these funds so you're making money while you're sleep. You're getting that tax free benefit from the Roth ira. But most importantly, use your youth to make as much money as you can. Don't just go get a job and then spend nights and weekends video gaming and going out with your friends. I want you to have fun. Everyone needs to have fun in life. But you also need to multiply your money because. Because you can also be young and be successful at the same time. I know a lot of people don't think so and they think that, you know, when you're young you should just go have Fun all the time. But I'm going to tell you what the biggest hack I had in my life and Austin did as well, is I used my 20s to build. I worked my butt off. I had two, three jobs. I had everything set up where I was investing in stocks and funds and back then it was mutual funds, funds, and really just set myself up. And it just made the rest of my life so far that much easier. So that's where I'd start if I were you or anyone listening that is younger and hasn't started investing just yet.

Austin (20:46)

Three tactical pieces of advice I'd give you, Brandon. One, open up that Roth IRA. At 18 years old, every dollar that you invest into this Roth IRA and actually invest, right? Not just contribute, but it gets invested into Voo or QQQ 70x's by the time you are retired, right? $, you think about spending on shoes or going out to eat or going on a beach trip with your friend, like, whatever. Every dollar costs you $70 in retirement. So just by thinking, oh, what's this $5 or $10 or $100 going to be like? Is, you know, this doesn't matter. It's not a lot of money. It is a lot of money. It will 70x throughout your lifetime before you retire. So think about that. The second thing is just to kind of reiterate what Robert said. If you have the desire to be very wealthy and on point with your money, being able to grind it out for the next 10 years, right? You're 17 right now. Close your eyes until you're 29, right? Gary Vee had this awesome piece of advice he had published online back in like 2016 or 2017. When I first started following him, he said, if you're in college and you want to go build your career, all this stuff, graduate college, then close your eyes until you're 29. That's what he said. And by that he means just like, go do what you got to do. Tunnel vision for the next, you know, in that instance, five, six, seven years. So in your instance, the next, again, five, six, seven, eight, nine, 10 years, it's going to be so worth it. When you have so much money saved, so much money invested, maybe you have a real estate portfolio, maybe you have a small business you own, maybe you are a homeowner with, you know, a vacation, rent, like, whatever, right? Life is going to come with some awesome opportunities. But life comes with those awesome opportunities. If you go out and you look for them, looking for them does not mean I'm going to sit at home all day Saturday and play Fortnite or looking for them doesn't mean that I'm going to go find the fun, crazy cool parties I can go to with my friends and get in trouble and you know, go get high all the time and do the stupid stuff. Right? Like, that's not, not what it means at all. So if I were in your shoes, I'd close my eyes until I'm 29 and go work really, really hard. Well, what does work hard mean? So that's step three here. I would figure out three different businesses that I could start. If that is clipping, I think you can do that with WAP and make a ton of money. Maybe that's TikTok shop, maybe that's AI automations. Maybe you learn how to do Facebook and Google Ads. Maybe you learn how to build and use AI to start websites. Right? Right. But like figure out how to make $1,000 a month online doing something on your own here, it's, it's, it's never been easier. Or maybe you want to sell a product, maybe you want to do some sort of service or like, who knows, right? But it's just like there are so many of these. If it's with WAP or on school or on whatever else, you can go join these free programs that teach you how to make thousands of dollars a month at 17, 18, 20, 22 years old, just on your cell phone, your computer, because you are technologically in a enabled and you can figure this stuff out. On the flip side, if you don't want to do that, figure out how to work underneath somebody who's maybe doing electrical or H vac work. There's a guy that came to my house recently that works for zero mold. Super nice guy, trying to make sure that I don't have any mold in my house. But long story short, he's been working there for seven, eight, nine months. He said that he's loving it. Like maybe there's a world where you could like think outside the box for what your career begin to shape up as, right? What are you interested in? What are you good at? You're good with your hands, good with your brain, good with your communication skills. Like really hone in on what that looks like, be as self aware as you possibly can and then double down on what you really enjoy doing.

Robert (24:15)

I want to add to the double down part of that because I think where a lot of people miss out financially is they don't think about how can I optimize as many hours of my Day for profit versus waste or actually spending money. So I really want to click back on that because it's so true and so apparent in my eyes. But so many people don't think like that. They work their eight hour shift, they go home and they're like, all right now, now what? They video game, they go out to eat, they play around, they waste money, they waste time. Whereas you could add one more. That side hustle, that online side hustle, all of these things. And all of that money could just be to invest to get you ahead later on. And so I really love that outlook that you have there, Austin. And I think more people need to consider that at all ages. How can I optimize more hours of my day for profit?

Austin (25:11)

Let me also be clear. What Robert just described was normal. Everyone's normal. Oh, I go work, I come home, I have some food, I watch a movie. Like, that's normal. Normal is beautiful. If you want to be normal, please enjoy it. Enjoy normalcy. You have our, our utmost respect. Like, seriously, like, we're not telling everyone to go have this hustle culture, whatever. If normal works for you and you're on track to retire a millionaire, like, you're doing it all, like, that's wonderful. But if you're someone who complains about normal, you don't have enough money, you don't have enough opportunities, you want to have these different things. Like that's the people we're speaking to right now. So don't confuse that with like, we're telling everyone to go get a side hustle and go make a million dollars on a weekend. Right? We're not saying that, but we are saying is if you don't like your normal situation, there's ways to get out of it. Robert and I got out of it and we hoped that Brandon C. Can also get out of it. Our next question comes from Laura C. Laura says, Hey, I recently found your podcast. I'm a huge fan. I'm an attorney for the State of California and I'm currently over three years into my PS LF program. I've paid 40 pay payments out of the 120 required. I started with $176,000 in student loans and despite one year of actual payments, my balance is now 178,400 due to high interest and the nightmare that is PSLF. I'm 38 and I went to law school. Later in life during COVID I was fortunate that two years of paused payments still counted toward my 10 year PS LF requirement. I take home about $5,400 a month. But with my rent, medical bills and other expenses, I'm barely scraping by and can only put $115 a month in my Roth IRA. I also recently received a pay cut from the state and I'm making less than when I started as an attorney. I also have $8,000 of other debt that I'm close to paying off and trying to prioritize. My state job only offers 5% annual raises with a possible promotion in three to five years from now. I'm very much considering pursuing a private sector role. In the next six months, I'd make about 170,000, base salary, a quarter million dollars with a bonus and I'd get a 401k match, but I would not qualify for the PSLF. However, I would likely refinance my loans to get a lower interest rate. Once out of pslf, if I stay within the state of California, I might actually start my own firm. But I can't afford to invest in that right now and that would take years to see a substantial return. Given my debt, limited savings and PSLF progress. Should I stick it out with a state job to get my loans forgiven or pivot to a high paying private role and aggressively pay them down myself? Honestly, I regret going into law. I feel like it set me back financially instead of moving me forward. It did not set you back financially, Laura. We are about to give you the playbook, girl. Here we go. Congratulations on being an awesome lawyer. You're clearly incredible. You've been doing this for a long time here. Three, four, five, six years. You're crushing it. I would 100% say see you later, bye to the state of California and the $80,000 a year that they're paying you. I would go make an extra 100 to 150,000 working in the private sector. So you'd start taking home anywhere between 11 to $12,000 a month, which is more than than what you're making right now. You would not be scraping by anymore. You'd be able to aggressively pay down your $8,000 of other consumer debt, which I'm assuming is credit cards and high interest rates. You would also be able to invest toward your retirement. You'd have that 401k match. And yeah, just pay off the loans, that's fine, right? So live off of this, let's call it $8,000 or maybe seven, $8,000 a month. Use the other, I don't know, 4,000, $5,000 that you can make and use that to pay off these loans, right? 178,000 divided by $4,000 that payments you divide that by 12, that's three and a half years. So fast forward three and a half years and you've got all of your student loans paid off. That's amazing. Yes, do that. Private sector all the way. Go get your bag. That's why you went to law school. Because specifically here you're saying, hey, I regret it because I'm, it's setting me back financially. It's not setting you back financially. The situation, the route you chose is what's setting you back financially. Right. Making as little money as possible for the hope and the idea that I'll get, get my, you know, loans forgiven, that's great. I respect people that do that. But if you feel like, hey, I have a problem, I'm not moving in the right direction, let's fix the problem, right? Let's go figure out how to go make that 170, 200, 250 a year as a private sector attorney. And then maybe every year you use your bonus as a, as a lump sum payment to the student loans or you feel back, you know, you're, you're not moving in the right direction. Maybe those lump sums go get invested for you, right? So. So now you really feel like you're making progress. At the end of the day here, there's a clear ro out of getting out of this, and that is to refinance those loans at a lower rate. Go work in the private sector making 170, 180, 200, 250, whatever it is, get that 401k match. These loans are gone in three years or so. And now you've got a 12 to $15,000 a month payroll that you're collecting. And think about all the investing you can do then.

Robert (30:08)

Geez Louise, we could spend three hours unpacking the magic that you just laid out. So, Laura, Austin nailed this 100%. Get out of of there. Stop worrying about this forgiveness program that you have in California because it is holding you back. You are leaving so much money on the table. I have calls with people every single month and they say, well, I know if I went out in the private sector or if I know if I quit my job and went out on my own, I can make XYZ more, but they have really good dental. Well, guess what? Go make the extra hundred grand a year and pay for your own dental because you're leaving too much money on the table worrying about a forgiveness program. Austin, you killed that answer. Laura, get out of there. Go be private, make all that money, invest the difference and you'll be so much better off in your life.

Austin (30:59)

Let's say that Laura makes right now $100,000 a year salary. Let's just pretend so she makes $100,000 a year salary dot she takes home $5,400 a month. So let's now pretend that she got the lower end of her estimate of 170,000. That $70,000 difference period of time is $700,000 more that she would make. Or you make 70,000 less and go get your 178,000. What would you rather have, Laura? $700,000 extra or $178,000 of student loans forgiven? Give me the 700,000 every single day. And just in this instance, right? You said you're three years out of the 10, so let's even call it seven years. So that's seven years time, $70,000. That's $490,000 or 178. I take the 490. Even after taxes, you're making out more. And that's assuming you don't make any sort of promotion in that 10 year period of time. Of course you're going to make promotions and bonuses and big projects like Laura. Go get your bag, girl. We're rooting for you. We're proud of you. You are not behind financially. You're going to do this just fine. Our next question comes from Joseph B. Joseph B. Says, hey, Austin and Robert, my name is Joey and I absolutely love the show. I've never missed an episode. I'm 22, debt free and still live with my parents in New Jersey. So my expenses are very minimal. I've wanted a house for years and was hoping to get your opinions on whether it's feasible for me within the next 12 months or if you think I might be getting a little too ambitious. I'm a fourth year Union electrical apprentice. I gross roughly $90,000 a year. I'll make a hundred thousand next year and then become a journeyman, which increases my yearly gross to about 140,000 after that. I've just hit my first hundred thousand dollars invested. I have 50,000 in my bridge account, 30,000 in energies annuity, 20,000 in a Roth IRA and 4,000 in a cryptocurrency account. I also have a High Yield Savings emergency fund with $45,000 in it. I understand that this may be too much left uninvested related to my expenses, but most of that is earmarked for a down Payment and closing costs on a multifamily. So bear with me. Robert, what's your take here on Joey's situation?

Robert (33:06)

My take is that Joey is crushing it. So cool. When I see younger people that actually have it together, together they're focusing on their wealth, they're focusing on their money and just really not letting their lives pass them by. So what do I like here? I love all of it. What would I do different? I would definitely consider since he has the base built, getting some money either out of the annuity or out of the high Yield savings account. I would do a Fannie Mae 5% down mortgage right now. It's just an incredible, incredible program. You can buy up to $1.3 million dollars and you can have even a lower credit score if need be to be able to qualify for these. And I would go buy a duplex, triplex or a quadplex. Remember, you have to live in one unit for at least a year. But Joey, I think you're ready and that's what I would do because you've already got the base built, you're going to be making a lot more money and you're going to be building equity into this property by doing so. I love where you're at. Keep crushing it. That's what I would do.

Austin (34:07)

Yeah, I would dump the annuity, figure out what the cash that you can get out of that. Go invest that in your brokerage account via your bridge account there. And I promise you, over the course of the next 45 years of your life, between now and 65, you will make more by just investing it in the S and P and the NASDAQ than you would from whatever your annuity person's telling you. So dump the annuity, eat the cost on whatever the surrender charges are, whatever, it'll be fine. And then go invest that and then yeah, you've got $45,000 in this high Yield savings account. You probably only need about in it to keep your emergency fund, which means you'll have 35 or more. Right. You're making a ton of money. You can beef that up to 40, 45, 50, depending on what that down payment begins to shape up. As for you, go buy that duplex. The thing is though, New Jersey real estate, New Jersey real estate is expensive and I know that because Ireland's from New Jersey. My fiance and I just, I didn't know how expensive New Jersey is. Do you have any tips or tricks for him, Robert, as it relates to finding a multi family in a high cost of living state like New Jersey that maybe he could have afford. And you know how that begins to shake out.

Robert (35:10)

Yeah. Do exactly what I'm doing right now in Ohio. Go to the parts of New Jersey that are up and coming. Not so far away from your job or your family, but there's always these tertiary sectors of a market where they're up and coming and they're not an A level, they're more of a B or a C. Find something there in an area that's growing, that's gentrifying because there's always still going to be deals in those areas and that way you can be part of the growth and not buy at the top. That's what I would do.

Austin (35:41)

There we go. Heard it here first. Our next question comes from Ricky G. Ricky says hi Austin and Robert. I hope this message finds you both very well. I've been listening to your podcast for several months now and I'm garnering a lot of useful information and I enjoy listening to you both, especially how you both use real world examples for all of us to easily digest the information. Keep up the amazing work. Thank you. I'm reaching out as my father was recently diagnosed with dementia and my mother can no longer be his caretaker due to his condition. My brother and I cannot care for him daily either as we both have our own children in our respective homes. My parents do not have long term care insurance, but they have two homes that they own, one they live in and another is a rental property in New York which they own outright. If my mother were to sell the rental property, she would net about 700 to $750,000 after taxes. Is there an investing strategy that she could opt in for or park the funds into, which can grow over time but would also allow her to draw a small percentage every month or annually to help pay for assisted living for my father. Assisted L plus memory care costs in our area range between 7,000 to 10,000amonth or about $100,000 a year. I'm not privy to how much real estate income my mother is making from the home currently, but I have to assume it's in the neighborhood of 4 to 5,000 per month. But I could be wrong. I'm interested to confirm if keeping the home as a rental property instead of investing a lump sum from the sale is recommended. I'm sorry man. I'm so sorry Ricky by someone who just lost his father. It is just a terrible, terrible time and a terrible situation and I just. I feel so bad for you and your family. Thankfully my dad did not have dementia or anything like that. But I was looking at these assisted living facilities. I'm seeing 5, 6, 7, $8,000 a month. And I'm like, oh my gosh, like, how do people afford this? And I actually asked one of the people that work there and they said that from their assets, right? And normally when they move into the assisted living facility, they're moving out of an existing home. So they sell the existing home, take the proceeds, and use that to pay for the assisted living facility. I think the statistic is that people live in these fac for, I think it's around four or five or six years, something like that, on average. So just kind of keep that in the back pocket as you think about projecting out how much this could cost for you total. I would sell the home. I would use that 700 to 750,000 after taxes. I would probably park some of it in the s and P500 or the NASDAQ, maybe 50, 60, 70% of it, let it grow over time, park the other 30, 40, 50% in some high yield savings account or CSA, hi, which is an ETF that, that pays monthly distributions with T bills, you know, some sort of like very, you know, low risk, pays three and a half to four and a half percent per year account, like a high yield savings account. Right. And then have that as your sort of way to help supplement some of this money. Maybe once per year you take off, you know, 10, 11, 12% of the total portfolio. Use that to pay for it. And because it's invested and because it's growing, hopefully you do not have to spend this entire amount of money. Hopefully there are different things that you can figure out in the future. The future that could help. But maybe because it's invested in, in sitting in the right accounts, it could prolong the total amount that you can spend. Right. So maybe instead of, you know, seven years, you're able to spend for eight or nine years now because you're able to grow this money over that period of time. Ricky, I'm so sorry that you're going through this, man. I. My heart hurts for you.

Robert (38:54)

Yeah, I agree 100%. I like the idea of getting it into the markets, getting it, making money. Because I look at it this way, let's say that the assisted living is 7,000amonth, and you put in $750,000 into these accounts and you get a blended return of 10%. That's $75,000 a year in growth. And so if you can stay within that, you're not going to deteriorate the actual principal. But you would be using all of or most of the growth and that's very reasonable to expect 8, 9, 10% return to you on this money. So I agree with Austin 100%. That's what I would do. Because at the end of the day, it is one of the biggest burdens most people go through. You're very fortunate that your parents do have this property to be able to offset those costs because otherwise you could run out. That's what happened with my mother. Her Medicare and all that stuff ran out and I had to come out of pocket for those expenses just like Austin did. So keep that in mind. Our heart goes out for you and I hope this helps.

Austin (39:57)

I will say too, you probably will have to tap into the principal, right? You know, be great if you could consistently get those 10, 12, 15% returns in the markets. But we know that that's like an average. So there will be down years. Like I share that, only to let you know it's totally cool to tap into the principle and spend some of this money, right? This is, you know, what it's supposed to be used for. And fast forward 10 years from now, hopefully your father's still alive. But if he's not, and you did have to, you know, spend some of this money to make sure that the last couple years of his life was amazing for him, you were going to feel like you did the right decision, you made the right decision, you did everything versus, oh man, I wish I still had an extra 50, $60,000, you know, now that my dad, like, you're not going to feel that way. You're going to feel so grateful that you had this money to spend to make sure that your father was in a wonderful, comfortable place in his last years. That's one thing I learned about my dad is like, you know, I've been taking care of him now for it was about seven years, the last seven years of his life, I was taking care of him. And I don't regret at all any of the money I spent, any, anything. Like, it was so worth every penny for me. Where statistically speaking, like, did it put me back or whatever? Like, sure, you could think about it that way. But I think about it as my dad was super comfortable and we got to spend time together. So I, I argue, Ricky, that you will feel the same way. So if the 750 turns into 350 over the next, call it 5, 6, 7, 8, 9 years, I have a hunch that you're going to feel like it was money well spent and also.

Robert (41:16)

For everyone else listening, Think about Getting ahead of this. If you have parents that are aging and you want to get ahead of this, you can look at long term insurance, long term care insurance, and getting ahead of some of these things to be able to help you down the road when it happens. Yes, you have a preloaded house expense, but it also sets you apart from not having to sell all their assets and potentially run out of money. So keep that in mind as well. And if you want to learn more, Austin and I have been working with Shuriance for a long time. They've done a wonderful job. For anyone that we've sent their way, ask for Russ and tell him that you found him from the Rich Habits podcast and there will be a link in the show notes below for anyone that needs it. So before we get into our next next question, Listen up folks. You can lock in a 6% or higher yield with a bond account on public. But remember, your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward/rich habits so our next question.

Austin (42:23)

Comes from TK because they want to be anonymous TK says hi. Robert Nosson. Big fan of the show. Thank you for all your thoughtful no BS advice. A friend introduced me to the podcast and I've been hooked ever since. Let's go Robert. We tell people all the time. Share the episodes with the friends. TK got it from a friend. Shout out to TK's friend. We're super grateful. Now TK says. I'd love your take on the situation I'm navigating. I recently received $315,000 in capital gains from a stock payout from a former employer I know. Hashtag first World problems. I live in a high state tax state and expect to owe about $75,000 combined state and federal in taxes this year on that payout. I've set aside some of the proce proceeds to supplement my income as a part time solopreneur over the next few years and have invested the rest in my taxable brokerage account, mainly in the index funds and ETFs you guys talk about. Shout out to you all to reduce the tax hit. I'm contributing to a SEP IRA and I'm benefiting from the higher salt deduction thanks to the OBBB changes. But here's the real question. A tax mitigation firm, not my CPA, recently suggested I consider investing $100,000 into a short term rental Airbnb fund with a real estate investment company that they know. The pitch is that it could generate returns while also helping me offset this year's tax bill with passive losses. Is this a smart move or is it too good to be true? I'm weighing the potential tax benefits against the risk of tying up cash in an illiquid investment. What red flags or liquidity concerns would you watch out for? And how would you think about this trade off compared to simply investing the money for long term growth and eating the tax bill? Robert often talks about real estate as a solid investment, so I figured this might be interesting. Your wheelhouse. Thanks for considering this for a future Q and A episode. I'd love to hear how you think through it. Robert, I'll let you kick this one off.

Robert (44:09)

This is a great situation. Love the question, but here's my takeaway. I would be very careful and I would have to really dig deep to understand what's the general return? What is the track record of this company? How long have they been in the Airbnb business? All of the above. Because a lot of these funds can be fantastic. They can offer you the tax benefits, they can offer you the things you desire. But the other, other part of it is what if the returns stink? What if they're not good operators? And you have to consider all of this before making this investment. What I would rather see you do is take that hundred thousand dollars and buy your own short term rental property to be able to get all of the benefits without all of the fees coming with investing in someone else's fund. That's what I would do if I were you. That's what I do every single year in my world and in a lot of people's world that do what Austin and I do, there is a a saying that I never ever don't have top of mind. And that is it's not what you make, it's what you keep. And in this instance, if you did this strategy you're talking about, you would gain a lot of tax benefits. Keep more of your income away from the tax man. And it is a really good strategy. I don't know if I do it through a fund unless I knew the fund themselves and I knew that they were really good operators and their fee structure was fair.

Austin (45:31)

I think that's a great answer. I'd rather have $100,000 of cash invested to my favorite ETFs in single stocks that I choose that goes up 10, 15, 20, 30% a year, because I'm pretty good at this. And I, like, I'd rather have that than have a hundred thousand dollars invested into a random fund that I have no control over. That, sure, I can get some passive losses, let's call it 20 to 30,000 of that hundred thousand would be realized as passive losses because of the cost segregation study that they would do. But it's like, okay, cool, one year's time, fast forward, and I make up for that 20,000 save because I have my money invested and I make 20%. I guess trying to say is, like, we talked about this in the past on, on different episodes, like, I understand where people are saying, like, hey, let me optimize for taxes, save as much, like, whatever. And I get that. And there's a ton of things that I don't know about taxes. But on the same token, like, I firmly believe there's nothing cooler than having a bunch of money in my brokerage account. Cool. You've got all these Airbnbs, all these things, and all this debt. Like, you've got all this stuff going on. Like, I'm, I'm glad. I'm, I'm sure that works for you. I've got a friend, Michael Elefante. He does a great job with Airbnb, and he does this stuff so well. Like, it works for him, but I'm not an expert in that. But what I do think I'm pretty good at is investing. So, like, I do. It works for me, right? Know what? What? You're comfortable with what works for you and choose what works for you. And so if, if you want to go with this Airbnb route to save 2030,000 and they've got good returns and you're able to, like, see, like, cool. It might work out. Like, I hope it does, but I wouldn't do it because I feel like I could just take that same a hundred thousand, park it in the markets, make the 20, 30% the following 12 months, like I've already done in my portfolio so far this year. And it's not a liquid. I can now sell it the next day. Really powerful. And I will always choose to have hundreds of thousands, if not millions of dollars in my possession than having that money spread across in funds and illiquid things that I can't control or see or touch or feel. Does that make sense?

Robert (47:22)

It makes perfect sense to me. And I'm living through it right now from a different perspective. And that is, I feel too Many people want to optimize their tax strategies long before it's necessary. And then they find themselves trying to get too familiar fancy with their money. And here's an example. I invested $250,000 15 years ago in a limited partnership with an oil reserve company because it sounded great. I was going to get this passive income. It was going to grow over time. $250,000, it was supposed to mature in five to seven years. I get my returns plus my dividends. All is what well in the world. Well guess what, it's 15 and a half years later I get around a thousand dollars a month from my $250,000 and the only way to get liquid is to sell it through an auction. Then I have no control of what I get back. So just use this as fuel to understand that all these fancy structures and all these things. Personal finance is personal. Do what works for you. Because at of the, the end, end of the day, I love Austin's take that he likes to be able to control his money, know where it is, have the liquidity and all of this is so important. So Austin, great answer as always. I love your perspective because I too am suffering through it. Think about what I could make with $250,000 just in Voo for the last 15 years. I haven't figured it out yet because it'll make me sick of how much money I would have from that investment. But instead I'm stuck collecting $1,000 a month from it and it's illiquid and I'll never do that again.

Austin (49:02)

I think that's a wonderful example, Robert. It's just, and, and it's not that that's every instance, right? There are some oil and gas I'm sure that you know, worked out for people, but oh man, I, and, and something too. And this is more of like an Austin thing is like I also never want anyone to think, oh, Austin only got rich because he, because he figured out how not to pay taxes. That's the only reason that he's got no, I paid 120,000 last year, I'll pay probably over thousand this year. Like I pay my taxes, I'm a tax paying man. I, I throw into society what I get out of it. I'm cool with that. I'm happy to do that. And yes, do I do the SEP IRAs, the backdoor Roth IRAs, I do all that normal stuff that everyone else does, but I'm not doing some crazy finagley finugly stuff that we see these billionaires do so. All right, next question. Actually, our last question. Michelle E. Says, hey, Austin and Robert, I recently was introduced to your podcast and I've very much enjoyed and learned a lot so far. I'm working my way through past podcasts, but I'm itching to get some advice on a financial situation. I help my MOT manage her investments and finances. She was very leery of the markets and was talked into buying an indexed universal life insurance policy. She has three of them, each worth $80,000 with the sale proceeds from her house. Oh my gosh. She lives with me now. They have a surrender charge waiver writer so she can cash them in at any time without a penalty. Previously she had this money in a basic bank account, so I think the increase in value is better than what she would have had earning nothing in a checking account. But I'm not convinced that this is the best place for her money. I'm wondering what guys would recommend as a better investment that will grow her money more but still be resilient to the markets. I feel others are making more off of her money than she's making on it herself. Really great question here. Cash it out, put it in a high yield savings account. Earn your 4.1% with Public's High yield cash account. She will see that money deposited every single month. She'll go, oh my gosh, I'm making some money with my money. And you know, the markets are up, they're down. But not me. I just keep going up. Like that's, that's essentially what she's done right here herself with this $240,000. So yeah, do that every month. She'll get a nice little payment of $800. She can use that to buy her groceries or maybe treat her grandchildren or whatever she wants to do with at 8:20amonth and then all is well in the world. If she does want to get a little bit of aggressiveness, maybe she can put 20, 30% of this into the markets and watch it go up and down over time. But assuming she already has some sort of nest egg, like maybe she doesn't need to do that. But if you are specifically asking what does she do with these funds so that she doesn't have to feel the ups and downs. Park it in a high yield savings account, ride the wave and she'll feel just fine.

Robert (51:30)

Everyone knows how I feel about Iuls and Michelle. You hit the on the head. No one should ever make more with your money than you make with your money. End of story. Iuls have high fees, hidden fees, high commissions, surrender charges, penalties. It is not a real investment. At the end of the day. You have to always ask yourself this question or the person trying to sell you the IUL why does my money go away when I stop making payments if it's an investment at the end of the day? If I put money into VOO every single month for 10 years and stop for the rest of my life, guess what? It's still my money and it continues to grow until I need it. That is not the case with an iul. So for me, I think what Austin said is exactly right. Get it out of there. Get it into a high yield savings. Maybe put some of it in SPYI or QQQI or VOO if you want to have some leverage and some exposure to the stock market. But get it somewhere where it's safe. You're not eroding with all of these fees and that way you control the money and you can get the income you desire or the growth you desire year over year and still control your own money.

Austin (52:44)

Couldn't have said it better myself everyone. Thank you so much for tuning into this week's episode of the Rich Habits Podcast. Don't forget to come back tomorrow for our new Friday episodes where we break down the biggest headlines and happenings impacting you and your money. These episodes are insane. We've already had a hundred thousand downloads. On last week's episode you all love the we talked about Apple $600 billion investment, what Disney's doing with the NFL. We talked about all the fun stuff. So go listen to that episode if you've not yet listened to it. And be sure to come back tomorrow for this Friday's episode. You guys are going to absolutely love it and if you enjoyed this episode, please consider sharing it with a friend just like TK shared the podcast with her. And then also consider leaving us a five star review. They mean the absolute world to we wear those reviews like a badge of honor. 4.9 stars right now in Spotify. It means so much to us knowing that we put out such great content and you guys are receptive to this content and truly think that it is worth listening to. So by just leaving us a five star review it it really really means a lot.

Robert (53:48)

And one selfish plug. Don't forget we're still running the Rich Habits Network 7 day free trial. You can join for $0. Come in and kick the tires, check out the modules, join a private live and see what it's all about and really, really entrench yourself and see if it's a good fit for you. We're running that seven day free trial right now. There's a link in bio or in the show notes below. So thank you all for coming by each and every week. We love you all and appreciate all that you do for us.

Austin (54:17)

Thanks everyone and we'll see you tomorrow. Sam.