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Rich Habits Podcast
Q&A: High-Risk Investing, Millionaires in Credit Card Debt, & Washing Your Crypto
00:50:24
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- [00:02]
Austin Hankwitz
You know that feeling when someone shows up for you just when you need it most?
- [00:06]
Robert
That's what Uber is all about.
- [00:07]
Austin Hankwitz
Not just a ride or dinner at your door.
- [00:10]
Robert
It's how Uber helps you show up.
- [00:11]
Austin Hankwitz
For the moments that matter. Because showing up can turn a tough day around or make a good one even better. Whatever it is, big or small, Uber is on the way. So you can be on yours. Uber on, on our way McDonald's meets.
- [00:30]
Robert
The Minecraft universe with one of six.
- [00:32]
Austin Hankwitz
Collectibles and your choice of a Big.
- [00:34]
Robert
Mac or 10 piece McNuggets with spicy nether Flame sauce.
- [00:38]
Austin Hankwitz
Now available with a Minecraft movie meal at participating McDonald's for a limited time, a Minecraft movie only in theaters. Hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes which are comprised entirely of questions from you all. You guys can ask us questions on Instagram at Rich Rich Habits Podcast. Just shoot us a DM. You can email us your questions@richhabitspodcastmail.com or you can ask us a question inside of the Rich Habits Network. The cool thing about that is your questions always get answered inside of the Rich Habits Network. As a reminder, we're still running a seven day free trial over there, so definitely go check that out in the description below. Robert I'm most excited about this episode because I feel like the questions we're going to be answering are across a range of topics. We got questions about personal finance, some business stuff, some real estate stuff. It's, it's all over the place.
- [01:31]
Robert
Yeah, I enjoy these episodes especially when there is a wide array of questions because we can throw the gavel down on people because we've got some questions. People are not going to like our answers and so but it's all about education and helping people with their problems, with their situations, with their growth. No matter what it is, we are here to break it down right off the dome and help people figure out what to do. Because as we always say, personal finance is personal and it is not always easy. Time, money, life gets in the way and we're here to help.
- [02:05]
Austin Hankwitz
That's right. Well, two quick call outs before we jump in. The first quick call out is our friend John Hu, the CEO of Stan. We had him on the show a couple months ago. His company, Stan Stan stores their website. They're still hiring. They're hiring for a head of product, a product manager, Creator, marketing events and programming lead product marketing manager, full stack Data scientist, video editor, Content creator, AI Content creator, professional memer I mean, they've got a lot of open roles. If you're someone who's a top 1% human being looking to go build equity in a really awesome startup, consider applying for an awesome job over at Stan. There'll be a link in the Show Notes below to go do that as well. And then finally our second quick call out is that if you are looking for an online broker that's actually built during this century, you need to give public.com a try. Because on Public you can invest in a almost anything. That includes stocks, bonds, crypto options and more. And if you're like us and you keep an emergency fund, you can actually take advantage of that 4.1% APY that they offer via their High Yield Cash account.
- [03:09]
Robert
Discover why Nerd Wallet gave Public five stars for its ease of use and investment selection. Fund your account in five minutes or less and earn up to $10,000 when you transfer your investments over to Public. And for a limited time, Public is offering a 1% match on all IRA contributions. So if you're finally investing towards a Roth IRA this year, do it on public and earn up to 1% match on all contributions paid for by Public Investing. Full disclosures in the podcast Description we.
- [03:40]
Austin Hankwitz
Are almost wrapped up with the month of April for 2025. If you've not yet started investing and contributing toward your 2025 Roth IRA, time to get started, right? Go get that 1% match over at Public. There'll be a link in the show notes. Just go to public.com rich habits and you'll get all the fun cool perks of being a listener of the show. All right Robert, Our first question comes from Monica G. Via email. Monica says, hi Austin and Robert, I just discovered your podcast and I wish I would have known all these things 45 years ago. I'm 60 and my husband is 62. We have 2.4 million across our 401ks and IRAs. Our home is worth 650,000 and we owe 200,000 at 2.8%. We have $25,000 in credit card debt, 100,000 DOL in a HELOC, and $28,000 in student loans that we're paying for our children. We don't have a savings account. We just finished paying our last tuition bill for our youngest child and would now like to start working paying off some debt that we've accumulated putting these three kids through college so we can hopefully retire in a few years. Now I've recently changed the elections for our 401ks to only invest up to the match. And I also plan to pay down this debt aggressively. Between my husband and I, we make about $400,000 a year between our salary and our bonuses. At the moment we're still paying about 3,000 doll month in rent and expenses for our youngest child in college. But hopefully we'll be able to cut that back here pretty soon. So here's my question. How would you prioritize paying off this debt and building an emergency fund? Do I do it all at once using our retirement funds or do I do it over time as we earn money via our income? And how should I reallocate our retirement accounts with retirement three years down the road? Robert, you want to kick this one off?
- [05:20]
Robert
Yeah. This is a tough one because although it's exciting that Monica G. And her husband do have this two and a half million dollars socked away, I love that and that's awesome. But what I don't like to see is we've got this HELOC that's out there at 9%. We've got this credit card debt of 25,000. So that's tough for me to really swallow because I feel like they've got the nest egg. But then they've got all of this debt that we consider high interest debt. And also they're kind of freewheeling with everything for the kids as well. And although $2.4 million sounds like a lot, it is not a lot considering that, you know, your current lifestyle is going to carry over into retirement in the next two, three years. And I think you're going to have to be really, really cautious what you do in the next two to three years to make sure you're still set up well for retirement. So in my opinion, to answer the question, I would first prioritize how can I get rid of the credit card debt? Maybe you do a balance transfer to a zero interest card for 18 months to get rid of that. Try to hurry up and get that paid off. But then also looking at the HELOC, you don't want to let it 9% that HELOC go for too long because that is going to eat you alive in interest as well. That's my situation. I'd like to see those two things paid off first before they think of anything else fancy towards retirement because you got to knock these out before, before you start thinking of any other ways to benefit yourself in retirement.
- [06:50]
Austin Hankwitz
I entirely agree. I think one of my favorite sort of slogans when it comes to personal finance is that only 20% of it is a math problem. The other 80% is behavior. Right? It's pretty elementary school math here to think like, okay, If I make 400,000 and I spend 450,000, then I'm going $50,000 in debt. And so I just want to make sure, Monica, like you all are $153,000 in debt. And if we are going to pay this off and be smart with our money by paying this off, you all are not going back into the debt, right? You're not getting another HELOC because you want to redo the kitchen. You're not going back into credit card debt because you want to go on the vacation. Right? You're doing things that actually make sense for you financially. So here's what I would do honestly. You have $153,000 of this high interest debt between the HELOC at 9%, the credit card debt at probably 30%, and the student loans that are anywhere between 5 and 7%. You have 2.4 million in your 401ks and IRAs, and you're over the age of 59 and a half, which means you can tap into that money without paying sort of a penalty or whatever that might look like from the irs. Depending on the type of retirement account, you'll still have to pay taxes on the money that you take out. So I probably would take out the $153,000 from your 2.4 million. You'll still have 2.2 million, right, sitting in that account, which is a great amount of money, maybe even take out 200,000 besides just that 153. So you can take the other, call it 47, 45, whatever there, and put that in an emergency fund. Said you don't have a savings account. If you're making $400,000 a year, you absolutely should have a savings account of 20, 30, $40,000. The only thing I want to make sure you're super aware of is that all the money that you're taking out of this $2.4 million 401k IRA, assuming it's not a Roth retirement account, just a normal traditional account you'll owe taxes on. And if you make $400,000 a year, you're probably in the effective tax rate closer to that 30% range. So just make sure you've got an extra $60,000 or so set aside for Uncle Sam in April of 2026 to offset the 200,000 of extra income that you received via your retirement accounts to get yourself out of this mess at $400,000. A year in salary and bonuses, you absolutely should be able to set aside $60,000 over the next 12 months. So that's what I would do. I would take out the 200k from the retirement accounts to wipe out this debt and then I would set aside $60,000 from my earned income. Right. The take home pay that hits your checking account, put some of that money Aside, right. That's $5,000 a month. And I would do that for the next 12 months to make sure I've got extra money set aside for the tax bill that will come. And then again, just want to reiterate how important it is to solve the underlying illness, the problem of overspending. Right. Because like being in credit card debt, having a heloc, having these student loans, that' symptom of the problem. The problem is you're spending behavior. And so if you and your husband and I totally respect that you guys want to put your kids through college. And I'm assuming this hundred grand of the HELOC was for college. Right. It probably wasn't just for some willy nilly things around the house like a kitchen remodel or a boat, which I respect and I think that's great and hopefully we don't have this again in the future. But just really want to make sure you guys are solving the problem of overspending and going into credit card debt as you all are now approaching an awesome retirement. And then beyond that, congrats. Got 2.2 million. You make 400k, you're going to make another, let's call it 5 to 750 grand after taxes over the next three years with this salary and bonus and things like that. Go sock away half of that and you'll be back to that 2.4 before you know it. So you guys are setting yourselves up for a really great situation. The biggest thing again is just make sure you're making the right decisions going forward.
- [10:40]
Robert
Yeah, this really brings me back to something you say a lot and that is wealthy people forecast and poor people react. And I think this is a situation of it's kind of a hybrid. And for any of you listening out there that have kids that are going to be going to college and you know what college they're going to be going to, maybe they're staying local at the, you know, nearby college. Think ahead, forecast, what's that going to cost? What does that look like? What's the real estate market around that college like? Because you could look ahead and say, hey, we're high earners. How can we get rid of some of our tax bills? Well, you could go there and buy a duplex, buy a triplex, buy a quadplex on the college and have a unit ready for your kid to use during their four or five years at college. That would be a great way to look at and forecast a way to save money, but also build equity, have some depreciation, have some appreciation, and be able to set yourself up and forecast ahead of a better way to spend money. Because I love the fact that you guys are high earners. That's the hardest part of the wealth bucket to figure out. But now that you've got that figured out, it's time to start forecasting better and not have these high interest debts.
- [11:54]
Austin Hankwitz
Our next question comes from Abel E. Abel says, hey, Austin and Robert, I'm a huge fan of the show and I've been watching for a couple months now. I'm 19 years old and I've been doing what you guys talk about. I have $5,000 invested, most of it being into the Nasdaq and a little bit into Bitcoin. My question is, I currently have $5,200 sitting in a special rate savings account paying 2% yield. But I hear you all always talking about paying 4 or 5%. So my question is, for my $5,200, is it worth paying the $60 a year to get Robinhood Gold to get their 4% yield, or should I use something else? I also live at home and make $3,000 a month after taxes. And we'll be in this situation for about two more years before I move out. Huge fan of the show. Thank you all for the help. Yeah. So Abel, great question. No, you should not pay $60 a year for Robinhood Gold to get their 4% yield. You should pay $0 a year. Go to public.com, open up a high yield cash, 4.1% and every $5,200 in there. Now, the big thing, though, that I want to make sure we're on the same page about, because a lot of people, you know, this is asked a ton in the Rich Habits Network because we're always the type that want to make sure people know the hacks, the strategies, everything they can do to optimize their saving, their spending, you know, their investing, everything along the way. And we take pride in being able to share those ideas with you all. But one of the things that just always cracks me up is there's people out there that are like, yeah, guys, I've got like 15 grand in this high yield savings account at 4%, but I moved it over to this one that's paying four and a half percent so I could start making some more money and like, you know all these things and I'm just like, wait, did you do the math on that? Do you understand that by like going through all those hoops and ladders of trying to figure out how to move from one account to another to get an extra half a percent on $15,000 is only $75 a year? Don't get me wrong, $75 is a lot of money for a lot of people. And I'm not trying to say it's not. But make sure that when you're going through some of these steps that you are accounting for the brain calories and the time spent and like all those things. I mean, you could go work a job paying 15 bucks an hour, work that job for five hours throughout that same 52 week period of time, right. That same year that you would get that 75 extra dollars, five hours making 15 bucks an hour and get the same 75 bucks. So I don't know. I just like to always think through and encourage people to not feel bad if they're not perfectly getting the pico amount that they need, right. 5.1 or 4.2 or 4.6 or whatever it might be From a savings perspective, what matters more than the 0.2% more APY is the fact that you even have an emergency fund. Right? That's what you should be focused on.
- [14:38]
Robert
I am all about, and we talked about this with me in the episode where we talked about credit cards. I'm not optimized. I should be better suited and optimized on my miles and what to do here and what to do there. So I think the moral of the story here, and I'm glad you touched on this, is getting people to understand sometimes you're going to leave money on the table. You can't get to it all right at the right time. You might have missed out on the big run for treasury bills or you know, you didn't get the investment into the Bitcoin when you wanted, but you did do it. It. Don't worry about that. At the end of the day, as long as you have good habits like Abel does, you are crushing it, especially at 19 years old. I love this because at the end of the day it's all about teaching yourself and becoming an investor and not just a consumer. So in this instance, you're doing great, you're on the right track. Don't worry about those little things. Obviously we want to see you open the public account because it's just a better overall strategy for your high yield savings account and you're going to make more money. But don't worry about the little minutia from day to day because people will spend hours to save pennies and that is not a good use of time. You guys hear me talk all the time about roi, return on investment. What is the return on investment for you to sweep that floor if you own a business versus having someone else sweep that floor? Understanding the time and value of every hour of your life is really important as you grow in your financial journey because then you can get rid of all those tasks. Don't live up to what your time is worth. And I think that's very important to understand.
- [16:17]
Austin Hankwitz
I think the phrase is stepping over quarters to pick up nickels or, or something like that. Right? That's what you're doing is like you're, you're over analyzing and you're over indexing on the importance of the small things. There are major things that if you do them correctly over a long period of time, like contribute and max out your Roth IRA and invest into the S P500. Like, like having a savings account, like opening up retirement accounts and you know, doing all the right things and earning more income. Like there are some major broad stroke actions that you can do with your life and your money that are going to set you up for success even if you don't perfectly optimize everything. Just being self aware enough to understand where you are and what's important to you.
- [16:58]
Robert
Yeah, it goes back to an old story, you know, and I've always been a financial guy and really into understanding how to optimize my time. And when my mother and I ran a restaurant together when I was in my 20s, she would drive to the Nichols bakery to buy our bread every 2, 3 days to save like 15 cents a loaf. So I finally stopped. I'm like mother, they deliver, you're dry, you're driving eight miles each way in traffic. Who knows what could happen? Wear and tear on the car, you could get in an accident, just let them deliver and charge us the 15 cents more. It's literally $2 a week. Why are you spending this time to go get these loaves of bread? So it's always about ROI and understanding because there's only so much time in a day and we want to make sure you guys are living your days with the best possible quality of life.
- [17:49]
Austin Hankwitz
You can 100% agree. So our next question comes from Tanner. Tanner says, I'm 20 years old. I'm an actor living in Los Angeles with my parents. I only have $500 a month in rent and I have no debt. I skipped college because I went straight from high school into acting. I've got 30,000 in a brokerage account and I have one individual stock, which is Palantir, that I got close to $24 a share. I have $7,000 in my Roth IRA, 5,000 in crypto, and I just wrapped a film last month and expect to make $20,000 from it. I'd love your advice on how I should think about distributing out this money. I want to invest a sizable chunk for the future, but I also want to keep some cash on hand for audition coaching, acting classes, some living expenses and other costs. Since my income varies project to project, I'm never quite sure on how much to save versus to spend. Of course I want to build a $100,000 base, but I'm really hesitant about putting a large chunk of this income, like $10,000, for example, into the volatile stock market today. Robert, what do you think is Tanner's best approach for having these large chunks of cash deposited to his checking account at such a young age and trying to balance investing with self development and forecasting for the future?
- [19:05]
Robert
Yeah, I love it. Great job, Tanner. This is so cool. We get these questions for younger people because I see it every day where there's people in their late 30s and 40s that are still kicking the can down the road and not setting themselves up for success financially. So I love the fact that you are actually considering already at your age, what should I be doing with this money? How much should I put towards self development? How much should I invest in this situation with this $20,000 coming in, I look at it, I would go right to the public high yield cash account. I'd open that up, get that four and a half percent, whatever it's making right now, and then I would take the other part of that and you could either put it there or keep it on hand in your checking account or your traditional brokerage account, because you have access to that money anytime you want it. And I would get that invested because we always want to try and see everyone dollar cost averaging, even during a time when the markets are volatile, because it'll just keep you invested and prevent you from trying to time the market. So that's what I would probably do. I keep 10 in the high yield cash account, 10 into the traditional brokerage account to keep building that, to get you closer to your base. And then with every single time you get a payday, keep doing the same thing. Because you don't want to have too much in high yield cash. You want a couple months, maybe three, four months worth of your total expenses, but also in your case, maybe a little more. So you have the money available for the coaching, you have the money available for some of these things. Maybe it's travel to go do an audition or whatever. So that's what I would do in your situation and just really appreciate that you're crushing it and you're setting yourself up so well by doing all the things we talk about on a daily basis.
- [20:49]
Austin Hankwitz
I totally agree. Tanner is doing a great job for 20 years old. Guess who didn't have 30k in his brokerage account at 20? This guy, right? So Tanner, you are doing great, my friend. This is the framework that I like to share when it comes to people who are self employed and have unpredictable income. I'm going to just share the general framework. It doesn't exactly apply for Tanner because he's only paying $500 a month in rent, lives with his parents, things like that. But for other people listening right now are self employed. Hopefully this framework can help you. The framework is this. Figure out on a monthly basis exactly how much you need to spend to live your life, right? So for me, for example, I need to spend just about $7,000 a month and my life is good, right? If I spend $7,000 a month, my bills get paid, I get to hang out with my friends, I'm eating great groceries, utilities, my phone bill, my streaming services, right? 7K a month. And like life is good. And so when it comes to these windfalls of cash via, you know, you're self employed, maybe you have commission only projects, things like that, bonuses. How you should be treating those windfalls of cash is how many months of spending does this windfall cover? So for example, I always think that if you have very unpredictable income, truly unpredictable, right? It's like it's a commission on a sale or like you're a realtor selling homes or maybe you are an actor in Los Angeles. I like to encourage people to have six months of expenses saved, set to the side. Because you could go six months without selling a house or six months without getting that next audition. Like that could very well happen. Which is why we say three to six months of expenses. Three if you've got a very stable job. Six if you've got more commission based unpredictable thing so in my instance, having $42,000 sitting in an emergency fund, six months of expenses would make sense for me. Right. Assuming that I was a completely self employed person, that it was on commission only and I couldn't predict my income. So the framework of switching the, oh, I've got this money coming in, how do I spend it? And switching that framework in that mindset now to here's how much I spend on a monthly basis, if I have a $30,000 windfall, how many months of expenses, normal spending does that buy me? And if it buys me, you know, more than however much I have in my savings account to replenish it back up to that, that, you know, 42,000 or six month threshold, then that addition is what you can go invest, or that addition is what you can go save elsewhere, put in a sinking fund for your whatever else. Right. And so when it comes to your situation, Tanner, you unfortunately are kind of an anomaly here. So I can't give you like too much of this framework because you're only paying 500 bucks a month in rent. You're not really like you're living with your parents. So it's a little different there. So I am going to lean into what Robert said, which is like, yeah, please put 10, maybe $15,000 set aside into a high yield cash account on public. Assuming these auditions and acting classes and some other expenses that go into self development could be a little bit more expensive. You're already doing a wonderful job when it comes to your brokerage account and your Roth ira. The only thing at this point that I would focus on when it comes to investing like straight up, you have to do it, is the Roth ira. I think the bridge account is like a cherry on top. I think the crypto is like a cherry on top. Definitely do the Roth IRA because at 20 years old, every dollar that you're investing right now into your Roth IRA turns into 35, 45, $50 at 65 and 70 years old. So literally by putting thousands of dollars into this account, you're making hundreds of thousands over the next 40, 50 years because of compound interest.
- [24:25]
Robert
This really illustrates for me, and we talk about it daily, that so much of America lives beyond their means and we talk about this all the time. And you know, thinking about Tanner living with his parents and having 500amonth rent, I don't care if you're 20, 30 or 40 years old, if you don't have yourself set up financially where you're going to be able to achieve financial freedom at some point, and retire well and be able to have dignity and live the life you want to live, you have to make that consideration at some point in your career. You just do. Whether it's 20 years old, 30, 40, sometimes 50 years old. You can't keep kicking the can down the road and living beyond your means because at some point you're going to run out of gas and you're going to be in a tough situation. So I love these illustrations of the 500amonth because I'll tell you what, if you can find a place that's suitable for your lifestyle, but it's a hack or a way to save money on your overall expenses, whether it's not buying the new car and buying an older car for a few years, or house hacking with someone where you're renting a room instead of having your own place, I strongly suggest doing that because it just gives your money more time to compound over a longer period of time to allow you to have more financial freedom later on. I think we talked about this in last week's episode where I told everyone the time to really buckle down is in your 20s and 30s, because then it sets you up for your 40s, 50s, 60s, and beyond. And most people do it backwards. They mess around till they're 35, then they start to get serious about their money. And I think that is a huge mistake. And people should look at it more seriously in their younger years because it'll just set them up way better later on in life.
- [26:18]
Austin Hankwitz
To piggyback on that, though, Robert, I think it's important, though, to make sure people in their 40s, 50s, and even 60s that are, you know, feeling behind with their money doesn't always mean they are behind with their money. For example, maybe you have an encore career, right? Maybe retirement looks a little bit different than sitting on a beach and drinking margaritas all day. Maybe it means that you're 67 and you just love music and you've been, you know, this weird passion for music. So you go be a music teacher at your local elementary school. Or maybe you're in your early 70s and you've had this, you know, passion for baking. And so you're working over at Publix in their bakery. Like, I don't know what it means for. For you specifically, because a lot of people have different passions and, you know, things that get them up in the morning and get them excited. But sometimes retirement, and I'd assume, you know, Robert and I are going to do the same thing, means working 10, 15, 20, 25 hours a week doing things we love to do, because it doesn't feel like work at that. I absolutely love what I do, and Robert loves what he does. And at the end of the day, we could probably retire right now if we wanted to, right? But we don't, because this is great and we love it, and it's this awesome opportunity. And I want to encourage people who are in their 40s and 50s and 60s and they're feeling the pressure of not having invested or buckled down in their 20s or 30s to know that one. It's never too late to start. You can go put. Put 10, 50, 100, $500 in one of these brokerage accounts and just get started with the s and P500, go open up that retirement account for the first time at 53, doesn't matter. But getting started, getting invested and having a plan, the most important thing to realize, and I see this all the time with people who are the most successful folks that I've ever met, they do not drift through life. Right? They forecast. We talked about this. You just talked about this. Wealthy people forecast, Brook. People react. And that's not just like. When it comes to your money, that can also mean your care, your relationships, different milestones you want to achieve physically or mentally. Right? But forecasting and having a plan and not drifting through life is how people become very effective and very successful in general. And so we just want the show to be the hope that people need, even in their 40s, 50s, and 60s, to realize that it's not too late. You can go get started, and we're here to help you along the way.
- [28:36]
Robert
Let me linger on that for just a little bit longer, because I love it when you define broke people. But I want to take it a little step further. There are a lot of people out there that are broke because they're living beyond their means, not because they're poor, not because they're not making money. So many people have good jobs. You know who you are. But because you have too much house, too much car, too much spending, and you're not forecasting, you're not getting ahead, and you're not setting yourself up. So I wanted to linger on that for a minute because there are millions and millions of people living beyond their means out there right now that are broke because of their habits and their lack of forecasts. I want to make sure we clear that up, because I think a lot of people look at broke as being poor, and they're totally different things.
- [29:22]
Austin Hankwitz
I entirely agree, and I'll even take it One step farther. I think of poor and broke as this. I think people who are poor are, to your point, they're low earners. They might have a victim mindset. They've sort of gone like, you know, E. Or is their spirit animal? Like, they're just not feeling good about anything in their life. And that's like one side of the equation. Broke, in my opinion, are people who are go getters. They are, you know, victors, not victims. They want to go be more, but they don't have any money. And to your point, they don't have any money because either their extended lifestyle or, you know, whatever, like, you know, being broke is not the same thing as being poor. Being broke just means you don't have it right now. But, like, you've got that mental fortitude to say, I know where I'm going and how to get there and I'm gonna go do it. I just don't have it right now, but I'm gonna go figure it out. Right? That's just broke. I've been broke. Robert's been. We've all been broke. But in my opinion, right, being poor is like that sort of victim mentality. I don't make that much money. I'll never make this much money. You guys are always talking about stuff that doesn't apply to me. People out of my neighborhood have never made it. Why should I? People that look like me have never made it, so why should I ever make it, right? I think that's poor. I want to encourage everyone to not be poor, to just be broke. If you are broke, be a broke person in the sense that, hey, I don't got it right now, but I know I will have it, and I know where I'm going, and, you know, I've got the resources around me and the tools to go do it. I just got to go do it. And that's, in my opinion, the difference there. It's a big mindset shift 100%, and.
- [30:49]
Robert
We could linger on this for hours. And I think it is one of the biggest causes of financial disarray in people's lives is the mentality that they can't fix it. You know, I did a video the other day after working a shift in my own restaurant, and I was like, wow, wow. If I handled this like a side hustle, and I had my 9 to 5 job, I have my house, my family, but I did this shift once a week and took that hundred $120 that I made in that shift and just invested it. Think about how much money I could have doing that once a week for 20 years. So I think we could linger on it forever. But the moral of the story is just change the mindset. Get your affairs in order, because there's always a way out. I'm living proof of it.
- [31:34]
Austin Hankwitz
So our next question comes from Ting Z. Ting says. Hey Austin Robert, My name is Ting. I've been listening to your podcast for a few months now and I've been recommending it to a lot of my friends and family. I really appreciate that you guys spend your time and expertise educating people on their finances. It's been very helpful. I would love your thoughts on a question. My husband and I are both self employed. All of our companies are single member LLCs or partnerships that we own together. We have some money in our bridge account and have been maxing out our Roth ira. However, we want to contribute more to our retirement accounts than just maxing out our Roth IRAs. I was reading a little bit of about converting one of my companies from an LLC to an LLC taxed as an S corp and then doing a Roth 401k for ourselves. I was wondering what your thoughts are on this and when people should be considering converting their LLCs from just simple LLCs to being LLCs now taxed as an S corp. And if you have any advice on how people can save more for retirement than just the Roth IRA if they are self employed, I'll take a first stab at this one Robert, because this is what I do. I have an LLC that is taxed as an S corp. I am the only employee at that company. Except now that I think about it, this will still work for you and your husband because the laws of the IRS say that it can be you as the employee and your spouse. Right? So you both can be employees and this will still work. But essentially what's happening here is you're opening up a solo 401k for your S Corp and I do this on Carrie.com, this is not sponsored. It is, I swear to you, the easiest way that any self employed individual or anyone looking to do a backdoor Roth IRA as well, they make it so simple on there. But carry.com I think it's like 20 bucks a month. They're like, you know, 200 bucks a year, whatever to use this. There's no AUM fees, it's all just straight flat fee to use their platform. But their website, I've got hundreds of thousands invested in my solo 401k. Through them they make it very simple to open up a solo 401k, they tell you exactly how much to invest exactly. You know how to be doing it via the. I think in my instance it's the mega backdoor roth solo 401k. Like they walk you through the whole thing. So yes, you can do this. I do this. It is very simple, especially if you use the right platforms. If you want to go through a Fidelity or a Schwab or a Vanguard, I would argue it's a lot more complicated and there's not as much flexibility that is offered then on Carry. I think Carry also allows you to like, like have a self directed IRA with some of this stuff as well. So you can go invest in startups or real estate syndications. It's like super flexible. So go check out Carrie.com C-A-R R Y.com Ting go do that. And then the other thing I want to call out here in that question too. I think she asked when should people be converting from the LLC to the S Corp. So I'll let you answer that one. Robert.
- [34:18]
Robert
Yeah, this is a great part of the question because so many people get it wrong and a lot of the fake gurus get it wrong. They tell you to go open an S corp Corp. I don't think anyone should start their company, their journey, their first company as an S corp unless you're already crushing it, which normally isn't the case. So here's kind of the barometer of what we talk about and how I function through many, many decades of experience. Open the single member LLC because you can always convert to an S election, whereas if you start as an S corp you can't convert to a single member llc. Why is this important? Well, because an S corp is more complicated and more expensive to operate. So I generally tell people if your company is not making currently or you don't believe it's going to make right out of the gate, 75, $80,000 a year in profit. You should start with the single member LLC because you can always change it. But if you start as an S corp and let's say it takes a couple years to get the company going, you are then paying extra fees, extra accounting and it's more work to be able to accomplish what you need that you could do within the llc. So that is my answer for this part of the situation. It's very important. So let me recap. Open a single member LLC because you can always turn it into an S election versus opening up an S corp that you can't migrate to a Single Member LLC. That is the goal. And then that 75 to 80,000 in profit is kind of the middle ground of where you should be profit wise before considering the S Corp. And the.
- [35:51]
Austin Hankwitz
Reason why opening the S Corp is so useful depending on how much money you're making. Like so for example, my S Corp profits hundreds of thousands of dollars a year and what's cool about that is I've got myself on a reasonable salary, right? So Austin Hankwitz also pays federal income tax on this salary as does the S Corp pay federal income tax on the salary. So I'm kind of like double taxed. But what I'm able to do is then take owner's distributions out of the S Corp and pay it straight to Austin Hankwitz. And there's no, you know, specific like I think it's the, the Medicare taxes, the Social Security taxes. Like I'm not double taxed. It's really cool. So it's a way for you to also save some money in taxes depending on how much you're profiting in your S corporation. Highly recommend doing it. Especially if you want to do this like solo 401k thing. Just make sure you're working with an accountant, a CPA and you're not just listening to two guys on the Internet. Because we are not CPAs, we're not certified. We're none of this. We're just sharing with you what we do and want to encourage you again to go work with a professional that can walk you through it and can hopefully get all this stuff, all the paperwork done for you for a reasonable price.
- [37:02]
Robert
100%. Well, listen up folks, time could be running out to lock in a 6% or higher yield. At public.com you can lock in a 6% or higher yield with a bond account. But remember, your yield isn't locked in until the time of 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.
- [37:29]
Austin Hankwitz
So our next question comes from Andrew H. Andrew says hi Austin and Robert. I'm a massive fan of the show and I've been here since episode one over two years ago. Let's go Andrew. Wow man, thanks so much for listening for such a long period of time. We are just, just so humbled whenever people are like, yeah man, I've been here since day one. Two years in the making. It's just so cool to read that. So thank you Andrew. Andrew says you guys have helped me build my base to over a hundred thousand dollars and it's invested into the ETFs we love and know. But now that I have my base built, I'm looking to allocate a small amount of my net worth, about 5 to 10% to be more aggressive with my investments. I loved the episode with Chris Camillo as it sounds like everyone else did as well. I particularly love the idea of having that high risk investment bucket. I wanted to get your thoughts on what exactly this could look like. He mentioned Nvidia, Amazon and Tesla as high growth for humanoid robotics over the next 10 years. However, that doesn't feel like high risk as he was describing it as VOO and QQQ have a lot of those shares already. So my question is what would you guys do in your high risk bucket? Is this utilizing options? Is it leveraged ETFs to capture more upside in these names? Is it Bitco at all the above for background? I'm 26, make a hundred K a year, have 110 grand between my 401K and my Roth IRA 35,000 in a high yield savings account for my emergency fund and I'm starting to save for a house down payment. I want to allocate 100 to 300amonth to this high risk bucket. I have an investment horizon of 35 plus years. What a good, good, fun question. Yeah, you guys love that episode with Chris. Oh my gosh. I'm just going to look it up real quick. You guys shared 30, 40, 40 comments on that episode and some of those comments just to like call them out here. Great content guys. This is the greatest episode I've ever listened to. Love this podcast in space. Excellent episode. Great episode, great episode. Like incredible episode. You guys were just all about it. So we are super happy to be bringing you fun people that we've been connected with for a long time and give them the spotlight they deserve. And hopefully you guys learned something along the way, which it seems like you certainly did in this episode. So Robert, I'll kick this one off. Andrew, shout out to you for having a wonderful base built. You make great money. You have $100,000 plus invested, you've got a great emergency fund and it seems like you want to start allocating a couple hundred bucks a month to a high risk bucket. In your situation. It seems like you are saying, hey, I already have exposure to these names and so I want to do even more. How do I get even more exposure? How do I have even more, you know, risk that comes with this Two ways. One, you can invest in privately held companies, which we do pretty much every month inside the Rich Habits Network. Go join if you want to invest. We've offered two humanoid robotic investments so far, which I think we raised over like 1.9, just about $2 million of investments from Rich Habits podcast listeners into those companies through the Rich Habits Network. So, like, what are you waiting on? Go join that, Andrew. And then the second thing I'd encourage you to think about is again here, Chris Camillo has made millions and lost millions, right? So it obviously he's made more millions than he's lost, which is why he has $60 million. But he's had bad trades along the way. But he's done that by leveraging options, which is a way to bet on a stock price on a specific date. So essentially, with an option contract, if it's a call option or a put option, you're either bullish or bearish. And with that, you are betting that the price of the stock will hit a specific number by a specific date. Chris does that with earnings. He does that with other, you know, sort of specific events that are pertinent to stock price movement. And by doing that, he is able to make a bet that if it is above that, that specific number, he'll make a lot of money. And if it's below that specific number, he'll lose his entire bet. Right. So you are either all in and you make a bunch of money, or you're all out and you lose it. All right? I mean, it's very, very risky stuff. It is not investing. It is gambling. It really is gambling here. So if you want to do that with your high risk bucket, maybe learn more about calls and puts. But I would not want to go into, like, margin or anything. Chris does use margin, but he's got, like, special relationships with, like, Schwab, and these people, like, give him good rates because he's got $60 million. So it's a little bit different. But I wouldn't use margin. I wouldn't go into debt. But if you did want to say, hey, I want to, like, try to do this stuff, and you want to put 200 bucks on a call option on SoFi stock or 200 bucks on a call option with, I don't know, Ford or something on an earnings, and it hits and your 200 turns into 800, like, congrats, you just gambled and you won your gamble, or it doesn't hit, congrats, you just gambled and you lost. Like, that's just what Happened, happens.
- [42:19]
Robert
And for everyone listening, we really appreciate that you love that episode with Chris. But let me make something very clear. Having a high risk bucket is important in my opinion as well. But it doesn't mean that it has to be highly complicated. I think a lot of you correlate that high risk is high complication, doesn't have to be. You don't have to do all of these crazy strategies. The way I would look at it, especially in your first few years of, of investing like this, this is. You're going to look at it that you're going to earmark this amount of money every single month to invest in a higher risk sector or sectors. So it could be anything from precious metals to a cryptocurrency sector, or it could be these pre IPO private placement companies that we invest in every single month. So just keep that in mind that high risk does not have to be highly crazy, like complicated to be able to do. It's just a matter of pivoting away from some of the safer stuff and putting a higher percentage that 3 to 5% of your net investable capital into this higher risk bucket. So I hope that clarifies to a lot of you because I don't even do the crazy strategies very often. Most of my stuff is set it and forget it and keep going, even if it's in the high risk sectors.
- [43:39]
Austin Hankwitz
Yeah. Let me be super clear. I am terrible at doing what Chris does with options. I've done the, you know, hey, I think a stock might go up because social arb is happening and like, whatever, right? And I'll go buy the stock. But when it comes to buying options, I am so, so bad at it. I've probably lost 15, $20,000 of my life trying to figure out these options. And it is just, it's so hard between the theta decay between the premiums with the underlying vix now elevated, like all these crazy terms and Greeks and it's, it's so, so hard. So shout out to Chris for being able to do it if you want to like, figure it out. Like go figure it out with this, like 200 bucks a month that you're allocating to this high risk bucket. Encourage everyone to go be curious and do things like that. But of course, always make sure that you're maxing out the Roth IRA, you're investing in your 401k, like, like you're doing the normal things necessary to afford you the opportunity to go open up a high risk bucket. So our next question comes from tj. See TJ says hi Rich Habits. My name is tj. I've been watching your podcast for a while now and I've learned a lot from you guys. I really appreciate the content. I'm facing a bit of a dilemma with how uncertain the market is right now. I'm 28 years old and I understand that I have a high risk tolerance and I've been consistently dollar cost averaging into the stock market. But I've also just been paying the minimums on my credit card debt each month. Here's my question. During times like these, would it make sense to continue to pay the minimums on my debt every single month month and put the rest into discounted stocks? Am I crazy for thinking like this or should I focus on paying off my debt first even though the market feels like it's full of bargains right now? What do you think about this, Robert?
- [45:22]
Robert
I think T.J. knows the answer. You can't out invest high interest debt. We've been saying it forever. I've been saying it for decades. You can't do it. And right now you look at the stock market. Yes, there are a ton of discounts accounts. I love that all of us can make more money because this is when the real profits can be made. But you have a problem and that is the high interest credit card debt. In my opinion, you shouldn't even be thinking about anything until you knock those out. Because yes. Are you going to miss some upside potentially in the markets going back up? Sure. But you're also going to be continually missing upside if you're paying high interest debt. Because. Because look at it this way, right now the markets are doing poorly, but your interest on your credit cards is still 25, 30, 32%. So you need to look at that as if I pay that off. I just made this money back. Because you got rid of that debt. It's so important. We see people every day in our dms. I do one on one calls to help people where they'll have a hundred thousand invested over here and 80, 000 in credit card debt. They're making 10 on their investment, which is great, but they're still paying out 30 over here. Doesn't make sense. I know it's tough when you see money in your bank account and you don't want to give it up to pay off a high interest debt because then you're like, well, I don't have any money now, but I paid that off. You have to though, because you have to get yourself to a level playing field where you don't have all the high interest debt floating around because otherwise you'll never get ahead. Head.
- [46:55]
Austin Hankwitz
I've got nothing to add. I don't think I could have said that any better myself. 100% agree with you, Robert. So our final question comes from Martin on Instagram. Martin says, what's up, guys? This year I've got $30,000 of a realized gain in the stock market. I also have to bitcoin that I'm down about 30 to $40,000 on. If I sell my bitcoin and realize that loss and then buy the coins back immediately, will that wipe out my 30,000 gain with the tax man from the stock market? So you're essentially trying to do a wash sale, which is like, hi, I've got two bitcoin I bought it for. Let's say. Let's say the two Bitcoin right now are worth $200,000 just for round numbers. I hope bitcoin goes back to $100,000 each. So for round numbers, your two Bitcoin are worth $200,000. And let's just say you paid $240,000 for them, right? So you are down $40,000 on your Bitcoin. And let's say that you bought these bitcoin earlier last year at the perfect top, whatever it was, and you're just like, dang it, I'm down 40 grand on these bitcoin. Theoretically, yes. What you're doing is called a crypto wash sale. It is still totally normal, totally legal in the eyes of the irs. I don't know if they're going to change the laws anytime soon, but I did this myself. I was down on Ethereum, so I did a wash sale. I sold it, realize the loss, use my proceeds to buy back the same amount of Ethereum. So I had the same amount of Ethereum afterward. But now I also had a $40,000 realized loss that I could use to offset any other realized gains across my entire portfolio, including stocks and crypto and, you know, startups or whatever else I'd invested into that had gains and use that money to offset those gains, which is exactly what you're saying here, here. So, yeah, if you sell the bitcoin and you use it to offset $30,000 of realized gains with realized losses, that is exactly how that works. Again, consult with a cpa. Make sure that you are doing all your research. This could change at any moment, Right? Right now this is the case, but it's not going to be the case forever. So just be aware of that Martin, but you're definitely on the right track.
- [49:04]
Robert
And the only thing I want to add to that is, and we've talked about this many times, every one of you needs to go out and get a journal. And I want you to write inside the journal. Rich Habits Notes. Keep all of those notes in one place. I fill up so many of these constantly and these because I'm always wanting to track my notes because I think a lot of people constantly learn and they hear ideas. But if you don't execute on these ideas to help you in your financial journey, we're not doing our jobs well enough. So please, please take good notes, know where your notes are at, keep them separate from grocery list notes and all of the other stuff in a notepad so you always know where you're at and you can reflect back on all of these items to know how to execute upon them.
- [49:51]
Austin Hankwitz
100 everyone, thank you so much for tuning in to this week's episode of the Rich Habits podcast, Question and Answer Edition. Don't forget, if you've not yet started investing, go open a public.com brokerage account, head over to public.com rich habits to do so, transfer your existing portfolio over to public and get up to $10,000 in bonuses as well as take advantage of their 4.1% high yield cash account. We're also offering a seven day free trial for the Rich Habits Network. Like we said before. Yeah, I mean, Robert, those specific humanoid robotics technology companies that Chris was talking about in that episode, we offered the exact same ones to our Rich habits members and $2 million worth of people's money was into them through us. We are doing this all the time. We've invested into, I think eight or nine startups since August, which is when we opened up the network, including SpaceX, including these humanoid robotics names. And one of them recently just had a 2x markup, which is also really exciting and that happened in October. So yeah, there's just like awesome cool opportunities over there beyond just the video coursework. So go check out the Rich Habits Network if that's something that you are interested in. And as always, thank you all so much for joining us every single Thursday for these Q and A episodes. We really appreciate it. Thanks everyone and have a great rest of your week.