Rich Habits Podcast: Q&A Special

Episode Title: Q&A: Investing OR Paying Off Mortgage, Passing Wealth To Children, & Paying For College
Hosts: Austin Hankwitz & Robert Croak
Date: October 16, 2025

Overview

In this 101st Q&A episode, Austin and Robert respond to listener questions addressing nuanced personal finance dilemmas, including maximizing retirement options as self-employed business owners, deciding between paying off a mortgage or investing extra cash, handling debt versus business growth, building wealth for children, and strategies for paying for college without derailing retirement plans. Throughout, they apply their trademark blend of practical advice and candid storytelling, always focusing on “personal finance is personal”—what works best in each unique situation.

Key Topics & Discussion Points

Listener Gratitude & Podcast Impact

[00:45–03:51]

• Austin and Robert express appreciation for their community.
• Celebration of 101 Q&A episodes.
• Shoutout to “Seasons,” a community member who won AirPods.
• Austin: “I would argue this podcast… has probably changed the financial trajectory of so many people.”
• They emphasize the importance of taking actionable steps, like opening Roth IRAs and starting 529 plans.

1. Self-Employed & Retirement Account Optimization

Listener: Glycy R.
[04:40–08:36]

• Situation: Both spouses self-employed, low W-2, seeking to invest beyond Roth IRAs.
• Austin’s Framework:
  • Prioritize long-term, tax-free growth? Check out the Mega Backdoor Roth Solo 401k via Carry.com.
  • Care more about tax deductions now? Use the SEP IRA.
  • Don’t over-optimize for tax avoidance; reporting low income limits access to loans and investment opportunities.

Austin [06:21]: “Everyone… is hypnotized by this idea of ‘Oh yeah, I didn’t pay any taxes this year...’ The only way that business owners don’t pay taxes is by not making any money.”

• Robert’s Input:
  • Too many try to “get fancy” with taxes before building sufficient income.
  • Focus on increasing earnings before complex strategies.

2. Roth Conversion & Prioritizing Retirement Contributions

Listener: Jacob Y.
[09:01–10:33]

• Situation: Young couple, each with various IRAs and a new employer SIMPLE IRA with a 3% match.
• Robert’s Advice:
  • Convert small Traditional IRA balances to Roth early; small tax cost now, big benefits later.
  • Max out Roth IRA contributions if possible.
  • Remember: Match > Roth > Taxable

Austin [10:21]: “Match beats Roth beats taxable. That’s what we always say… Get the free money, get the tax-free growth, and then get just the compound interest over time.”

3. Protecting Wealth in Pre-Retirement Years

Listener: Jane S. (New Zealand)
[10:33–17:11]

• Situation: Approaching retirement, significant investments and real estate, considering entrepreneurship or more passive investments.
• Robert’s Advice:
  • “Be very careful” risking large sums on a new business at age 58/59.
  • Consider lower-paying, less stressful jobs to supplement wealth instead of “going backwards financially.”
• Austin’s Analysis:
  • With $3.3M aggressively invested, letting compounding work is likely to double assets in 7 years (Rule of 72, [14:20]).
  • Suggests focusing on happiness and lifestyle, not just income. “You’re at a point… where you can make those decisions.”
• Side Hustle Angle: Robert suggests leveraging Jane’s marketing skills for consulting or a small agency that isn’t age-dependent.

4. Should I Pay Extra on My Mortgage or Invest?

Listener: Jack H.
[17:11–24:37]

• Situation: Young homeowner, 6.125% rate, considering $400–$500/month extra payments or investing instead.
• Austin’s Breakdown:
  • Paying extra saves ~$300k interest, shortens loan by 12 years; investing $450/month for 30 years grows to ~$1.5M.
  • Investing wins out due to higher long-term market returns versus mortgage interest ([20:55]).
  • Emphasizes actual investing of the monthly surplus, not just the theory.

Robert [22:34]: “If we’re making 10, 11, 12% over here in the market… You just want to make sure that you have that arbitrage in your favor.”

• Both agree: Pay minimum on mortgage, automate investing the surplus for best long-term growth—unless you need the peace of mind of a paid-off home.

5. Debt Repayment vs. Expanding the Business

Listener: Sergio
[24:37–30:27]

• Situation: Successful construction business owner with $90k in mixed debt, cash and equity, plans to build duplexes.
• Robert’s Guidance:
  • Pay off high-interest debts (especially credit cards, equipment loans) first.
  • Consider selling out-of-state rental to focus on local, manageable projects.
  • “You can’t out-invest high-interest debt.”

Robert [26:13]: “I would pay off the debt, especially the credit cards... I just don’t know if it makes sense [to expand]… when you still have this high-interest debt.”

• Austin’s Nuance:
  • Don’t fire-sale real estate, but be smart and use the equity to eliminate expensive debt before pursuing new projects.
  • Duplex project could be highly lucrative if debt and risk are managed smartly.

6. When To Use An Emergency Fund?

Listener: Gabby
[30:27–36:12]

• Question: “What counts as an emergency?”
• Austin’s Framework:
  • Any unbudgeted expense is an appropriate emergency fund use (e.g., large vet bill, [32:00]).
  • Don’t go into credit card debt or sell investments for emergencies; that’s what the emergency fund is for.

Austin [32:31]: “The emergency fund is not an investment, it is insurance against your investments to ensure that they stay invested…”

• Robert agrees:
  • Routine, expected expenses should be handled via “sinking funds,” not emergency.
  • Real-world example: Stolen catalytic converter required a $600 unplanned payout.
• Tip: For property owners, set aside 10% of monthly rent for repairs/vacancy.

7. How To Pay for a Child’s Costly College (Aviation) Without Ruining Retirement

Listener: Edie
[36:12–44:38]

• Situation: High income ($250k), no college fund, expensive career path (pilot school), not wanting debt for themselves or daughter.
• Austin’s Core Rule:
  • Student loan debt should not exceed the graduate’s first-year expected salary.
  • Do not jeopardize retirement for children’s education.

Austin [38:05]: “[Student loans] are part of the game… The rule of thumb is to not take on more student loans than your first-year salary out of college.”

• Robert’s Caution:
  • Make expectations explicit, avoid blurred boundaries and future family strife.
  • If you are in a strong enough position, help out—but only after ensuring your own security.
• Austin: “Proper planning includes being very crystal clear with your daughter about the arrangement.” ([41:12])

Notable Quotes & Moments

• On Overcomplicating Taxes (Austin, 06:21):
  “The only way that business owners don’t pay taxes is by not making any money… when you don’t make money on paper, it’s so much harder...”

• On Investment vs. Mortgage Arbitrage (Austin, 20:55):
  “This is real cash versus like saved interest. So Robert, we just broke down the numbers. These are all real. We just did the calculations.”

• On Debt & Growth (Robert, 26:13):
  “We love debt as long as the arbitrage in our favor makes sense… I would look at maybe selling that [NC property] when the market gets better…so you can get top dollar, taking the funds from that…”

• On Emergency Funds (Austin, 32:31):
  “The emergency fund is not an investment, it is insurance against your investments to ensure that they stay invested…”

• On Paying for College (Austin, 38:05):
  “The rule of thumb is to not take on more student loans than your first-year salary out of college.”

• On Planning with Kids (Robert, 41:12):
  “Just make sure it is crystal clear as to what is going to be agreed upon here so there’s no weird vibes in five or ten years…”

Key Takeaways

• Don’t over-complicate or over-optimize for tax, especially at lower income levels; focus first on increasing income.
• Convert small Traditional IRAs to Roth while young—pay small tax now for big tax-free benefits later.
• Unless being mortgage-free brings you peace of mind, investing surplus versus early payoff usually wins long-term. But only if you’re diligent about investing.
• Pay off high-interest debt (particularly personal and business) before expanding or leveraging further into real estate.
• Use emergency funds for true emergencies—budget for the predictable, save for the unpredictable.
• When it comes to paying for kids’ education, prioritize your retirement security first. Debt for education should roughly match likely starting salaries, not more.
• Always be clear, transparent, and direct with family about financial involvement and expectations.

Full Episode Timestamps

| Segment / Question | Start Time | |-----------------------------------------------|------------| | Listener appreciation & community impact | 00:45 | | Self-employed retirement accounts (Glycy R.) | 04:40 | | Roth conversion/priorities (Jacob Y.) | 09:01 | | Retiring & growing wealth/later years (Jane S.) | 10:33 | | Mortgage vs. investing extra (Jack H.) | 17:11 | | Debt vs. building business (Sergio) | 24:37 | | Using an emergency fund (Gabby) | 30:27 | | Paying for college & boundaries (Edie) | 36:12 |

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