← Rich Habits Podcast
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- [00:02]
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- [00:31]
Austin
Savor every last drop of summer with Starbucks. From bold refreshers to rich cold brews, the sunniest season only gets better with a handcrafted ice beverage in your hand. Available for a limited time, your summer favorites are ready at Starbucks. Hey everyone, and welcome back to the Rich Habits Podcast brought to you by public.com? and answer edition. These are episodes where we take your questions via Instagram DMS over at Rich Habits Podcast on Instagram or via email at rich habits podcast gmail.com and we answer them. We answer your questions as if we were in your shoes going through whatever you're going through right now. These are right off the dome. These aren't really prepared too much. It's just Robert and I having a casual conversation as to what we would be doing if we were faced with what you're facing.
- [01:16]
Robert
Yeah, I love these episodes and it's just so much fun recording them because it challenges us every week. We get some of these crazy, crazy scenarios and it really kind of illustrates what we always talk about, and that is personal finance is personal. Everyone has a different strategy, different issues, different hardships that they go through in their financial journey. So I really enjoy getting to dig into these questions and help people figure it out as best that we can.
- [01:46]
Austin
And we've got a ton of awesome questions coming to you today and some of the questions that we're being asked right now that we'll be sharing I don't think we've ever talked about on the show before. So we're excited to jump into this episode. But before we do that, quick shout out to our sponsor, public.com if you're looking for an online broker that was actually built during the century, you need to give public.com a try on Public. You can invest in almost anything. That includes stocks, bonds, crypto options, and more. And if you're like us and you keep an emergency fund, you can take advantage of their 4.1% APY offered by their high Yield cash account.
- [02:20]
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 1% match on all contributions paid for by Public Investing. Full disclosures in the podcast Description all.
- [02:49]
Austin
Right, Robert, let's jump into our first question coming from Vin Vin says hi, Austin and Robert, I've had the great privilege to offer my tenants a rent own lease to sell my investment condo in Austin, Texas. I'm hoping to offer seller financing to optimize my profits. How would you recommend I consider and evaluate structuring a rent to own lease and seller financing? My condo is currently renting for 1% of the purchase price per month with a 10 cap rate. It also has a 2.75% mortgage rate. It's a great investment property by the numbers, but I just really don't enjoy managing tenants and although my current tenants are wonderful, I get too much anxiety at the thought of screening new tenants in the future. I concluded that the rent to own and seller financing would be worthwhile to take profits while also seeing a new family happily live in their new starter home. Another factor influencing my decision is with the economy and interest rates. It's very much a buyer's market right now, and structuring a purchase contract for a contingent sale three years later will hopefully provide enough time for real estate to recover. But I really just don't have any data and so I'm just assuming three years will be enough time. Thank you so much for your thoughts. So Robert, I don't know anything as it relates to seller financing, a rent to own lease, investment condo, any of this stuff. So I want you to just like take it away here. Define what Vin's talking about, break it down into the layman's terms and teach me how, if I was in Vin's shoes, how to approach, you know, evaluating and constructing one of these seller financing rent to own lease contracts.
- [04:24]
Robert
Okay then, great question and I'll do my best to break it down not only for you and Austin, but everyone listening. First and foremost, you're going to need a real estate lawyer because you're going to need someone to draft a land contract for you to be able to do this owner financing. It's not difficult. Any good lawyer is going to be able to handle it very simply. And you're also going to need an amortization schedule so you can calculate what the payment is going to be basically what a land contract is. It's the document you're going to create as if you were the bank or the mortgage lender that spells out the terms of this purchase agreement, that that's what it is. The amortization schedule is going to spell out what is the principal and interest that this person in the land contract is going to pay for that two, three, five years and then have the balloon at the end. Because remember, you don't want to carry this like a mortgage for 30 years or 15 years for someone. You want it to be short term to get yourself in a situation where you can make more money on this deal. That's why many times owner financing can be highly profitable for the seller like yourself. And on top of that, you're going to have to come to an understanding of what is the interest rate you're going to charge in this land contract. Right now I would think you could probably charge 8%, maybe 9%. Because someone that needs or desires owner financing is willing to pay a little bit more interest and that helps you create more profit in the deal for you. So we know what the land contract is. What? We know what the amortization schedule is and we know that we can charge a reasonable interest rate like I said, 6, 7, 8, 9%. All of those are very favorable for you to be able to do this. But I strongly recommend you have a lawyer help you to get it all in order and make sure you understand the documents and the agreement for not only you in the land contract, but also for the person buying the property. Or what are you responsible for, what are they responsible for? And make sure that you understand all of the default mechanisms as well. Because you want to make sure that they understand when buying this, they have to keep up the landscaping, they have to make sure to do reasonable improvements to make sure that they don't let the property degrade all of these things. A good lawyer will help you calculate and put in this land contract to protect you in the long term sale with you doing owner financing.
- [06:52]
Austin
Now, this might be a silly question, but despite it being a condo, it's still called a land contract.
- [06:57]
Robert
He mentions a rent to own lease. I don't do those. I don't know the difference of if that's actually real, where you could do a lease, but you're renting to own it. To me, it's just a land contract at its origin. So yes, you can definitely do it with condos. And you just have to make sure that you understand when doing this is make sure there's no due on sale clause with your current mortgage because you need to check with your mortgage company first and say, this is what I'm going to do. Make sure there's no issues if there is an HOA with being able to do this in your community, in your condo community. So there are other things to look for. So that's a great question, Austin, to make sure that you qualify to be able to offer this before you get the cart ahead of the horse.
- [07:43]
Austin
This is a great breakdown. So now I'm curious as it relates to, let's say we fast forward three years. You mentioned this balloon payment. Does that mean that three years later, the person who's purchasing the investment condo in Austin, Texas, goes out and gets a normal mortgage and then takes that money and buys the condo from Vin?
- [08:01]
Robert
Yes, yes. And where it becomes advantageous for them is let's say interest rates do come down in two, three years and there is a clause that they could buy out of the land contract early because interest rates plummet back down to 3, 4 or 5%. Then Vin would get his cash out at that time. It's just a great way to do business because many times you might have a really motivated buyer, but they may not qualify for a mortgage or they're trying to avoid the really high interest rates right now that they would get from a traditional mortgage. And that's where Vin has some leeway. Because if they say, hey, I can get a mortgage right now for 7.75% over 30 years or 15 years, and Vin says, well, hey, I'll do it for less down payment and I'll do it for 6%, it gives you more negotiating tools to, to be able to get the deal done.
- [08:52]
Austin
Got it. Okay. That makes a lot of sense. Shout out Vin for being so smart to think about this. I don't really, as you can tell, have much understanding of it. I've never done anything like this. So shout out Robert for being able to explain it, walk everyone through it. Wishing you all the best, Vin. I think you're going to think you're going to do just fine in this situation. So our next question comes from Leslie K. Leslie says, hi, Austin and Robert. Thanks for being two nice guys on the Internet that we can trust, helping us learn more about personal finance and investing. Leslie, we appreciate it. So Leslie says, before you, my investments were all in target date funds and now I'm doing so much better. I want to now start investing in real estate. In fact, someday I think I'll be able to buy my first multifamily once I have paid down my own mortgage. Here's my question. What do you guys think about using platforms like Arrive, fundrise and Yield street to begin diversifying into real estate before I actually go out and buy a multifamily? Robert, I love this question here from Leslie. We talk about, you know, diversification after you build your hundred thousand dollar base all the time, which means, you know, call it 15 to 35% of your money is diversified across different asset classes like real estate or cryptocurrency or precious metals or cash flowing businesses or startups and pre IPO companies. Right. But you are well diversified across a bunch of different asset classes. So that when we have, you know, volatility like we've experienced so far in 2025, you've got some money parked elsewhere like in precious metals, gold and silver that are up 30% this year compared to the stock market' 2% or real estate through different platforms and things like that that are up 3, 4, 5% versus the stock markets 2 or 3%. So being diversified is something we believe in. Now Leslie, you asked about Arrived, fundrise and Yield Street. So we're going to break down all three of those platforms as to how we understand them. So let's start with Arrived. Arrived is backed by forerunner Jeff Bezos, the CEO of Uber. Right. They're very legit, they've got all the normal institutions and very smart investors. So they're not over here like a fly by night company by any stretch of the imagination. But makes Arrived different than these other platforms is they very much focus on single deals. So when you go to Arrive's website, you'll see a bunch of different offerings if it's a single family, if it's a, you know, something else of that nature. But you're going to see all these very specific deals with addresses and towns and it's very specific on a deal by deal basis. And so what you are doing as an investor is you're investing in a specific deal. You are saying, I think that this single family home in Kingsport, Tennessee, which is actually offered on their website in my hometown, is going to be a good investment, therefore I'm going to put money into it. Right, you're investing on a deal by deal basis. Now let's move on to Fundrise. Fundrise is the platform I've been using since 2016, 2017. Robert's been using it since probably 2022, 2023, something like that. And it's very similar to Arrived in The sense that you are investing into real estate and deals and things like that. But fundrise can be thought of more as a robo advisor, not so much a self directed advisor. And by that I mean you give fundrise some money and they're over here deploying it as strategically as possible for you across the country in different types of real estate. Think multifamily is, think apartments, think last mile distribution centers, single family homes, build to rent, things like a ton of different types of real estate. And fundrise does all that for you automatically, which is why I like it, because I don't have to scrutinize different deals and be an expert in specific regions of the country. And then finally, Yield Street. Yield street is a platform that offers yield across a bunch of different asset classes, including real estate. And you very much then get to choose the type of real estate exposure you want to get the yield you want. They also have like private credit and hard money loans and things of that nature. They've got art and crypto and whatever else. Like it's just a platform that you get to earn some yield on your money and they put you in different types of assets and asset classes to generate that yield.
- [12:49]
Robert
Let me piggyback that a little bit and break it down really simply, in my opinion. And that's a great way to explain it. Austin is, I look at it this way, Arrived is individual deals. If you're just getting started and you want to have fractional ownership number two, Fundrise, Austin and I love it. It's more of a reit. Like he said, you're giving them your money and they're deploying it across multiple deals. And then Yield street to me is for the more sophisticated person that's looking to get into these private deals. And that's a little further down the road. So I think it's kind of beginner, middle and more expert. And all three of them are good platforms. We obviously love fundrise, but Arrived has had good, good reviews and it's just so you understand you're investing in an individual property that you can choose. So that's pretty cool as well.
- [13:38]
Austin
And want to just reiterate here. I've never used Arrived. I've never used Yield Street. I've heard of them, I've heard great things about them, but I've not used them personally. Whereas I have used and am an investor with fundrise and Fundrise. I've been an investor for a very long time and so has Robert. And we've had a great experience with the platform. So our next question comes from Edwin K. Edwin says, hi, Austin and Robert. How are you guys doing? I've been listening to your podcast since 2022, and I've learned so much. Here's my question. I have $11,000 invested in a Roth IRA using Merrell guided Investments, and I wanted to roll over that Money to either Public.com or Vanguard. Which one should I roll over into? I'm skeptical about Public.com's longevity compared to Vanguard because Vanguard's been around for such a long time. I also have $11,000 already in public, but it's in a bridge account invested into the index funds in ETFs you talk about. Robert, you want to take this question?
- [14:34]
Robert
Yeah, I love this question. And everyone that follows this podcast knows Austin, and I really, really love public dot com. We both use it. We've used it for years. Let me spell out a couple things. There is a term called SIPC insurance, and Public has that on all brokerage money. It just means that anything that you have under their custody is backed and financially insured to make sure whatever happens with the platform, your money is protected. And also, one way to look at it in this instance, Edwin, is that if you were to roll this over, there is $150 bonus you could receive for rolling it in. So I have no concerns over Public. I know Austin doesn't. They're a great company. We've worked with them for a long time, invested using their platform for a long time, and we love it. Are they as big as Vanguard? Not yet, but they're definitely getting bigger year over year. And I don't think there's anything to worry about.
- [15:30]
Austin
Yeah. Let me just reiterate. Nothing to be skeptical as it relates to really any online brokerage platform, no matter how long they've been around or not, assuming they are SIPC insured, SIPC protects against the loss of cash and equities, up to $250,000 of cash and $500,000 of stocks held by a customer of a potentially financially troubled SIPC member brokerage firm. So it doesn't matter if it's Public or Robinhood or Vanguard or Schwab or Fidelity, any of those. Right. They could all go bankrupt tomorrow. And assuming that you have less than $500,000 of stocks and less than $250,000 of cash, which you have 11,000. So you definitely are under that threshold. Your money is backed and insured, and you're going to be just fine. You'll get it all back. Like, you do not have to worry about the longevity of a specific brokerage platform assuming they are SIPC insured. And to Robert's point, yeah, public gives you a bonus for rolling over funds off of old platforms onto their platform. So 11,000 from your Roth Merrill guided investment account into a public.com Roth IRA will give you $150 bonus. So, heck yeah. That's awesome. So our next question comes from James K. James says hello, Austin and Robert. I want to start out by saying how much I love the show and that you guys have truly changed my life. I wish your podcast was around 20 years ago. When I was introduced to your podcast, I binged like I've never binged before. That's so funny to hear. Thank you so much, James. My name is Jim. Oh, James goes by Jim. Thank you, Jim. We appreciate you listening to the show. So Jim says, I'm 44 years old and I'm married. I have a question, though I don't think I've heard it yet on your show. So here it goes. I started my career as a pharmacist at 26 years old. I've always contributed to my company's 401k plans. I've moved employers three times in my career, and I've transferred my 401k balances from each employer into a traditional IRA account. It has done very well for me over the years, and I'm now sitting on $1.1 million in this traditional IRA. I also max out my Roth IR every single year because I understand the benefits of a Roth. Last year, however, for the very first time, I ran into the situation of my income being over the limit and had to pull contributions out of my Roth and instead move them into a traditional ira. I hated doing this. I hear you guys talk about a backdoor Roth ira, but having a traditional IRA with this much money in it, to my understanding, prohibits me from doing this. Because of the pro rata rule, I believe my income will be above the limit going forward. So what can I do? And what do you guys recommend I do with my traditional IRA so I can still contribute to the beautiful thing that is a Roth ira? Thank you guys so much for what you are doing. You are truly changing lives. Jim, first off, what a nice guy. I just. I feel so warm and fuzzy inside. Thank you so much, Jim. And man, 44 years old with over a million dollars in your retirement accounts. Like, that is amazing. And I just want to, like, reiterate here too. I had my friend J.C. rodriguez. He's doing this series where he's interviewing people on Broadway that are like, in their 50s and 60s that are on vacation. And he just asked them, hey, like, one, are you frugal? You're building wealth. How much wealth do you have? And like, have you done it? And a lot of the people who's interviewed that are in their 40s, 50s, and 60s, that are millionaires, they're just like, yeah, man, index funds have been doing it for 20, 30 years. Nothing crazy, just investing and staying consistent. So it seems like Jim has done exactly that. And kudos to you, my friend, for being able to achieve such a big nest egg at such a young age. So I'll jump into this question first, Robert. You are absolutely correct, Jim. It is going to be very hard for you to do a backdoor Roth IRA with $1.1 million in a traditional IRA. You'll have to either one, convert all that to a Roth IRA, which means you're going to be paying a ton in taxes. Do not do that. Totally not worth it. And two, and this is something Robert and I found online, if you're able to move your traditional IRA money into your current 401k or a solo 401k, that will make sure you now don't have any money in your traditional IR, which now allows you to put $7,000 into a traditional IRA, convert it into a Roth IRA, and then invest the money. Right? That will be the only 7,000 you have in a traditional IRA. This is what I do. So I've had a SEP IRA in the past. I moved it into a Solo 401K, and that's how I'm able to do my backdoor Roth IRA every year. But if you're able to Somehow take this 1.1 million in your traditional Iraq and put it Into a current 401k or a current Solo 401k, it gets it not categorized right anymore as a traditional ira, which now allows you to do this backdoor without the pro rata rule messing everything up for you.
- [20:18]
Robert
It's a great breakdown. And the only thing I would add is if you're looking to open and get going On a Solo 401K, Kerry.com is where Austin and I do it. We love the platform. They do a really nice job. That's all I would add to this question. But great job, Jim, and better job of breaking it down, Austin, because I know that was a lot.
- [20:37]
Austin
Yeah, shout out, Jim. Congrats, man. And we're rooting for you. So this next question comes from Roger F. Roger says Hi Austin and Robert. I'm 53 years old with $760,000 in my 403B. I'll have my house paid off in about three years and I currently have no other debt. I plan to retire between 62 and 65. My wife and I make a total of $200,000 per year. I'm thinking about withdrawing enough from my 403B to buy one bitcoin, even if it means paying the early withdrawal penalty and taxes. Two questions. Number one, do you think this is a smart move even with a conservative bitcoin return? And two, could that long term upside outweigh the penalties and risks or is this very much just short term thinking? I appreciate all the value you bring. I love the show so much. Robert, you want to kick this one off?
- [21:25]
Robert
I think it's a great question, but I wouldn't do it. What I would first do is I would go to the admin for your 403B and say, hey, what kind of autonomy do I have here? Is there a world where I can migrate some of these funds into one of the Bitcoin ETFs like iBit? That's where I would start because I would hate to see you sell money, pay the 10% penalty, pay the taxes on it, to speculate on bitcoin. Although I think everyone here that follows along should own bitcoin, I don't know that it makes sense to pay the penalties and interest to do so. It could weigh out correctly for you. I mean bitcoin has returned 944% in the last five years, which would far outweigh, you know, any penalties in taxes you would pay. But it just seems a little wrong to do it. So I would first start by checking with your admin, seeing if there's a world you can move some money into. One of these ETFs that already exist so you get the bitcoin exposure without paying the penalties and the taxes.
- [22:30]
Austin
Yeah, I'm right there with you. So if I was in Roger's shoes, I would one check out my 403B and see if I can, you know, get some exposure into Bitcoin, which could also maybe mean Coinbase stock. I mean, I don't know, it really depends on, on what's, you know, offered here by your 403B provider. But just getting some crypto exposure, I would try that first. The second thing I would do is if Roger here had a Roth IRA or a traditional ira, I would maybe, you know, that should self directed, therefore I would Try and, you know, use some of those funds to buy some bitcoin. And then if none of those happened, dude, you make $200,000 a year, like just dollar cost average into bitcoin at its current price with your extra funds at the end of every month that you have, until you have a bitcoin after maybe 12, 18, 24 months and congrats, you're now 55 with the whole bitcoin or whatever. Right. I wouldn't overthink it. This is how people, like get desperate. And when people get desperate, they get silly. And this is a very silly move because think about it like this, Roger. If you're someone who has an effect rate of, let's call it, I don't know, 20%, I think the average American has an effective tax rate of like 23% or something. So let's say you have an effective tax rate of 20% and you also pay a 10% penalty from your early withdrawal. You are now essentially paying a 30% premium for your Bitcoin. So if it's at $110,000 right now, you would essentially be buying it at $143,000 per Bitcoin, which over long term could still just be like, great, but just use your after tax money that hits your bank, open a crypto account on public and just start the auto invest into bitcoin that way. Yeah, I just really wouldn't do this. And this goes for anyone that has money in a retirement account. How to think about when you take it out, right, you take it out, not only are you paying taxes on it, but you're also paying a penalty, which means you're essentially taking this money out at a 30% interest rate. Like that is bonkers. Just keep it invested, grow it over a long period of time and find money elsewhere in your budget. If that means cutting back, maybe you get a side hustle. Maybe you do something differently here to get some exposure to crypto. But with a $200,000 annual household income, just use that money, you're going to be just fine.
- [24:37]
Robert
100%. And the other thing to look at here, Roger, is do you have things that are sitting that you could sell? Do you have assets, motorcycles, anything that you're not using? Maybe there's an old boat sitting in the yard that you barely used or a camper that you could sell for 10, 15, 20,000 to jumpstart your Bitcoin purchases without paying this 30% premium. There's a lot of ways to skin this cat. Everyone should own bitco. Coin. But I wouldn't do it in the manner you're considering. That's just my takeaway.
- [25:07]
Austin
Absolutely agree, Robert. I think that is a wonderful, wonderful piece of advice.
- [25:11]
Robert
So before we get into our next question, 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 is not 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 slash rich habits.
- [25:38]
Austin
Public.com forward slash rich habits. You guys know it. We love it. Public is the easiest way for anyone to get invested. They have such a wonderful platform. It is just 10 out of 10 experience and we've helped tens of thousands of people become investors via public and we could not be more grateful that you guys are now part of the investor class growing your wealth over a long period of time. Because Robert and I talk about this a lot, right? We firmly believe the only way anyone will be able to retire, which means stop trading their time for money via a salary or, you know, an hourly wage. Whatever trading time for money means to you is by owning equity. And profitable companies like Apple and Amazon and Google and Nvidia and all these companies that are going to grow in value over our lifetimes own equity in American capitalism. Go do that. That is the easiest thing anyone can do today to start building wealth. Go open a Roth IRA on public by V O and just ride the wave. So our next question comes from Parker V. Parker says. Hi Austin and Robert, My Name's Parker, I'm 23 and I recently found your podcast. I've been binge listening for a couple days now and it is fantastic. My fiance and I recently graduated college with Master's degrees and I have a job lined up that begins in August. My job however, does not offer a 401k. My fiance is still actively job searching. We both have Roth IRAs with very little money in them. We were both college athletes so we were lucky enough to escape college with zero debt and $58,000 in our pooled savings account. With my almost current salary and monthly budget, I believe I will be able to support us while saving just a little bit without having to tap into that 58,000 in savings. We would like to have the ability to put a down payment on a house in the next three to six years time. What is the best way for us to allocate the $58,000 between an emergency fund, our retirement accounts, the stock market it and any other things that you guys can think of. And should we invest this amount of money all at once or do we dollar cost average it over a period of time? Thank you guys for always helping your listeners out. What a great question, Robert. I'll let you kick this one off, Parker.
- [27:46]
Robert
I think you're in a great situation. Here is what I would do. I would take the $58,000, I would leave enough for three months expenses in that hopefully high yield savings account. I would immediately get a public.com account opened up, get the Roth IRA set up up both for you and your fiance because we want to get that tax free growth in the future. So I would get that opened up and then I would start getting that maxed out with the index funds that we like Those low cost ETFs like Voo Vug, QQQ. I'd get some money moving there as soon as possible and then I would also get some money moving in. Cryptocurrency, you can do that anywhere. We like public as well. Buy the blue chips, the bitcoins, the XRPs, get a little money working there as well. Because we believe that cryptocurrency is going to do great over the coming years. But at the end of the day, the way I look at it is if you're not going to buy a home for three to six years, I don't like the idea of the money just sitting in savings, even if it is high yield savings, because that's too long of a window to leave 5, 6, 7, 8, 10% on the table year after year. So that's why I would get the money working. You've heard me and Austin say it for many years now, or if you're new here, you may have not heard it yet. But you need to make your money work as hard for you as you work to get it. And that's a lot of money for you to have sitting in, potentially only making 2, 3, 4% on it. So that's what I would do. Get the Roth set up, get a traditional brokerage account set up, get that money in and get it invested throughout these low cost ETFs and cryptocurrencies to get you making a higher yield on your money money in the coming years.
- [29:30]
Austin
What a great breakdown. Robert Parker. Here's your play by play from someone who was in your shoes six years ago. First thing you want to do is completely understand exactly how much Money you will be taking home on a monthly basis. Right now you have like a salary, probably you know, offer numbers. You got some stuff figured out from your job, but you don't yet understand yet after taxes and benefits and things like that, how much you'll be taking home. So your budget might, might flex a little bit, but you really need to understand exactly how much you'll be taking home and make sure whatever situation you and your fiance are putting yourselves in when it comes to an apartment or where you're going to live or how you're going to fund your lifestyle, if that's, you know, commuting to work and how you guys are saving, like all these things, it has to fit within that monthly budget because if it doesn't, that's how people get themselves in trouble with credit card debt, tapping into savings, draining retirement funds, things like that. Do everything you can to understand exactly what your monthly budget is and stick, stick to it. That's number one. Number two, Robert crushed it when it came to the emergency fund. Three months of expenses is all you need. I'm assuming your monthly expenses will be about $5,000. So put aside 15,000 of this 58,000 into a public.comhigh guild cash account paying 4.1% APY. That's going to be the buffer between you and life. So when crazy stuff happens, you don't have to tap into your savings or cash out investments or anything like that. That to pay for it, you just use your emergency fund for that event. The next thing, Robert was completely correct. You want to get those Roth IRAs open and funded. You want to get, before you buy a house in three to six years time, $100,000 saved and invested. We call it building your base because this means that you now have $100,000 working for you, growing, compounding 5, 7, 8, 10, 12% per year over a long period of time without putting all of that money instead in a single family home which normally just turns into a cash pit, money pit for when things go wrong or maybe it doesn't appreciate as fast as you thought and then the interest rate's too high and it's just a disaster. So I would make sure that you got the Roth funded, max that out every year and then you'll have some more money left over. Make sure that you've already figured out when it comes to how much it's going to cost you to move to where your job's going to be. Maybe you got to put down a month or two of a deposit on your Apartment. Maybe you gotta upgrade some furniture, maybe you got to do some things to get to a situation where you all are ready to start. Start the adulting, that is being a college graduate, which is exciting. But what I'm saying is make sure you've got that money saved and ready and allocated so you're not swiping the credit card because you're 23 and you think, I'll just pay this off later and you just find yourself in a mess. And then the last thing I want to encourage you to do is be very thoughtful as to how you actually go buy that first house. Robert and I talk about house hacking all the time. You guys are going to be in your 20s in the next three to six years, which means house hacking is, is definitely on the table for you. You should be able to do the 5% down Fannie Mae mortgage, which allows you to buy up to four doors, borrow up to $1.3 million. I believe at that 5% down, whatever it looks like for you. So go buy a duplex somewhere in your town, make sure the numbers shake up and you're good to go. But that will be your first foray now into real estate investing. And once you live there for a couple years and you're ready to actually buy your first single family home, you'll have two doors now, two tenants. You'll have it from one side of the duplex and the other, and hopefully cash flows. And everything's going great. You guys will be off to the races being millionaires in no time. So, Parker, congratulations on setting yourself up for such a wonderful long term financial trajectory. Robert and I are rooting for you and we hope that this breakdown will help guide you a little bit as to where you'll be going over the next 3, 6, 9, 12 years.
- [33:07]
Robert
I love it. And the only thing I would add to it for any of you that aren't living together but are looking towards marriage, the ultimate hack. Because remember, once you get married and sign on the dotted line, all bank entities look at you as well. 1. So the ultimate hack is if you're not living together yet, both of you go buy a duplex. That way when you get married, you have four doors and then you can live in each one until you get married and then use the income from the four doors to buy the primary home. Because I will say this, until I'm blue in the face for the next few decades, I don't think anyone should save and buy their primary home too early and become housebroke. Because so many People think that is the next iteration in adulthood is to go out and buy a single family home. I don't think it's a great move to start, especially as young as you guys are. So please look at house hacking at the very least. And for anyone else listening, that's thinking about getting married the next one, two, three years, think about going out and getting a duplex for each of you. So that way you start that marriage off with all of this additional capital appreciation and income from all the doors you'll already own.
- [34:16]
Austin
Boom. Could have said it better myself. Our next question comes from Ben W. Ben says hi Robert Nosson. I've been listening to your podcast for several months now and I haven't few questions about QQQI. I have $2 million in investments and retirement accounts. 500,000 is sitting in my Roth IRA. Can I move all $500,000 into QQQI, reinvest the monthly distributions back into QQQI until I'm 59 and a half, and then once I'm able to start withdrawing money out of my Roth IRA tax free in retirement, can I begin to live off of these monthly distributions? It seems like a great way to earn passive income or retirement income, but I'm worried what might happen during market volatility as well. This is a great question, Ben, so I'll just quickly answer this. You're totally thinking about this correctly. If you have $500,000 in your Roth IRA and let's say you're 50 years old right now and you are investing all 500,000 of that into QQQI, which again is just the NASDAQ and you know, having about 25% of your investment portfolio in the Nasdaq I don't think is too egregious or too aggressive. Right? We always talk about the NASDAQ, the S P 500 and other index funds and ETFs that are important to us us as great ways to build wealth over a long period of time. So if you had 500,000 and you put it into QQQI and you're 50 years old and those monthly distributions were then spit out to your brokerage cash right inside your Roth IRA and you took that brokerage cash and reinvested it back into more shares of QQQI and you're having a great time building up this passive income machine. Now let's fast forward. You know, 10 years, you're 59 and a half, 60 years old, you can begin withdrawing profits tax free out of your Roth ira. If it's pay whatever it pays out as a monthly distribution and you take that out of your Roth ira, that is very much a way to withdraw profits tax free. Off to the races with QQQI you go. And then as it relates to market volatility, I want to make sure we're on the same page about this. QQQI pays a monthly distribution of about one one and a half percent. But they do this on the price of the share that month. So if the NASDAQ crashed by 50%, your monthly payments would go down by 50%. Just like if the NAS back skyrocketed 50%, your monthly payments would go up 50%. The distributions paid by all Neo's funds and other covered call ETFs in general are very much tied to the share price on a monthly basis, not the price that you got in at. So I want to make sure we're on the same page about that.
- [36:46]
Robert
Yeah, what a great breakdown. And this episode is really about complexity. It's so cool seeing these questions that are really, really deeply thought out. And you know, Austin and I have been talking a lot about getting people to think deeper and I don't want people to get overly creative to where they feel like they have to like always be trying to find a different way to invest or you know, thinking outside the box. But this is a very, very deep question and Austin, I think you handled it very well. We love QQQI and the income focused way that they make money even while investing in the NASDAQ 100. So great question and even better answer, Austin. I think it's just fantastic that people really thinking outside the box but keeping it somewhat simple so they don't make their lives over complicated because at the end of the day we want everyone to build and maintain growth in their wealth but also be able to live life and enjoy life as well.
- [37:41]
Austin
Well, that was, you know, Monday's episode, right? How to build wealth without obsessing over money. Which by the way, if you've not listened to that episode, it's a pretty good one. We highly recommend checking it out. So our last question comes from Yatsana B. I hope I pronounced that correctly. Yatsana says hi Austin and Robert. I'm avid listener of the Rich Habits podcast and frequently recommend it to others, especially younger folks, as a resource for building a strong financial future. My husband and I, who are both 51 years old, have followed sound financial habits, which means we max out our 401ks including those catch up contributions. We make a backdoor Roth IRA contribution every year and we were able to even cover our two sons college expenses. We now have an extra $450,000 to invest and would love your advice on how to allocate it. We're drawn to funds like V, vgt, SPYI and qqqi, but we'd appreciate your insights specifically on asset allocation, bonds, equities, alternatives, things like that, fund selection. Are there other ETFs we might be missing and then even some weightings. Do we go all in on stocks? Do we have some diversification? Would love your all's thoughts and thank you so much for the invaluable knowledge that you share. It's made a real difference in our financial journey. Robert, you want to kick this one off?
- [38:55]
Robert
I would love to. Let's see how close we are in agreement. Agreement for this scenario. So it's a great question. I would say as far as asset allocation, a lot of people think in times when there's market volatility they should really go all in on bonds. I don't agree with that. I don't think your bond should be more than 5% or 10% of your total money invested. Next, I would say equities could be anywhere from 40 to 60%. And then with cryptocurrency I would say 5 to 10% of your net investable capital. And then when it comes to alternatives, you mentioned alternatives that range anything from crypto to real estate to precious metals. Again, for me that's a 10 to 15% allocation amount. So that's how I would break it down. First and foremost, when it comes to fund selection, you've already named a lot of the ones that Austin and I like. And fund selection to me is really an important part of this answer because I feel too many people try to get too fancy. I see people all the time with their portfolios where they've got 15, 20 or more funds. And I just don't think it's necessary. There's enough overlap in most of the funds we talk about to cover all of the sectors we like. And so in that instance, I think the average person that's building their wealth should have five to 10 funds total. And we really like people starting out with the V, the vugs, the qqq. And then if you want the dividend income we love SPYI and qqqi, buy from NEOS funds. And then if you want to explore AI, we like aiq. I think that's a really good long term fund that'll make people money in the emerging sector of aiq as it gets Bigger and bigger. So that's the take for me of what I would do in your situation. Because you want to be diversified, but you want to make sure that you're catching all of the secular growth trends so you can make the most money in those sectors while still maintaining training quality products like voo, where you're betting on the US economy. That's what I would do.
- [41:03]
Austin
So as it relates to like this $450,000, the first thing I want to encourage you to do is to dollar cost average the money, right? Don't put all 450,000 into whatever funds that you decide with whatever weightings all at once. My general rule of thumb is if the amount of money that I'm investing is more than 10 to 20% of my total portfolio value, I'm going to dollar cost average it. So for example, let' say you've got a million dollar portfolio and you've got $20,000. 20 grand is only 2% of a million dollar portfolio. The markets move up and down 1 or 2% on a daily basis. Just go chuck it into your portfolio, you'll be just fine. Don't worry about dollar cost averaging that over a period of time. But if we are now talking about $500,000, well that's 50% of your portfolio, right? That's a big number. So if this 450,000 makes up more than 10 or 20% of your total net worth, your total invested portfolio dollar cost average, it may be over. Right? Nothing too crazy, don't wait too long. But don't do it all at once either. As it relates to asset allocation, I love the idea of putting the vast majority of this into equities, specifically ETFs. Right? You mentioned Voo, VGT, Spyi, Qqqi, I'll add Vug, Vti, Aiq. I think all those were wonderful. Moat is another great one. M O A T I think that's great. Say maybe 400,000 in the equities and then maybe 50,000 in cryptocurrenc currency. If you want to put 50,000 of that into IBIT, IBIT or BTCI, those are both Bitcoin focused ETFs. Or maybe you want to just go buy bitcoin directly via some sort of exchange like Coinbase, I think that's great too. Just make sure that you don't have more than 5 to 15% of your total invested capital in cryptocurrency. And then as it relates to like breaking all this down from a weightings perspective, Robert and I firmly believe in the core satellite portfolio strategy, which essentially means 65 to 80% of your portfolio should be invested into the index funds and ETFs we talk about, whereas the other 20 to 30% of your portfolio should be invested into those diversified, you know, asset classes. If it is precious metals, if it's crypto, if it's real estate, if it's single stocks, whatever that might look like for you, but having the vast majority into index funds and ETFs and having some nice, you know, diversification on the other side of it, I think that's a well rounded portfolio.
- [43:32]
Robert
Yeah, I agree with everything you'd said and the only thing I would add on top of what we already answered is you're both 51 years old, so you have a long investing horizon ahead of you. So just keep in mind you don't want to become too risk off too early because then you're going to leave a lot of money that you might desire to have in retirement on the table because you pulled your foot off the gas too soon. I see this happen all the time. At 51 years old, you have a solid 12, 13, 14, 15 years, 20 years before you're really fully into retirement. So you want to make sure you get as much money out of the money you have now by investing wisely, not going all in on some crazy sector or some crazy stock, but also giving yourself the chance to make the best returns possible over that next 10, 12, 15 years.
- [44:23]
Austin
I couldn't have said it better myself. Everyone, thank you so much for joining us on this week's episode of the Rich Habits podcast. A couple reminders before you go. The first one is do not forget to subscribe to the Rich Habits newsletter. It's completely free, comes out every Thursday morning and it's already going out to like 60,000 investors. So we're super excited that you guys are enjoying the Rich Habits newsletter again. There's going to be a link in the show notes below to subscribe to that reminder. Number two is please consider joining the Rich Habits Network. We are still running a seven day free trial. This is a community for our biggest fans. We're hosting two hour long weekly live streams via Zoom every Tuesday night. We have seven, seven or eight hours now of video coursework that is all about buying businesses, investing in stocks, how to evaluate stocks, retirement account investing, growing your credit, everything as it relates to personal finance and investing. And we also give you all the opportunity to invest alongside of us into some of the coolest startups and pre IPO companies. That are out there. We recently just had an offering for an awesome company that plans to IPO in about 18 months, so we're really excited about that as well. Again, link in the show notes below to trial the Rich Rich Habits Network.
- [45:35]
Robert
Yes, it is so exciting and I think the Rich Habits Network is growing very quickly, but I think it is one of the best values on the Internet for anyone that is looking to improve their knowledge in business mindset and personal finance. We cover it all. We have a lot of great guests on the podcast. We have a lot of incredible investment opportunities. So we just really wanted you guys to know that we are running that free trial right now for 77 days. You can go in, you can tinker around, do a private live with us, see what you think with no money out of pocket. So make sure you check it out.
- [46:12]
Austin
And as always, thank you all so much for coming back every single week to listen to the show. There's over a hundred thousand of you that come back on a weekly basis now and we are incredibly grateful if you learned something from this show. If you've enjoyed Robert and I's conversation here, please consider giving us a five star review and sharing the episode with a friend. Thank you all so much and have a great rest of your week.