← Rich Habits Podcast
Loading summary
Transcript70 lines
- [00:01]
Austin
As a contractor, I don't pay for materials I don't use, so why would I pay for stuff I don't need in my mobile plan? That's why the new My Biz Plan from Verizon Business is so perfect. Now I can choose exactly what I want and I only pay for what.
- [00:14]
Zade
I need right now with my biz plan. Get our best price as low as $25 a line. Visit verizon.com business to get started today.
- [00:23]
Robert
Price per month with 5 plus lines includes auto pay and paper free billing.
- [00:25]
Zade
And special intro offer.
- [00:26]
Robert
Discounts, taxes, fees, economic adjustment charge and terms apply. Offers end June 10, 2025 at Capella University you can learn at your own pace with our flexpath Learning format. Take one or two courses at a time and complete as many as you can in a 12 week billing session. With Flexpath, you can even finish the Bachelor's degree you started in 22 months for $20,000. A different future is closer than you think with Capella University. Learn more at capella.edu fastest 25% of students cost varies by pace, transfer credits and other factors. Fees apply hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition. As you guys know by now, these are our Thursday Q and A episodes, which means if you have a question to ask us, you can ask us a question via Instagram dms@rich habits podcast via email@rich habits podcastmail.com or ask us a question inside of the Rich Habits Network. And as a quick reminder, we are still running a seven day free trial. There's been over 200 of you that have joined the Rich Habits Network over the last two months because of this seven day trial. You guys are loving it. You're trialing the network, you fall in love with it after the first live stream and you stick around. So we very much appreciate it. Now, Robert, this episode is going to be a little bit different because we actually have a special guest, Zade. Thank you so much for joining us on this Q and A episode. As you guys might know if you listen to the Rundown by Public, Zade Admani is the host of that show. Zade is a character when it comes to the financial markets.
- [01:58]
Zade
I appreciate you having me on Austin. You know, we've known each other for almost five years now, so it's great to finally be on the podcast. And Robert, great to finally meet you and talk in person. I've been watching your walking talks for forever now, so it's great to be on the pod with you guys.
- [02:10]
Austin
Definitely Love having you. You do a great job on Instagram as well. It's really fun because you're our first ever guest on a Q and A episode. So let's, let's mark that in the annals of history.
- [02:22]
Zade
Let's go.
- [02:23]
Austin
The Rich Habits Network and Rich Habits Podcast. So let's get into it.
- [02:26]
Robert
It's actually gonna be a fun episode. Right? So not only now will Robert and I be answering some questions, but we'll lean on Zade to give his hot take as well. But before we jump into our first question, I take a moment to give a quick shout out to, you know, on the rundown, you guys do these like deep dive episodes on Saturdays every single weekend and it's call it like 10 or 15 minutes long. It's a video episode and this most recent one was about the Google antitrust lawsuit. A little bit of earnings call info stuff in there as well. So why don't you walk our listeners through a little bit what to expect when it comes to those deep dive episodes in the past and maybe even in the future.
- [03:03]
Zade
Yeah, thanks for asking about that. So our main show is a daily show, seven to eight minutes long. Give you a quick recap of what happened in the markets the previous day, what to look forward to, trending stories and things like that. What we started to do recently though is do weekend deep dives. Just focused on one topic where we go deep for 10, 12 minutes. And this past weekend we actually talked about Google. They're making a lot of news these days about earnings and they're also under some heat from regulators, you know, being called the monopoly, potential breakup there. So we did a nice deep dive about that and what it means for Google. Are they going to be broken up or is it going to be more of a Microsoft situation that happened in the 90s. So we talked about that. Highly recommend checking that out if you want to learn more about Google and their fate. You know, they could be broken up.
- [03:45]
Robert
Yeah, man. They just had an earnings call this last week and it was very good actually. Right. So like, I think a lot of investors, including myself, were kind of thinking like, is chat GPT going to be the end of Google? Right. Everyone's just going to go ask these AI models for answers versus googling an answer. Well, $50 billion of search revenue for the first quarter of the year kind of puts those speculations to rest. And I think they were talking about their quarter billion monthly active users for Gemini and their cloud business segments running on high octane full speed ahead. It's It's a really cool business model. So yeah, definitely check out the earnings if you haven't already.
- [04:19]
Zade
That to me was like Google dropping the mic, telling the critics that they're not cooked just yet. They're, I mean the fact that search is still growing double digit, everyone says that ChatGPT and the AI models are just going to destroy Google's business model. That's not been the case so far. I think it's because people just have been googling for 20 years now. Right? You're not going to change the habits of the entire world in two or three years. It might happen in 20 years, 10 years maybe, but it's not going to happen overnight. And Google just keeps printing money in the meantime and investing in their AI. We talked about that in the deep dive episode. So they're not going away anytime soon.
- [04:55]
Austin
And I want to piggyback all of this because for me it's always funny because we're in this every day and people that are on the outside, they're not thinking about how we think about the markets in these individual stocks and where these sectors are going of growth. And so for them, I believe you, it's five, ten years away before they're switching away from a Google and getting their answers from Grok or TikTok or wherever they're going. So I agree totally.
- [05:24]
Zade
And I think the interesting thing is because Google is still printing money, 30 plus billion dollars in profit, Q1, I mean profit, right. That allows them to then potentially build a monopoly or remote when it comes to AI. I mean they got the data, they got everything. And to me that's going to be the most interesting thing. It's two things. Number one, are the regulators actually going to break up Google? That's a wild card here. I don't know, we'll have to see. But number two, can Google use the money printer that they have right now, billions of dollars to cement a moat in AI and then that's their next dominant industry that they're going to be a monopoly in for the next 20 years. So those are the two things that to watch out for when it comes to Google. Until then, just as a shareholder, I mean you're, you're also getting the benefits of share buybacks. They announced 70 billion in share buybacks, increase in dividends, things like that. So I know the stock hasn't done so well compared to other big tech stocks this year, but definitely something that I'm keeping an eye on.
- [06:20]
Robert
I am right there with you. As a Google shareholder, I got really excited when I was listening to the earnings call and they talked about robotics, right? Specifically alluding to humanoid robotics. And obviously they invested well over $100 million or so into Apptronic, which is a company that we were invested into as well, which is exciting. So yeah, I'm all here for Google. Shout out to Google. So now, before we jump into our first question coming from Lynn, let's take a moment to hear from our episode sponsor, Public. If you're looking to open a brokerage account actually buil the century, you need to give public.com a try. Because on public you can invest in almost anything. Stocks, bonds, crypto options, and much 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.
- [07:10]
Austin
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 an extra 1% match on all contributions paid for by Public Investing. Full disclosures in the podcast Description all.
- [07:41]
Robert
Right, so our first question comes from Lynn V. On email. Lynn says hi Austin and Robert. I'm a new listener in my 60s and love all of this valuable information. I'm getting ready to ret next year. At 67 years old, I will have a great pension from a large company and I also have about 400,000 in 401ks in Roth IRAs, 150,000 in brokerage accounts, $100,000 in crypto assets, 80,000 in a high yield savings as well as some CDs. The Pension and Social Security I will get will provide about 90% of my current income, which gives me a pretty nice living in retirement. However, I'm also starting to lean towards more high risk investments. On last week's episode, Andrew's question about high risk investing was interesting to me, specifically Talking about leveraged ETFs and how to capture more upside using them. My question is, are these ETFs generating monthly income by selling or writing options on the stocks? I'm not sure how these ETFs work and how they're able to multiply both the upside and the downside of the price action with the underlying stocks or indices they track. This is a really good question, Robert. You want to kick us Off.
- [08:51]
Austin
Yeah, I'll kick it off by saying that. Make sure that everyone listening and following along does their research. It sounds great when it's promoted to you. And it's a 3x multiple. So if it makes 8% and it's three times leverage, you're going to make a 24 return. But that rubs both ways. So remember, in these leverage ETFs, and it's why I don't use them or promote them, you're going to have the same multiple of downside risk as well. So make sure you understand that, especially in volatile markets, because it all sounds good if we are, if we feel like we're safe enough. A long running bull run. But right now I just don't think it's a really good strategy. I think there's better ways to find higher risk, but I don't think this is the way I would go about it. I would rather see taking some of that money and marking it for private investments, pre IPO investments, maybe some real estate in multifamily. Some of those things may be a little more high risk to balance out your portfolio without being in the predicament of what I believe is a bad idea for these highly leveraged etf' Yeah.
- [09:55]
Robert
I just want to make sure Lynn listening here completely understands how these ETFs work. Right. So, for example, Upro is a very popular one. It's the Pro Shares Ultra Pro S P500 ETF. And according to their website, they offer a daily 3x leverage to the upside or the downside on the performance of the S&P 500. Which means that any given day, if the S&P 500 is up 1%, this ETF will be up 3%. Just as if it's down 1%. This ETF will be down 3%. And year to date, the S&P 500 is down about 6 or 7%. And this ETF is down 25 and a half percent. Right. So like, if you're on the wrong side of one of these sort of leveraged trades, you can absolutely blow things up in your portfolio. So what I want to encourage you to do, Lyn, is, is maybe take a step back from this. I understand that you want to do some high risk investing. I'd encourage you to listen to Robert's advice about different asset classes versus using leverage to multiply your returns or your losses, depending on what you're trying to buy in the stock market. I don't own any leveraged ETFs. They just to me don't Make a lot of sense. It's very much timing the markets and I'm not very good at that, to be honest with you. So it's something I'm staying away from. But Zaid, what's your perspective on leveraged ETFs and things of that nature?
- [11:18]
Zade
Totally agree with everything you guys are saying. I do want to add about these leverage ETFs so I'm not a leverage ETF guy myself, just like you guys. These leverage ETFs are designed to track the daily movements of, of whether the S, P or they have like these leverage ETFs that track individual stocks as well. So it's not a buy and hold instrument either. So like there's decay over time. I think Austin, you mentioned that the S and P example, the S and P is down what, 4% this year, but this leverage ETF is down 24%. So these leveraged ETFs are designed to be a day trader instrument. So unless you want to, unless you want to do that and you know, day trade with these leverage ETFs, which again, I don't recommend either. It's just hard to recommend these to anybody. They're too volatile, they're too risky. The decay is there. You got to be trading these hourly essentially to take advantage of the volatility. There are better options out there that Robert just mentioned. So you got to understand how these leverage ETFs work and just don't get caught up in the viral TikTok video or whatever that someone's like, oh, I made 300x because of this leverage ETF on Nvidia or something. Gotta be very careful with this stuff. The decay behind these instruments can have a huge impact on returns.
- [12:28]
Austin
Yeah, I totally agree. And it always comes down to this as you're building your wealth. Personal finance is personal. But you don't have to get fancy. I'm very wealthy. I'm here every single day sharing my journey and I don't do fancy stuff. I understand what I'm investing in. I'm a long term investor and I suggest all of you watching and listening do the same. Because when you try to cut corners and be real fancy to make more money, it usually doesn't work. And you know, Austin and I's message is pretty straightforward. For the last few years you've been following and that is be a long term investor, understand what you're investing in and just stay consistent. And I think that's the big takeaway for this question.
- [13:11]
Robert
So our next question comes from Jordan C. Via email as well. Jordan says. Hey Robert and Austin, I love the podcast and I look forward to the new episodes every single week. My name is Jordan. I'm 22 years old and I'm currently financing a vehicle at 6.9% APR. I'm currently considering trading in this car and leasing a new one. Here's the breakdown. I have a 2020 Tesla Model 3 with about 71,000 miles on it and I owe a little bit over 15,300 on it through this financing, paying about $500 a month. I can trade this in, begin a two year lease and pay $2,100 upfront, which includes the first month's payment, and then pay $388 a month for the next two years. I just finished up my master's degree in education. I have no student loan debt, but I do have this $15,300 loan weighing me down. Obviously I would lose the equity trading this in and leasing a new vehicle, but I believe leasing a new vehicle would offset that loss and save me thousands over the next two years. What do you guys think? Your thoughts and opinions are much appreciated, Robert. I'll let you kick this one off.
- [14:16]
Austin
So yeah, here's my thought and this is a good, good question for many of you. I have a rule of thumb. If you want to get something new and you're going to drive it to, the wheels fall off, buy it. Otherwise, never buy a new car. You should always lease. That's my opinion. The numbers make sense to me. I get a new lease every two or three years because I don't want to deal with maintenance, I don't want to deal with repairs, and I want to make sure I have a nice car that is safe at all times. But to answer your question, you have to look at it this way. I don't think you're giving up much equity in this vehicle at $15,300 because of the fact that they're going for 15, 16, $17,000 on the market. So I think that's negligible and not something I'd be too concerned with. I would be concerned with the actual numbers. How much are you really saving? And are you doing this because you want to save the $150 a month or are you doing it because you want to have a newer car, lower miles, and get a better model of, I'm assuming another Tesla? It doesn't clarify in the question, but that's the way I look at it, is why are you doing this? I don't Think you're doing it just to save the hundred and fifty dollars because I don't see that where that's going to move the needle much for you. But if you're doing it as a combination of the monthly savings, having a newer vehicle and having this lower priced lease, then that I think is a good idea.
- [15:41]
Robert
What's your take, Zed?
- [15:42]
Zade
Yeah, actually I thought about doing something similar myself. I actually have a 2021 Tesla Model Y that I bought used last year. I was thinking about getting another Tesla for my wife. You see all these deals advertised by Tesla for their leases and it sounds very, it sounds really nice, right, 299amonth or something along those lines. I agree with Robert. You know, I think if the goal is to get a new car because the 2020 Model Y or the Model 3 that Jordan has doesn't, doesn't do it for him anymore. Okay, I understand that part, but otherwise I think it's hard to recommend in my opinion.
- [16:14]
Robert
I'm always someone who, I just want to make sure people understand that like when you lease a vehicle, you're essentially renting it and you're renting it for 388amonth over this two year period of time where I'm assuming at this $500 a month you should have this car paid off in the next like three years. So it' I have a lower payment for the next two years and then I guess like you're going to take on another lease after that, maybe the payment stays the same. So now three years go by and yeah, you're probably driving a 2025 or 2026, but like you just have these, you know, payments in perpetuity or you just spend three years of your life paying off, you know, call it 7% interest rate debt, which is like in that range where it's like, yeah, you could pay that off. I'm not mad at you for paying off 7%. Now if it was 4% or 3% I would be mad. I'd say keep it around. But it's like one of those things where it's like okay, fast forward three years, you have a paid for Tesla Model 3 with maybe a hundred thousand miles on it. That's probably worth like I don't know, 10 to 12K. But you don't have a monthly payment and you have a vehicle now versus fast forward three years, you still have a monthly payment of 388, 450. Like who knows what that next lease is going to turn into? I don't know. For me, it's always so hard because I think the best way to build wealth is to find margin in your budget. And you find margin in your budget by saying no to high interest debt and by paying off debt that you've just kind of had over a long period of time. And so in this situation, like what happens in three years from now when you have this $500 a month freed up, you could invest that $500 a month versus in a situation in three years from now where you're leasing, maybe Your lease is 500, and you consistently have this payment. So I'm going to say keep the Tesla, pay it off over the next three years, and then start investing that $500 a month, every month for the rest of your life. And when you do need a new car, do what Zay did, which is go buy a used Tesla Model Y or something. Before this episode, we were talking about it, and he said after the tax credit, his model Y was $21,000.
- [18:13]
Zade
That's right.
- [18:13]
Robert
Save up for that. Go buy it. Assuming interest rates are 7, 8, 9, 10%. Right. So I don't know. I'm just a big believer that the only way you build wealth is by investing money, and you find money by finding that margin. And margin normally comes from paying off unnecessary debt.
- [18:29]
Austin
All right, I'm going to unpack this just a little bit further. And I love this question because, Austin, you and I always differ on it, and that's what makes this podcast so good. We always say personal finance is personal, and this exact question is personal. So let me give you a reference. My personal driver is always a new lease. I don't want to mess with things. I don't want to have to deal with it. I don't want to have to have any issues. So I look at that payment as a cost of doing business, as a cost of life. My cool vehicles are always bought used, and my company vehicles, you guys would get great joy. My construction company in Ohio, at one point, I had five of the same vehicle. They were 1998 to 2005 Chevy Silverados. Now, since then, I've sold three of them, but I still have two. And so it's always situational here when looking at this, and I agree with Austin 100%. But let's put a little bit of one last wrinkle into this. If you're a lawyer, if you're a doctor, if you're a salesperson that drives all the time, if you're a realtor, someone that has to take people in their vehicle all the time. You don't want to have an older ratty vehicle with a hundred thousand miles on it, because then they may frown on that and look at it like, well, if this person's successful in their own field, why don't they have a slightly nicer car? So that is why with all things personal finance, it's up to your situation. I think either way is a good way to do it.
- [19:56]
Robert
And I will end it with, they said they just finished up their master's in education, so I'm assuming this is a teacher, which means you're probably making 45 to 65k and you're not a lawyer or one of those things. So with that information, do you think they should still lease?
- [20:11]
Austin
If we're specifically speaking to Jordan and not the other hundred thousand people that are going to see this episode, then yes, I would keep the Tesla, but for other people. That's why I said 100. Agree with you, but with everyone else listening, I want to make sure people understand we're not telling you not to have a nice car. We're telling you that there's a time and a place and do you need it? And I always tell the story. I had a friend that owned a construction company in Ohio. He came to one of my job sites and he laughed at me. He looked at all the trailers and the trucks. He goes, dude, what is going on? What's with all the old trucks? I'm like, what's wrong with them? They run great. And he was like, he has all of these big crazy trucks and trailers. Well, he went bankrupt a year later. So I stopped him and I said, hey, what was your carry cost every month for all your trucks and trailers? And he was like, about $26,000 a month. And I'm like, exactly. So I think that really speaks to your point, Austin, of finding those ways in your budget to arbitrage that extra money to build towards wealth so you're always not living beyond your means, even if you own a business.
- [21:14]
Robert
I love these discussions. They make this podcast so unique. So our next question here comes from Dan C. Via email as well. Remember, if you want to ask us a question via email, email us at rich habits podcastmail.com Dan's question says, I have been listening to the podcast for a while now, and after hearing about all these 20 something year olds who are killing it, I decided to ask for some advice. I own a small business that is appraised for about 750,000 based on about a quarter million dollars of SDE I owe $45,000 on this business. I have a primary residence worth 700,000 with only about 110,000 of debt on it at 2 1/2% interest. I own a beach house worth 1.1 million with no debt, no mortgage, no nothing. And we rent it and make about 40,000 a year. I also have $150,000 in my bridge account that's invested in v international funds. And in a money market, I've got $600,000 sitting on the sidelines earning four and a half percent. I want to get back in and start the process of moving my money market money into public and get a little bit more income on it. I will inherit about $600,000 over the next few years and I'll need to put that money to work somewhere as well. Assuming I don't buy another business with it. I'll be 56 next week and your advice will be my birthday present. So what do I do with this $600,000? My wife has 100,000 in her RO day. I've got about 40,000 in mind and we maxed out for the year already. P S. I still love Silly bands.
- [22:47]
Austin
I love that. And let me take this one first, Dan. Don't worry about all the young kids killing it. It's all bull crap, I promise you. Most of them have leased Lambos. Lease this, rented this. It's all fake. I know it. I see it from behind the scenes all the time. You are killing it, Dan C. And it's impressive. And you're still so young. You have a lot of great years ahead. So me coming from a very similar situation to you, I love the idea of buying multiple more businesses in your career. Because if you're really good at it and get that value add, increase the profits, increase the sales, you just get so much more multiple later on when you exit that business. So the number one thing I see here and I love everything about your situation is this 600k. I feel you're too risk off when I see you have all of that in the money market. Plus you have another 150 in your bridge account in international. I just feel like you should be more risk on at your age and obviously at your net worth. So for me, I'd love to see you build up more in the bridge account and less in the money market. Get some more of these ETFs we talk about. Maybe you could look at start getting into some private equity deals and getting some of this money working in pre ipo. Maybe some more Real estate and stuff like that to where it's a little more risk on, but you still have a lot more upside. Because I do feel you're playing it a little too safe having that much money making four and a half percent. But Austin, I'd love to hear you and Zade's take.
- [24:24]
Robert
No, I largely agree with you. A couple things stick out to me. The first thing, which is not really the question you even asked, but you're only making $40,000 a year on this $1.1 million beach house. That's a lot of equity tied into a beach house to only yield about 3 1/2% cash on cash on an annualized basis. I'm not saying you sell it, maybe you raise rents, maybe you do some short term rentals, maybe you try and get it up from three and a half percent to five or six or seven. Like how can your beach house begin to start bringing in, call it 65 or 75,000 a year to really begin to turbo those cash on cash returns. So that's just a little call out there. But I agree with you, Robert, when it comes to this bridge account being all these international funds, 600,000 sitting in cash earning four and a half percent, it seems to me like Dan is already in the I'm retired mode, right? Which like, don't get me wrong, that's cool. But on the same token, you're 56. You can't touch this money for three and a half years anyway, right? So it's like if you can't even withdraw the money without penalties until 59 and a half, why not have that money work for you over that three and a half year period of time. And I understand if you're like trying to say to us right now, oh, it is working for me, it's earning four and a half percent. Sure, I get it. The stock market's down 6, you're going to make four and a half percent this year. So theoretically you're up probably like 2ish percent year to date. Like that's cool, I get it. But the four and a half percent you earned last year was much less than the 25% the stock market delivered. And I'm not saying that the stock market's going to be in the green next year or that we're even going to be in the green this year. But what I am saying is that the chances of you living until 66, 76, maybe even 86 are pretty high. And I'd be very, very mad at myself if I encouraged you to just sit in cash for the next 10, 15, 20 years knowing that this $600,000, if invested correctly in the S&P 500 and the index funds and ETFs we talk about, on average, will double every seven years. That means your 600,000 will double to 1.2 million, and then that will double again to 2.4 million, all by the time you're about 70 years old. So there's a lot of upside potential that you could potentially be leaving on the table here assuming you just stick to this cash. But yeah, I agree, you're really risk off. And I'd really want to encourage you to be a little bit more aggressive now as you turn 56 years old on your birthday.
- [26:48]
Zade
First of all, like you said, Dan, absolutely crushing it. Incredible to see your portfolio at this level at your young age. I would agree with everything, you guys. I think this is a story about portfolio construction, portfolio allocation. It doesn't have to be 100% ETF or equities. It could be a 50, 50 split, 60, 40, something along those lines. Something to give you more exposure to the stock market. Because historically, like Austin, you said doubles every seven years. So it just might be a tweaking of the portfolio to get more exposure to equities. And then if you want to go, you know, even bigger swing for the fences, real estate, private equity deals, things like that, IPOs, you can just make a sleeve of your portfolio that allocates to those funds. I think your situation is pretty solid here. You have a lot of levers to pull here. I think that's the key thing is there's a lot of levers to pull here. A lot of things you can experiment with. Good thing about public. He mentioned public in his email. You can construct your portfolio and generate a sleeve that does some bonds, some Treasuries, some equity, some ETFs. You can kind of do it all on the public app. I think you're in a really good spot, and you just got to tweak some levers to end up in a better spot by the time you're retiring.
- [27:52]
Robert
I think the biggest call out to me that I just kind of realized here is, one, this guy's like, you know, 2 million plus net worth, which is incredible. But also, two, he has $1.6 million of equity in his real estate, and maybe that's his play, right? Maybe the play is he's going to let his real estate of 1.6 continue to trend higher, and in 10 years, he'll have a Paid off primary residence. Maybe his 1.1 million beach house is worth 1.62 million. I don't know. And that's like his retirement is to get out of that and sell it and put that into maybe some bonds or 60, 40 split with equities and things like that. So maybe he's on a completely different like path we aren't seeing. But I do want to just encourage you here, Dan. You got another probably 20 good years ahead of you of investing. Don't sit on the sidelines for that entire 20 years.
- [28:44]
Austin
I 100% Mike drop. That was exactly what I was going to say. I deal with it every single day where people just have their foot off the gas, they get some money and then they take their foot off the gas immediately for far too long. All you have to do, and we say it every day, is when in doubt, zoom out, go click on the S P500, go look at Voo, the ETF and then zoom out for 20, 30 years and you will see that it goes up into the right over time and you can't let these little bumps in the road get in the way and then sit in cash or B super scared on the sideline. I love that take Austin.
- [29:21]
Robert
So our next question comes from Katie P. Katie says, I have a question about my mortgage. I have a 30 year mortgage at a 2.8% interest rate. I never thought much about it until I started listening to your podcast and exploring more ways I could be financially responsible. I did a little bit more research about how mortgage loans are paid back and I'm seeing that now in the first half of my 30 year mortgage, the majority of my monthly payment is going to go toward interest and not much toward principal. Would it be stupid of me to consider taking out a HELOC for the amount of my mortgage, use it to pay off my mortgage and then use the money I was paying my mortgage off with to now pay the HELOC off. Correct me if I'm wrong, but I believe the monthly payments I'll be spending toward the heloc, more of that will go toward the principal than the interest, which is the opposite of my mortgage. Is that a good idea? I'm honestly not sure what I should do in this situation.
- [30:14]
Austin
I think it's a terrible idea. You have to look at the fact of right now you have 2.8% interest. The HELOC is going to be seven, seven and a half, eight. I don't know exactly what they are at the time of filming and you have to Also understand something is it doesn't work that way. The HELOC is only going to approve you for a certain specified amount of the total equity you have in the property. That's what you're going to be able to borrow. So unless this house you've already paid down 60, 70, 80% of it, you wouldn't be able to get enough in the HELOC anyway. So I think your thinking makes sense, but the way it would play out simply does not work. So, Katie, I don't like this idea at all. For everyone listening, I'm okay with HELOCs. If you believe that you have all this equity in a home, say it's your primary home and you can use that for a really valid reason. Maybe you're going to renovate your business, maybe you're going to put an ADU in the backyard of your property and the numbers play out there where it's going to be profitable for you for the long term. But just to try and get a HELOC to pay off the current mortgage for a much higher interest rate, the math just doesn't work.
- [31:27]
Robert
I'm right there with you. 2.8% interest on a 30 year mortgage, I would be big chilling. I would be making my normal payments. I mean, you're probably over here, depending on how much you borrowed, like on an annualized basis, maybe paying 6, 7, $8,000 a year in interest, which really isn't all that much. I mean, the house I'm in right now and filming inside of, I bought for about 400 grand and I have a six and a half percent interest rate on this mortgage. And according to my tax payments, I paid like 22, $23,000 in interest last year, just like on those mortgage payments. Right? So like you paying six, seven or eight grand is pretty cool at that 2.8% interest rate. Again, when we talk about interest rates and why they're important to consider when it comes to investing versus paying off debt, things of that nature is because we know over a long period of time, the s and P500, the NASDAQ, the Dow Jones right, the ETFs and index funds we talk about go up and to the right by 8, 9, 10% over a long period of time. But that happens every single year on average. And so what you're essentially doing is taking money that you could have invested at this 8, 9 or 10% in these index funds and ETFs and instead putting it to pay off a 2.8% interest rate. So you're making 2.8% on your money because that's interest you're not paying. But the opportunity cost of that was not making 8, 9 or 10% somewhere else on your money. So again, we always talk about like arbitrage and making sure that our money is working hard for us and things of that nature. You can't out invest high interest debt. We say that all the time. Because if you're paying 30% interest, then yeah, you want to go pay off that 30% interest, but you're only paying 2.8%. So if I were you, Katie, I hear what you're saying about like the amateurization schedule of your mortgage. It's probably something you just learned and it's freaking you out. It's life, unfortunately. But I would just keep the mortgage.
- [33:21]
Zade
And rock and roll 100% agree with what you guys are saying about my house. Back in 2021, about 400k, 2.99. I've told my wife we're not moving because, because this mortgage rate is like a, is like an asset, essentially. You know, you can't get that anymore. And the amount of interest you're paying now compared to what you would have to pay if you buy a house today can't even compare. So, yeah, I mean, the mortgage, I would, I don't know if the asset is the right word, but I kind of treat it like an asset. It's an asset having that low of an interest rate and then you can use the money saved over to invest in things like the S P500 or other things because you're going to get, get a higher yield even, even in bonds. You can put the money in bonds and you're going to get a higher yield.
- [33:58]
Austin
I want to illustrate that a minute because I think it is one of the most important things in building wealth for people to understand. There's a lot of people out there that, that are in financial education that are telling you to have no debt, debt is bad, all these terrible things. But what you have to understand that Austin and Zaid alluded to is that. Think of it this way, in very simple terms. If you can borrow money for 3% and you can make 10, 12, 15% with the money, all of that arbitrage, that upside potential goes to you, not somebody else. And that is why the wealthiest people on earth have payments on their homes, payments on their jets, payments on their yachts and everything else. Because they know that if they borrow cheap and use their money elsewhere, where they're going to make a lot more with it. It's going to add to their balance sheet, not someone else's. So I hope that helps everyone listening, why we talk about this and that arbitrage is so important that the positive arbitrage is going into your account, not someone else's.
- [34:59]
Zade
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 yields aren'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 higher yield and investment grade corporate bonds only at public.com rich habits.
- [35:27]
Robert
Public.com forward slash rich habits. You heard it here first. Everybody go open up a bond account. Lock in that 6% or higher yield or take advantage of public's $10,000 bonus right now for transferring a portfolio into public or. Right, this is the third or take advantage of the 1% match happening in your IRA at the moment. Public is just crushing it right now. They've got all the perks and we're super excited to be working with them.
- [35:53]
Austin
Yeah. And another OR would be the High Yield Cash account. They're one of the top earning cash accounts in the country. 4.1% right now as of filming. So don't forget about that if you're trying to build that emergency fund.
- [36:07]
Robert
So our next question comes from Cameron B. Cameron says hi, Austin and Robert. I'm in a sticky situation deciding whether to keep my residential property or not. Before listening to the show, I fell for the trap that real estate is always a good purchase. And I purchased a single family home for myself and my son. It was at the peak of the housing market in July of 2022. I bought it for $310,000, but right now it appraises for below 260,000. I'm in San Marcos, Texas, and I owe $291,000 on my mortgage at a 4.9% interest rate. After my son's mother moved about 45 minutes away, I had to relocate closer to his school. So I'm now renting that house out. The mortgage that I'm paying on that house is $2,450, but the rent that my tenant is paying me is only $1,600. I'm 30 years old. I've got $80,000 in index funds in traditional brokerages, 22,000 in my Roth IRA invested in index funds as well, 250,000 in Bitcoin that has grown substantially over the last several years. And 10,000 or so in large cap single stocks, a few thousand in REITs, some art on masterworks, as well as about a hundred thousand dollars of cash in a high yield cash account for emergencies and disposable for future investments. I make roughly 120,000 a year, give or take, based on my commissions. So here's the question. Would it be smart for me to hold on to this house for the next few years or take the loss now to get rid of it and clean my hands? Robert, is a real estate question. I feel like it's right down your alley. I'll let you kick this one off as well.
- [37:46]
Austin
It's definitely a sticky situation. But I look at it this way. If you sold it right now, it's not really a massive loss. You can, you can fully handle the loss. You have plenty of cash to do it. But in my opinion, I wouldn't touch it because I don't know that part of Texas, San Marcos. But I would say that you at least have capital appreciation and the potential to make this money back if the housing market starts to go back up in San Marcos. So I would keep it. I know it's a 800 loss a month for you out of your cash flow, but I think the numbers make sense to give yourself that chance to be able to get the money back and have a positive outcome from this property rather than just selling it and cutting your losses. The only way I think it makes to sell and cut your losses right now is if you weren't in a good financial situation and the 900 or 800amonth was make it or break it for you. But otherwise I'd keep it because there's a strong chance that capital appreciation in that neighborhood goes back up. The house value goes back up over the next two or three years. And so that's why, in my opinion, I would keep it.
- [38:53]
Robert
That's a really good perspective. So I'm running some numbers here. And if he sold the house at about this 260,000 range, he'll take home to himself after commissions and probably some fees, about 240 to $245,000. But he'll still owe 291,000 on the mortgage, which means he'll still have to pay, let's call it 50 ish thousand dollars back to get out of this situation. So that's that $50,000 loss that he's alluding to. Now you're saying that he should just continue to hold onto this house, eat the $850 of negative cash flow every month, which after about four years or so will mean that same $50,000 loss if he just got out of it now. So you're assuming that in the next four years that the value of the home will appreciate so much that he'll be back in the money.
- [39:44]
Austin
Well, I look at it this way. If he originally bought it for $300,000, and let's say with a $300,000 home, the original price, and let's say that the capital appreciation is average, so it's 4% a year. So that would be $12,000 a year in capital appreciation, we assume at a 3, 4% rate. So I look at it this way. I would rather have the asset still with the opportunity to recoup my money than sell the asset, eat the loss. Because I know where you're going with this, and it does make sense is that he could take that 8, 900amonth and invest it. And where would the better outcome be? We don't know that. But that's just my take of what I would do, because I always like to give myself a chance to be able to win in a situation that is a bad one. And in this instance, that's why my opinion stands that I would keep the property. Because you never know with that area.
- [40:39]
Robert
So I know, Zade, you're very familiar with this area because you live in Houston and you used to live close to this area. What's your perspective?
- [40:46]
Zade
Yeah, so I live in Houston right now. I lived in Austin, which is pretty close to Saint Marcos. The entire Central Texas area is kind of going through a repricing right now when it comes to housing. It was really popular during the pandemic. And now these days, prices have come down significantly. So San Marcos is probably about an hour, hour and 10 away from Austin. I don't know if the area is going to bounce back to the same level that it did during the housing boom that we had during the pandemic. The vibes are a little bit down when it comes to Central Texas compared to what it was three, four years ago. But you have the opportunity of recouping some of the loss. I think the other question is, like, how much of a pain is it to manage the rentals? Right. So he's 45 minutes away. Does he have a rental property company who handles all the maintenance and stuff? Does he do it himself? How much of that is taken away from his job, his. His family, things like that? So I think that's the other question is if it's not too much of a pain. Then I guess you can eat the loss and hope for an appreciation. But. But if you add in the cost of managing the property and like the mental cost and the headaches, that could change the equation a bit.
- [41:46]
Robert
I will also say that this guy is in a wonderful situation besides the home, right. He's got 100k of cash waiting for, you know, disaster to strike. Well, guess what? This is the disaster, right? 50k could go to this. He has $250,000 of Bitcoin one. I would encourage you to take some profits when you're ready and then reallocate that to more traditional investments like what Robert and I are doing here. But it's. You've got these levers that you can pull that make this not so much a disaster in the sense that, oh my God, my mortgage. I'm going to have to travel this debt. I got to take on a personal loan, like all the. Now it's just an inconvenience, right? It's. It's the tuition you pay for learning. If you ended up wanting to get out of this. Yeah, I'm kind of torn. Right. Because on one side of the equation, to Robert's point, there is very much a world where it could bounce back. But on the other side of the equation, I think about probably myself here in Nashville, right. I paid about 400 for my home. I think it's estimates right now is like close to like 380 or so. I plan to live here for a while, and then I also plan to rent it out. So it's like, it doesn't really make sense for me to like, feel weird about a $20,000 capital depreciation. Since when? I bought it like two years ago. But I think, you know, it's very neighborhood specific. It's very specific to someone's situation. And your situation is that your child is 45 minutes away. So you now are renting a house or apartment closer to where your child is at school. And you're now having to, like, play, you know, this remote landlord job, which to Zade's point, I'm sure could be pretty intimidating. I agree. Like, it's. It's a toss up. If you are unhappy with the situation, you have the money set aside, saved and ready to go to get yourself out of it. And congrats, like, that's just paying tuition to the markets and learning and paying what is called a stupid tax, right? It happens. We've all paid all those stupid taxes in the past. But to Robert's Point you also have the situation where you also have enough set aside to eat this cost for the next couple years, allowing you the flexibility and opportunity to have it appreciate over time. So I would really just do some reflecting and know like at the end of the day it's no longer a math equation, it's a brain calorie equation. It's an equation to do with your relationships, it's an equation to do with your time spent away from your family. Like I think that's how I would approach it in this situation.
- [44:07]
Austin
And one last caveat and hack that I use all the time and I just use it to my advantage big time. In a commercial property purchase, do your research. You don't know you could sell this property, eat the loss and miss a news article in your local development newspaper or website or whatever your local administration of some new factory. Micron decides to spend a hundred million dollars building a factory there or FedEx builds a new hub and then all of a sudden rental rates in the area go up 40% in the course of a two year period and you just sold because you didn't know that was happening. So just always do your research in this situation because the people that understand what's happening and forecast like Austin and I always talk about are the ones that win. So that's why I always want to give myself a chance to, to win in these situations.
- [45:01]
Robert
Best of luck to you, Cameron and we appreciate you asking your question here on the podcast. Now our final question for the Q and A episode this Thursday is coming from Kyren on Instagram. Kyren says, hi, I've been a listener for a while and I want your honest opinion. Should I buy bitcoin right now? Are you bullish on bitcoin? So I'll kick this one off. I have roughly 1.7 ish bitcoin left. As you guys know, I had about 2, 2.2, 2 and a half, something like that. I forget the exact number I had is about a quarter million dollars worth of bitcoin. And I, over the last, let's call it like couple months as we've experienced some volatility after the Trump administration and things of that nature. I've been, I've been taking some profits, right? I think I took about 15 to 20% off the table. I did this around 85 to 89,000, you know, dollars per coin is when I took those profits. And I've got about 60, 70 ish thousand of cash now like from that account that I've since deployed elsewhere. And I Am not actively buying bitcoin at the moment because I bought a bunch of it in the beginning of 2023. Knowing that I've got an entry and I've got an exit strategy. I very much dollar cost averaged into Bitcoin in 23 and 24. I deployed about $100,000 into it and now it's worth about a quarter million. And I'm in the exit strategy part of my plan, which means I'm just dollar cost averaging out of it. Right. I sold some at 85.87. I sold some more at 89, 88. I'll sell some at 95, 100 if we get there. Right. Like my plan with any investment is to have a clear entry and a clear exit strategy. I've laid this out countless times, actually, ever since like January and again in March. Inside the Rich Habits Network. Robert and I are very transparent with what we're buying and selling and when we do it and why we do it. So if you've not yet joined the Rich Habits Network and you want those insight, they're all posted inside of there for our members to go check out. But I'm now in the exit portion of my bitcoin and I plan to be 80 to 90% out of my bitcoin. I plan to have a little bit. Right. I never want to get out of the asset class completely, but I plan to move out about 80 to 90% of it if we go up to 120, 140. Right. Somewhere in that range. I plan to reallocate elsewhere, put it into some undervalued single stocks, maybe some neos funds, things of that nature.
- [47:21]
Austin
So here goes. I'm on the bitcoin maximalist side of this equation. I have not taken profits in bitcoin and I'm not saying you should do the same. I have not taken any profits in Bitcoin since 2017. And so for me, I am in the boat that I still believe by let's call it 2030, we will see a minimum of a $500,000 Bitcoin by that date. That's what I think the minimum is for me. So for me, always take profits along the way. Like Austin stated, if you're not as bullish and maybe as crazy as I am, that's okay when it comes to cryptocurrency. But in my opinion, I'm not taking any more profits and I'm still accumulating along the way when I can in bitcoin specifically because I just believe the upside potential is so large that I don't think I'll find a better place to put money over the next five or six years. And, but also, you have to remember I started buying Bitcoin in 2011, so I had a big head start on most people. That shouldn't affect how you think about bitcoin now if you're starting today or you started in 23 or 24. But I agree with Austin 100% understand why you're buying it, understand your entry and your exit strategy. And a good rule of thumb that I've always used is when I buy something, when it goes up 50%, I take off 25%. When it goes off up 50% again, I take another 25% and I do that until I'm totally out of the position with my own money and I'm playing with House's money. So I totally agree with Austin on that standpoint. The only difference is I'm not at a point right now where I'm going to sell any bitcoin until probably, and we've talked about this many times, till probably $300,000 when it gets to that, I'd probably seriously consider selling a bunch.
- [49:19]
Zade
So something really interesting is happening with bitcoin over the last couple weeks. It's decoupling from the Nasdaq and the rest of the stock market. I think over the last year or so, bitcoin was kind of acting as a high beta, you know, high volatile tech stock essentially. Right. Nasdaq would go up, bitcoin would go up. That hasn't been the case over the last couple of weeks. It's decoupled whereas bitcoin was going up while the rest of the stock market stayed flat. That to me is very interesting. I think something interesting is happening here. I'm not as much of a bitcoin maxi as Robert is. I do think it's, I do think it's important to have some exposure in your portfolio like I do. That's my two cents. I talked about it on the rundown on the podcast is like the decoupling is happening. Keep your eye on bitcoin. It's, it's, I think it's the most interesting that it's been in a long time because of the behaviors over the last couple weeks. And maybe it means more central banks all over the world are going to buy it because of some potential shakiness in the US Dollar. We're seeing the same thing happen with gold. Gold is hitting all time highs. Maybe bitcoin will finally fulfill its promise as Being digital gold, I haven't felt that way in a long time until just recently because of what's happened over the last couple of weeks.
- [50:31]
Robert
So just to put some numbers around what you're saying, right, Bitcoin is actually year to date in the green about half a percent as of this recording, whereas the NASDAQ is down about 10% and the S&P is down about 6% year to date. So to your point, yeah, bitcoin is sort of acting as this like digital gold kind of being in the green while the markets are more in the red.
- [50:52]
Austin
So Zade, I'd love to have your thoughts. I said 2030. Where's Bitcoin's price at 2030 in your opinion?
- [51:01]
Zade
I think it could get to, you know, 2 to 300,000 like you mentioned. I mean I don't really have a price target. I just like to follow the macro of like what's going on. And no one really owns bitcoin as far as like the big money players, the central banks. Yes, we have ETFs and things like that. And yes, these ETFs are, are starting to get bigger and bigger. But like how many central banks are actually buying bitcoin yet?
- [51:22]
Austin
Right.
- [51:23]
Zade
I think that to me is the key question. If we start seeing real activity there and because of more volatility in the US dollar, that to me is the biggest question is like that could just MoonShot Bitcoin to 250300 if we see that inflow over the next two to three years.
- [51:41]
Austin
Yeah, that's what I wanted to hear from you is understanding if there's that much buying pressure which then puts, you know, this pressure on the amount of bitcoin available, would it be directly correlated to price appreciation? I think so. You just alluded to it and said yes. So good. I really like this question because it's such a simple question, yet we can make it really complicated or we can just discuss our beliefs like we did and then go from there and see what happens. Because like you both said, I think everyone should own it. And it's just a depending on how much of your portfolio, how risk on you want to be and what your out strategy is. I love Austin's out strategy because he's taking profits along the way, which a lot of people don't do, but he's still staying in the sector and I think that is the best strategy you can implement.
- [52:33]
Robert
I learned to do that after round tripping over the last two cycles. Right. And I think a lot of people are probably in that same boat. Right. In 2017, 2018, I was like, oh, Bitcoin's going to 100k when it's at 20k. And it went up and then it came crashing down to 3,000. And then in this most recent cycle I think was like 21 or 22, it went to like 65k. Everyone's like, oh, it's going to go to 100. I never sold any and it went back down. I'm like, dang, dude. Like, I'm really bad at this stuff. Like, I like next time. Even if I don't perfectly, you know, time the market. I need to have an exit strategy because I don't want to be so over allocated to this asset class in perpetuity. I want to be able to have exposure, we talk about 5 to 15% of our, you know, portfolio into cryptocurrency, bitcoin specifically. So it's like, yeah, I want to have some exposure to this stuff, but I don't want to have all this over allocation from long term profits. And you know, just for me, I've got more than 5 or 15%. Right. So it's like I need to have an exit strategy where I'm reallocating the cash to more traditional investments that make more sense for my risk tolerance now as I'm, you know, I turn 29 here in the next little bit. So I just want to be able to, you know, make a little bit of money, take some profits, reallocate it to other places and keep rocking and rolling. That's kind of how I approach it.
- [53:46]
Zade
Do you guys care if it's actually buying bitcoin itself versus an etf? I'm, you know, I'm curious.
- [53:51]
Robert
No, no, I don't really care. I think, you know, I've got IBIT in my Roth IRA. My Roth IRA is literally 90% S&P 510% IBIT. Right. I plan to keep bitcoin in my retirement accounts in perpetuity because I agree with Robert, it's going to be worth hundreds of thousands, if not millions throughout my lifetime. But with this specific trade that I'm alluding to. I did this in a normal brokerage account. So it's with just straight up bitcoin.
- [54:14]
Austin
Yeah, I think the most important thing with any investing, you know, the number one thing that's probably on every camera, in every conversation in every casino around the world when you're a gambler is I was up. You hear it all night long and I was up two grand. And then this happened. That's why you take profits along the way, and that's why you have a strategy. I think the number one thing that prevents people from building wealth, a lot of people get money, but they don't know how to build from there. And so I think the number one thing with that is letting greed and speculation get in the way of strategy. If you can implement your strategy and have that dialed in to where you understand why you're doing something and the term you're going to do it, within, I think, is the best way to build wealth. Because many, many people I've seen over the decades, you know, they, they get a little bit of wealth, they get a little bit of money, and then all of a sudden they go out and think that they're super rich. And I dealt with it yesterday in a conversation where a gentleman was asking me what to do. He bought a pre construction condo that he's assumed he was going to make 2, 300, $400,000 off of. And now his carry cost on that condo, now that it's finished and it hasn't sold, is $22,000 a month, which is killing him because his net worth was only $3 million. I'm like, you shouldn't have been buying a $2 million condo to speculate if you only have a $3 million net worth. And that's just all about understanding how to build wealth and not taking so many moonshots that you can put yourself back to zero. And that happens all the time.
- [55:53]
Robert
Everyone, thank you so much for joining us on this week's episode of the Rich Habits podcast. Question and answer edition. Major shout out to Zade as well for hanging out episode. If you've not yet listened to the rundown by public, highly recommend it. Zade and the team over there are crushing it with the daily episodes. I like to think of the the Rundown as sort of a little bit of supplement to what we're doing here at the Rich Habits podcast. Right? We got Monday and Thursday. Well, when we don't have it on Tuesday, Wednesday, Friday, Saturday, you can go to the Rundown and listen to what they're talking about.
- [56:21]
Zade
It's a great time to listen right now too, because we're in the middle of earnings season, so a lot of earnings coming out. I mean, we're talking, you know, we're talking big tech earnings this week and then next week is the Fed meeting. So we're going to keep you guys in the loop of all that stuff. Seven to eight minutes every morning. I mean, it's the perfect time to tune in.
- [56:36]
Robert
Absolutely. Everyone, thanks so much for joining us and have a great rest of your week.