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- [00:01]
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So good, so good, so good.
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Score Holiday gifts. Everyone wants for way less at your Nordstrom Rack store. Save on Ugg, Nike, Rag and Bone, Vince Frame, Kurt Geiger, London, and more.
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Cause there's always something new.
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I'm giving all the gifts this year.
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With that extra 5% off when I.
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Use my Nordstrom credit card. Santa who join the Nordy Club at Nordstrom Rack to unlock our best deals. It's easy. Big gifts, big perks. That's why you wreck.
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A
To start selling hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes where we sit down and we answer your questions as if we were in your shoes, leaning on Robert's 30 years of entrepreneurial experience in my weird obsession with money. If you want to ask us a question, you can DM us on Instagram at Rich Habits Podcast. You can email us at rich habits podcastmail.com or if you happen to be a super fan of the show, you can always get your questions answered from inside the Rich Habits Network, our exclusive community for our biggest fans. There'll be a link in the show Notes to learn more about that.
- [01:38]
C
We love these episodes and do us a favor, be very descriptive of your question and always include your age or ages if you're a couple because it helps us better define how to answer your question. So I want to make sure we get that in there because we get a lot of awesome questions, but without ages and more of a background of the rest of your financial situation, it's hard for us to give you the most value value. So always include the details and the age 100%.
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And as always, these Thursday episodes are powered by Public, the investing platform for those who take it seriously. We take investing very seriously around here and Public allows us to do so because on Public you can build a multi asset portfolio of stocks, bonds, crypto options and now generated assets which allow you to turn any idea into an investable index using AI.
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Generated assets are like ETFs but with infinite possibilities, completely customizable and based on your thesis, not someone else's. So go to public.com rich habits and earn an uncapped 1% bonus when you transfer over your portfolio. That's public.com forward/rich habits paid for by Public Investing.
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Full disclosures in the Podcast Description so.
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Our first question comes from Kyle. Kyle on Instagram says Hey guys, I just want to say I love your podcast and I started listening to it about a couple months ago and I've listened to over 40 episodes episodes and I'm really excited to be on this wealth building journey with you all. I'm 29 and I just graduated from graduate school and I have $219,000 in student loans sitting at around an 8% interest rate. At 29 years old, should I still be putting all my effort into paying off my loans or should I take the lowest monthly payment possible pay on them for about 20 years while also beginning my investing journey? I have a fiance and a child we're currently renting for about 2,700 per month. You always say that you can't out invest high interest debt, but I fear that I will be in my late 30s, maybe even in my 40s by the time I would start investing, having already paid off these loans and it seems like it'll be too late to get into the markets. Thank you in advance Kyle. What a sticky situation to be in. So the good news is you graduated from graduate school, which means you have a master's, you've got some sort of cool degree here that you can go put to work and hopefully you're earning six figures out the gate, right? You pair that with your fiance. You mentioned you have a child. Hopefully your household income is 120, 150 50, $180,000 a year because you went on to graduate school, you took on the extra loans, you listen to the podcast, which means you're smart so you know that you're not just going to go borrow a bunch of money to be an underwater basket weaver, right? Something that's not going to pay you any money. But you went to graduate School, you got the student loans. And so now you're likely earning 100, 120, 150,000 a year. In my humble opinion, if I were in your shoes, I would balance paying off this debt extra with investing extra, right? So, like, for example, framework we like to use when it comes to student loans is before you start paying down those student loans aggressively, have the same amount or more already invested in the markets, which means s and P500, NASDAQ 100, you know, Roth IRA, 400, 1K, bridge account, all that fun stuff. But in your situation, you're talking about student loans that are 7 and a half, 8%, maybe 9% interest, depending on the tranche of loans there. That's high when you ask me, right? High single digits. I don't like to keep that type of debt around. So if I were to your situation, here's what I would do. Kyle, I'd say, cool, I'm 29. I need to get invested. What does that mean for me? That means bare minimum. Every year, my name's Kyle and I max out my Roth IRA. I max it out for, you know, 2025, it's 7,000. For 2026, it'll be 7,500. But I need you, bare minimum to be investing and maxing out that Roth ira and any money above that, maxing out of the Roth ira. If you want to use that to pay off these student loans a little bit more aggressively, I'm here for it. But I'm not to pause my investing to focus on the student loans. I'm not going to do that at all. Because you're not going to have these off for maybe, you know, three, four, five, six years. $219,000 at 8% interest. I mean, they're gonna. They're gonna grow, man. So if I were you, I would say, listen, I'm maxing out that Roth ira, I'm gonna make sure I retire a millionaire, right? Cause you're gonna have 35, 40 years of investing ahead of you in this retirement account. Encourage your fiance to do the same thing. And every dollar above that, 7,000 this year or $7,500 invested next year, get that 219,000 paid off. 8% interest is no joke.
- [06:48]
C
Definitely. I love this take because you talk about this a lot, and I think it's very important for everyone to understand. We want to make sure you have money compounding and growing over time while you're paying off the loans. That's why we don't want you to just spend years taking Every dollar you have paying these loans off, because then you don't have anything growing for you. So I really love this take, and I think that is the move. Get the base built, continue to invest, at least get the Roth maxed out every year, and then rock and roll, pay down those loans and you'll be off into the races in your 30s.
- [07:22]
A
Now, Robert, what's your perspective about them renting at $2700 a month? How I would lay it out is I'd say I would like to see y' all pay off your student loans before you, you know, really think about buying that, that home. So think, you know, five years from now, six years from now, it'll make a lot of sense because I'd imagine at $219,000 of student loan debt, that monthly payments, like 1500, 1800, 2000amonth, like that's a. That's a mortgage payment in some parts of this country. So that's my take. But, Robert, what's your take on sort of their renting situation and how they should approach buying that first home?
- [07:57]
C
Yeah, I agree with you. I know they have a kid, 29 years old, all of that. But I do feel it makes sense to keep renting for a while longer to get that base built, whether it's two, three, five years. Because so many people think that the American dream is graduate from college, start paying on the loans, get the good job, buy a house. But the problem is if you never take the time to set yourself up for the future and get the compounding effect working for you financially, then all of a sudden you just have this really high debt to income ratio and you don't have the money to put aside for the future. And the longer period of time you can be investing towards your future, the greater compounding effect can help you. And that's why I think you're spot on here. I would keep renting. $2,700 a month might seem like a lot, but for a family, a smaller family, I think it's fine because they're going to have a nice place. And in most areas, it's cheaper to rent right now around the country because you don't have everything that goes along with owning a home. And I just don't like to see people bury themselves in home ownership debt because they look at owning a primary home as a good investment, but it really isn't unless you live in a high capital appreciation area. So I love the renting part and I would keep doing that and build the base.
- [09:14]
A
Renting buys you Time, right. Renting allows you to focus on other things before you go. Come up with sixty, eighty, a hundred thousand dollars for a down payment. I'm a firm believer that everyone should, you know, own real estate in their lifetime because it's adding to a well diversified portfolio. But I agree with Robert in the sense that renting is cheaper right now, statistically speaking, with these interest rates, right, These interest rates, mortgages are in the 6 and 7%, depending on what kind of loan you get, your type of credit, background and history. And to be quite honest with you, you look at the median house here In America at 450, you put, call it 20% down. Not only are you having to come up with about a hundred thousand of cash, but you still have a monthly mortgage payment north of 25,3000amonth. Geez Louise. Right? How is that affordable? So to our friend Kyle, you're in a great spot. Focus on maxing out that Roth, right? Getting money invested, you and your fiance, then every dollar above that, go pay off this debt. 8% interest is no fun. Our next question comes from Alex S. Alex says, hey, Austin and Robert. My wife and I are in a special place. We are 24 and 23. I make 3, 500amonth, and my goal is to be a financial Advisor. I invest 500amonth into my Roth IRA and everything extra goes into my bridge account. My wife makes 4, 200amonth. She does not invest much. However, here's the special thing. She went through a lot and recently had a settlement of $700,000. We bought a house, we paid off all our debt, and our mortgage payment right now is $2,100 a month. My question is, is it worth it to invest in a Roth ira or should we just put all this money in a bridge account? And if we did do that, like, what do I do? I have $500,000 left, and I don't know what to do with it. Wow. Well, first off, I am so sorry to hear about whatever terrible thing your wife went through to get a settlement of $700,000. I and I would assume that that was not a good experience. So I'm sorry to hear that. But, Robert, I'll let you kick off this question.
- [11:11]
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Yeah, same here. It stinks to have something bad happen. But looking past it, what should you do? I think you guys are in a great spot. Number one, definitely max out the Roths every year. Both of your Roths. You have to get her to understand the compounding effect and the importance of the Roth IRA. Maybe pull it up on ChatGPT and say, hey, what are the benefits of a Roth IRA? I'm 23 years old. What are the long term benefits? And put in some scenarios in chat, GPT or whatever AI you use to give you some idea. But to break that down, if you each max those out every single year, then take the rest of it, you're spot on. Have the traditional brokerage account, we call it the bridge account, and you're going to build those as well. So if it's in her name or in both of your names, whatever you decide to do, you're going to build the rest of that money up, up in this traditional brokerage account and you're going to diversify over a basket of ETFs, like we talk about the VOOS, the QQQs, maybe AIQ, because you're young and you can take on a little more risk, get those funds moving across a basket of index funds and then you can look down the road to diversify further, maybe into some precious metals, maybe you start looking at some real estate. Down the road you could look at a small basket of crypto, maybe with some bitcoin, some chain link and ethereum, something like that. But just keep it simple, don't overdo it. Because keep this one thing very important thing in mind, and that is that $500,000 over the next 30 years will make you guys very, very wealthy. If you don't get caught off guard and start investing in everything that you see your friends come to and all of that. If you stay focused and really have a plan with that 500k, you'll have millions and millions of dollars to even early retire just because of this situation. And that is what I would do. Keep it simple, stupid. At least for the next five to 10 years.
- [13:04]
A
You took the words right out of my mouth. The first thing I was going to tell Alex here is to realize that you are, you are not a anomaly. There are plenty of people in this world that win the lottery, that enter the NFL, that play, you know, pro sports, that sell their company, right? There's a lot of people in this world that have a windfall of half a million, 1 million, 2 million, 3 million. The stat is 78% of former NFL players face financial distress or bankruptcy within two years of exiting the league. Two years and they, they're cooked, right? That's, that's eight in 10. All I'm trying to say here, Alex and your wife is. I'm not trying to scare you, I'm not trying to like Intimidate you. I'm just trying to help you understand that you are not an anomaly and that there's going to be people that come out the woodwork and say, hey, I got this business idea, or, hey, I'm a financial. I'm gonna go put you in this. Or like, hey, if you put your money here in this thing, it's going to turn into this. And, like, forget all that. The boring strategies are the ones that are going to work the best for you. Right now, my friend. I want you to put half a million dollars, you know, put half of that in the S and P, the other half in the NASDAQ and forget about it for 15 years. Like, that's how you got to be thinking about this. Literally pretend that this money does not exist and you are now going to be able to retire at 45 instead of 65, because at 45, from 24 to 45, right, have this half a million dollars invested, and then maxing Roth on top of that, you'll have about $3 million adjusted for inflation. You can absolutely retire off $3 million, depending on your situation. And so what I'm trying to say here for you, Alex, is I 100% agree with Robert that there's going to be people that are going to try and do this and, like, keep it simple. Tactically speaking, go to public.com, you have your Roth IRA for you and your Roth IRA for your wife, all on the same. You know, you got to do a little joint account here, maybe have her open up her own one. Whatever you want to do there. But go to public, go open up that Roth, max it out. You got 500amonth. I want to see the. The actual 7,000 start of the year. Every year. 7,000, boom. Next year, 75. So 7, 500 in January. Boom. Invest it, forget about it. Don't worry about this monthly thing. Just drop it in, forget about it. The money you have left, I want you to just put it all right there into Voo and QQQ or Voo and VGT, or, you know, whatever good index fund and ETF we talk about here, that's going to track 7, 8, 9, 10% per year returns and forget about it. Because literally, if you do this for just 20 years, it's going to feel like a lifetime. Oh, my gosh, 20 years. I promise you, your 20s go by really quickly as someone who's turning 30 next year, which is nuts to think about. But all I'm saying here is, is you're going to look back and Say, man, that half a million, it's already worth a million dollars. I can't believe it. And that million, you're going to be, you know, your late 30s. Oh, my gosh, it's worth $2 million already. This is crazy. Like, you are going to be set up for success as long as you do not fall for the, oh, I can go put it in this crypto. Oh, I can go put it in this laundromat. My buddy's got a real estate thing he's doing. Oh, my parents told me that I got to go put it in this because that's what their financial advisor told them to do. Like, literally everybody's wrong except you in this situation. And you need to follow the most boring tactics of S and P Index fund, well diversified. That's just going to grow for you over your lifetime. Do not fall for anything else.
- [16:22]
C
Please, please, please, please. Everyone out there that gets a windfall, listen and follow exactly what we're saying here. Because at the end of the day, the less people that know you have the money are going to be the less amount of people that come to you with the best opportunity of your lifetime. If you can invest this money now and forget it exists, don't talk about it, don't bring it up to your family, your friends, any new friends or anybody else, the less distractions you'll get. And also, don't let your lifestyle creep up based on where that money is going. Because, yes, over time, are you going to want to improve your house? Yes. Are you going to need new cars at some point? Yes. But don't live beyond your means because you have this nest egg. Because the goal is to let this nest egg set you up for life. And it will, if you follow what we laid out here today.
- [17:13]
A
So our next question comes from Kaden. Mike Kaden says. Hey, guys, I'm a big fan of the podcast, and I've enjoyed listening for the last two years. Now, I was wondering if I can get some advice with what I should do where I am right now in my financial journey for some added context. I'm 27. I have 120,000 in various financial accounts with Morgan Stanley, own a home, have a monthly mortgage of 2000, and I have two roommates who pay that and some. I drop 200 a week into two separate accounts, my IRA and my Bridge account, and I make about $4,500 a month. I've got no debt. Besides this mortgage, I've got $75,000 worth of investments in real estate syndications. So here's my question. I've got $25,000 sitting in a high yield savings account as my emergency fund. However, I think it's too much. I don't need anything. I don't want anything right now. And I need to figure out what to do with this extra $10,000 that should not be sitting in this emergency fund. What do you guys think? What a cool question, Robert. I was just having this conversation with my friend Jonathan. He's a firefighter, and he's talking about, you know, getting some extra overtime and what he's going to do after he pays off the truck. And, you know, his. His wife is expecting, which is really exciting. And, you know, they're trying to figure out the 529 stuff. And. And we were talking through some numbers, and he was telling me that he has this mindset of, like, perpetually feeling behind with money because that's kind of how he grew up, right? He just didn't have a whole lot. And so he wants to ensure that every extra dollar, instead of enjoying it, he. He goes and invests it and tries to get ahead with his money as much as he can. And. And I think myself and a lot of other people I know in our friend circles have the same mindset. Not because either we grew up or didn't grow up, but just we have sort of this relationship with money where we want to invest as much as humanly possible, right? We don't want to enjoy it. We want to get the money and get it in the markets because we know what it can turn into over time. But there becomes a point, and I think Kaden is kind of going through this himself, where, wait a second, you kind of take a step back and you realize I've done pretty good. Hi, my Name's Kaden. I'm 27. I've got a hundred thousand invested. I'm house hacking, right? I'm doing everything, anything, right? I should start to enjoy this money. And I'm not saying, Caden, to go off the deep end here and go buy a brand new, you know, Ford pickup truck or some cool, you know, car. You want it, whatever, right? I'm not saying to do any of that stuff, but, you know, Kaden, maybe it's not the needs and wants. Maybe it's education. Maybe you want to take some of these, you know, online classes about something that's interesting to you, or maybe it's a new hobby you want to explore. Like maybe it's a place you've never been, or maybe you are a Giver and your, your love language is, is, you know, gifting and you want to gift your parents a trip to. There's a lot of different ways you can think about how to use money. So I would encourage you to now, as you're someone who obviously is very good with money, to think about. Now that I'm at this place in my financial journey where I don't have to feel like I can feel like I can start enjoying some of this. What does enjoyment mean to you? Because right now they're just numbers on a computer screen. But how can you turn those numbers into smiles on your face and people around you that you care for?
- [20:10]
C
I love this takeaway and this question is so timely because Obviously with our 30 year age gap, Austin, I love this because I think back to when I was 27 and other people that posed this question to me and here's my take. Kaden, you've done a great job. Anyone else listening? That's in this scenario, awesome for you. But this is also where a lot of people fall off the rails. They get some money together, they get that 100k base built, they've got some real estate investing. And how I know Caden could easily fall off the rails is by this line where it says 75k worth of investments in real estate and other things through various groups. That scares me because what happens is you start to feel invincible. You have this money burning a hole in your pocket. So you put 10 grand into this deal that a buddy brought, you put 15 grand into this deal and you put 10 over here again. And then all of a sudden you're super w in your investment strategies and super diversified, but they're not really good diversification tactics. Now, I can appreciate that he has the base built, he's crushing it at 27 years old. But this is where I would really double down, be smart, get this money into the things we know over time are going to be less volatile. Because I see so many people get this extra money. Maybe they're a high earner or they've just really been good at savings and then they go too diversified and too volatile in startups and friends projects and all that. And they end up going backwards financially. So Kaden and everyone else listening, that's in your 20s, that's crushing it. Double down, still have some fun with your money, still take some shots, but also make sure you're continually growing the base because you know what's cool with 120,000 at 27 years old is being 35 and having 400,000. So keep that in mind. Don't go too far off the rails and just keep crushing it.
- [22:08]
A
It.
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C
Adding the diversification carefully and with a strategy and you'll do great.
- [22:12]
A
I think this really comes back to like having that self awareness conversation with yourself of, what am I doing all this for? Right? Like, why am I saving and investing? Yeah, I want to do it so I'm not broke in retirement and like, I actually have money. Like, sure, I get that. But for those of you, like myself and like my friend Jonathan, who are like squirreling away everything that you can and trying to get invested into the markets, it's like, like, what's that number? What's that milestone? What's that checkpoint? What's that achievement where you get to say, and Ireland's asked me this before, she's like, all right, cool. Like, yeah, like we're investing. We're like, so, like, what's the goal? So when can we start going to like another vacation? Or when can I get a car that's not 8 years old? Like, like, you know, stuff like that. And so it's like one of those things where you're like, you gotta have that, you know, what, what is the number? What's that goal? What's. How do you define success with money? How do you win with money? And then once you've defined that, that, okay, now I can take the foot off the gas, now I can go on those trips I've wanted, now I can upgrade the car. Maybe it's an upgrade in a house or maybe it's, you know, something you want to start giving more, whatever it is to you that makes you happy. But just know that numbers on a computer screen going up do not. It's not as fulfilling as you might think.
- [23:19]
C
One of my favorite memories from when we first met and started recording together is when you explained, and I'd like you to do that for a moment here. I think it's a pretty cool moment. Moment when you explained how you reward yourself after a really good year. And I think that's what you're alluding to right here is what are the milestones? Where do I go to that next level where I can take my foot off the gas a little bit and enjoy the money a little bit without feeling like I'm going backwards financially and living beyond my means? And I remember that story you told, and I really like that because I've never really defined it in words, but I just always have that feeling where I'm like, all right, I've crushed it all year long I've had a big year, I've invested well. A lot of things are going well. I'm going to go buy a watch or I'm going to go buy a car, I'm going to go do whatever. So do you remember that story and how did you define. Because I thought you had it mathematically figured out of how you reward yourself in these level up periods.
- [24:17]
A
Yeah. So what I do is for every hundred thousand dollars that I get invested in the markets, I have a guilt free 10,000 that I can spend on anything I want as to just like feel good about it. Right. And so like again, mine is 100,000 to 10,000. Maybe yours listening right now. Is every 10,000 you invest, you guilt free spend 1,000 or 20,000. 1,000. Like personal finance is personal, figure it out. But for me that was the ratio that made sense, right? Because you know, I'm investing hundreds of thousands of dollars a year in the markets. And you know, I'm looking around, I'm over here. Ireland sometimes looks at me and she's like, we haven't done anything in like four months. Like can we like, I know how much you make. Like can we do like what's going on here? Like these having dinner is fun, but like can we go on a trip or do something? I'm like, yeah. So it's just like having that thing where you can feel good about the guilt free spending of money, knowing that it comes from a place of strength. Right? Coming from a place of. Yeah, maybe for you listening, I'm. Oh, I maxed out my, my 401k this year. Rock and roll, dude. That's awesome. Like you should be able to feel good about that and go guilt free. Spend a thousand dollars with you and your spouse or you and the kids or, or just you and your friends, like whatever. Or maybe you're someone who just loves and you get so much enjoyment out of, of going to Vegas and gambling. Like, sure, guilt free gamble like whatever gets you excited. Like have a number where you hit the milestone and you can guilt free spend this specific amount of money. I think it allows us to like continually not just feel like we're in this hamster wheel of oh, I'm investing, I'm investing, but nothing's coming from it. Right?
- [25:45]
C
Yeah, I agree totally. For us and everyone out there, just understand we always want you to have a plan with your money. We want you to prepare and we want you to forecast so you're not just out there. You get a bonus, you get some Money, you're doing well and you're just spending it haphazardly. That's all we're saying here. We want you to have fun along the way, but always have a plan.
- [26:05]
A
So our next question comes from P. On Instagram. P says hello. I recently joined the Rich Habits Network, but I've been listening for almost a year and I have already learned so much that has allowed me to take control of my finances and my retirement planning. So, first off, thank you for that. I'm 37 and I recently decided to buy a home with my partner, and I'm struggling to decide how to reallocate my leftover money. After my bills each month, I just barely have my a hundred thousand dollars base built. I have 23,000 in a high yield savings. I make 130,000 a year, and I normally have between 2000 and 2500 dollars left over each month after my expenses. Sometimes more if I receive a quarterly bonus. I'm in the habit of putting this money in my brokerage account as I've been saving for my base and the house down payment we just put down. But now that we have the home and I've built my base, I'm wondering if it's time to prioritize my debt. I have no credit card debt, but I do have a $12,000 car loan at a six and a half, and I have $68,000 of student loans at a 4.5% interest rate. My instinct is to throw money at the car since it's the higher interest rate than my student loans, since it's a little bit lower of an interest rate, but need to pay them off. But I'm having difficulty seeing such a low number in my brokerage account after withdrawing $45,000 for our home down payment. Looking for reassurance that I'm making the best decision. P. I love where your head's at and you are making the best decision, right? So here's. Here's what to think about. You've got your $100,000 base bill between your brokerage account and your retirement accounts. Rock and roll. That's the. That's the hardest thing to do, right? That takes seven years on average for the average person who's starting from scratch. Seven years to build that $100,000 base. You've achieved that. Rock and roll. Now you're saying I've got 23,000 in a high yield savings for my emergency fund. I think that's perfect. Call it three or, you know, four months here. I've obviously Got money left over, so you're gonna be just fine. Anyway, so now you're looking like, okay, I've got this money left over, what do I do with, with it? If I were you, I would start with that highest interest rate first, which is that car, right? Six and a half percent interest, $12,000. You'll have it paid off in, I don't know, let's call it six months or so. Just about six months. And then once you've paid that off, take that $410 a month payment that you mentioned in the message here, add it to that 2,500 bucks a month or whatever. Use that to now pay off the student loans and congrats, you've got your base bill built, you have no debt whatsoever. And now you've got over three, three hundred dollars a month because you just freed up this student loan payment and the car loan payment to go do what you want with. Back to this idea of investing up to that Roth IRA that maybe 15 or 20% of your take home pay. Like, go get that money deployed every single month. But if you still have money left over, enjoy your life, Congrats, you're rich. You did it right. You made the right moves like you're doing it.
- [28:51]
C
Yeah, I love that. That is the playbook as well. Low pay off the high interest debt first and then chop away at the rest of them. And even if you don't have a car note, but you have high interest debt of other things, chop away at the higher interest first, get rid of those, then work on the rest of them. And as soon as they're paid off, as each one is paid off, either add that additional amount to the next payoff you're working on or invest that in the difference because you want to make sure you're always chopping away at these high interest debts because you can't out invest high interest debts like car payments and student loan and credit cards.
- [29:27]
A
Robert, why don't you take a moment to talk about the sort of psychological warfare that happens when we save money for a big purchase, right? We see the 30, 40, 50, $60,000 or in their instance, 45 for a down payment on a home, and then it's gone. Because you, you use the money for what you said you were going to use it for and now you're like, oh my gosh, I, I feel like you have less talk about that.
- [29:51]
C
Yeah, that is a great question. And where I see this struggle, this psychological warfare the most is people that carry credit card debt every single month. But they're still investing every single month. So if they're making 10% over here, but the credit cards costed them 28, 30, 31%, they're losing and they don't understand you have to stop all of that and wipe this out. So in this instance, you say, okay, I took this 45,000, I bought this property, I've been wanting to do it, I use it for its purpose. But now I feel broke because that money's tied up into the house. That is a very critical moment in your investing and financial journey. To understand that is why we always say build your base first. Get all of your investments in order first before you go buy a house. Because so many people will save their first 50, 60, 70,000 and lump it all into a house, then they're back to zero. In this case, we don't have that. But we always want to make sure you guys understand you don't want to do that because it is very illiquid. Even though it looks good, you own a house and you have equity building, you still can't touch that equity unless you sell the home or you get like a HELOC to pull equity out. So that's why we don't want you to go broke to own a home, especially if you buy too much home. So the psychological warfare is to understand if you have a plan and you executed on the plan within your budget and what you properly decided to do, you're doing great. Don't worry about it because it is always a struggle. But if you're someone that's over here saving and investing while carrying credit card debt that has to end today because so many people think that's okay and they're not understanding the negative math that they are dealing with every single month, month. Because they're losing money on the money they're making because of the high interest credit card debt.
- [31:43]
A
So our next question comes from L. L says, hi, Austin Robert, My name is L. I recently opened a direct indexing account on public per your recommendation, I'm wondering what options you chose for the S&P50 S&P100 or S&P500? And if you took out any companies you didn't want to hold and if you did, what companies did you take out? What companies did you keep? Did you choose based on market cap or an split or any advantages or disadvantages to other things that you would chose? I'm new to all this. I'm still learning and honestly I get confused at times. But I'd love your help. If you get to this question. Well, l. We sure got to the question, and we're super grateful that you opened up a direct indexing account on public. So I just logged into my public account and I'm also direct indexing on their. On their platform here. So I'll walk you through L. My own thing. So what I'm doing is I'm tracking myself the S P100. I'm rebalancing quarterly, and the weighting is based on the index. So when you go into your direct indexing, you can scroll down to the about section and then click on View parameters and it tells you sort of what that looks like. So that. That's what I'm doing. I'm. I'm tracking the S P100. I'm rebalancing quarterly, and it's based on weighting is based on. On index. So rock and roll. That's what we got. And having some fun doing it here. Just doing the. Doing the direct indexing. It's. It's an important thing to have in a portfolio, we think, especially if you're someone who's going to have the S and p, you know, 100 or 500, you know, you track this, this index over a long period of time. Like, why not, like, take advantage of the. Of the tax loss, harvesting, and the other awesome things that come with that.
- [33:19]
C
So I like this takeaway, Austin, but I want to just touch on something. If you're just getting started and you really want to delve into direct indexing, and I think it's a good idea. Don't be afraid to just keep it simple, simple. Do the S P500, let it work its magic, and you're up and running and off to the races. And then as you grow and you're putting more money in, if you want to get a little bit more intense about it, you could look at the S P100 or S P50. But I think it's a great thing that public offers. We love it and it's a good strategy, especially as you're building wealth over time.
- [33:51]
A
So our next question comes from Renan B. Renan says, first of all, I'd like to thank you for your contribution to the world through this amazing podcast. Oh, thank you, Renan. Renan says. My name is renan and I'm 34 years old. Old. My net worth is negative 36,000. This includes an auto loan with a balance of $22,000 at a 5 1/2% interest rate. And I'm working on paying off my credit card debt and I'm expected to finish by next summer. I'm a performer for a full time band making approximately $67,000 a year. And I have a business idea for opening up a bar and grill which would include live entertainment like bands and DJs. My question is whether I should pursue this idea by building business credit and obtaining a loan for this type of business or if there's a better you would suggest. Any suggestions would provide clarity on whether this is a good idea or not. Thank you. Renan. Love where your head's at. Entrepreneur, right? Rock and roll. Very cool. You're making 67,000 a year. You're focusing on paying off that high interest credit card debt. I would focus on getting out of this trap of negative net worth and I also want to get $100,000 invested into your base before you begin to go say, okay, I'm going to go in and take on a business loan. I'm going to go, you know, do this other thing trying to get my, my, you know what, whatever loan thing for a business. Because what happens if you're, if your bar and grill doesn't work out and now you are personally guaranteeing a $280,000 loan to some bank and now you're not $36,000 in debt, you're $300,000 plus in debt. Right. So it's like I would make sure that I am earning more income outside of your full time band. Maybe that means you're doing some seasonal, you know, UPS delivery. Talked about that on last week's episode. Maybe you're walking some dogs depending on where you live in the we, you know, doing some affiliate stuff on TikTok. Like there's a bunch of ways to make extra money right now, but the last thing I'm doing is taking on more debt while I'm trying to pay off existing debt.
- [35:44]
C
Yeah, you definitely. And I love this for you. I started out very early on and have owned banned bars and restaurants for 35 years. I love that for you. But you have to get to ground zero first and work towards getting that hundred thousand dollar base because right now, now you're looking at throwing more irons into the fire to try and get ahead while you're drowning in debt. So we've got to just buckle down, work as much as you can. Like Austin said, get the side hustle, get out there, make as much money as humanly possible over the next two years so you can get to a positive place financially. Right now in the United states, it's estimated 25 to 30% of U.S. adults over 25 years old old have a negative net worth. Because remember this, for those of you out there, just because you have a car, just because you have a house and just because you have a peloton and all these cool things at iPhone does not mean you have a positive net worth if you have loans and credit against all of them. So we want to get you out of this rat race of negative net worth and get you making the money. Wipe it all out. Live lean and mean for 2 years years. Get yourself on track to get your 100k base built. Then circle back to this. It's not going to go anywhere. If you have a love of music and a love of entrepreneurship. You can always do this in two, three, five years down the road when you're in a much better situation. Because remember this too. If you open this with a negative net worth and you have no nest egg and then all of a sudden it is slow for a few months or there's bad weather depending on what part of the country and you can't make your bills bills, you lose everything. Whereas if you have a nest egg you can weather the storms. And that's what we want to see you have before you go open a business and go further in debt.
- [37:31]
A
You took the words right out of my mouth. Our final question comes from Brittany M. Brittany says Robert and Austin with four exclamation points. I love your podcast. I'm 23. I'm earning 40000 a year. I've got 15000 in my high yield savings. I opened up a Roth IRA two years ago because of y' all and it has 3000 doll it more seriously and now I'm putting in 300amonth into Voo Qqq things that you all talk about. I want to buy a home in the future, maybe even a newer used car, but of course not anytime soon. So in the meantime I'm asking myself should I invest part of this $15,000 I have saved or do I just keep building my savings for a home? I also work a 9 to 5 job. I often feel like I have too much free time after work since I'm single and don't have any kids. Should I look for a part time job or what would you think is a best reasonable way? Some extra money? I love both of you all very much and thank you Brittany. We love you back. You seem like an awesome person. You're crushing it right now. You're 23, you're earning 40,000 a year. That's incredible. You've got $15,000 in a high yield savings account. What I think is likely your emergency fund, I really like that number. I think you know, call it $5,000 a month for three months or you know, maybe $4,000 a month for about four months. Right? That's kind of where it comes out to at this 15,000. I think a lot of people, people find themselves in that $15,000 emergency fund range. So I'm all here for this. You mentioned how you're now rocking and rolling 300amonth into, into that Roth IRA. That's incredible. Love Voo, love QQQ. I love that you're doing these things and now you're saying I'm ready to buy a house. Do I, what do I do with this 15? Take it easy. We want to see you build that hundred thousand dollar base before you go out and save for a home. And you're well on your way to do that, trust me. It seems like it's daunting right now, but I promise you, you, you're going to start finding these side hustles that start making anywhere between 4, 6, $800 extra a month if it's again doing this like seasonal delivery for ups, making 25 bucks an hour, go do that from I don't know, 6pm to 10pm or do that on the weekends or you know, there's a lot of pay me, pick up a bartending shift or you know, serve tables or like do some delivery. Like there's a lot of different ways to make this extra 5, 6, $700 a month. And I'm telling you, you put some of that money towards saving and investing that 100,000 is going to come a lot sooner than you think.
- [39:52]
C
I'm back to Robert Croak at 23 years old. I disappeared for years. I didn't go out, I didn't go party, I didn't go on all the trips. I did nothing for like three years because I wanted to set myself up just like you are. And so I had as many jobs as I could possibly do in a 24 hour period of a day. And I think you're spot on. Get out there. You have a lot of time on your head, hands. Don't worry about dating and partying and all the other stuff that everyone wants to do. That's what all my friends did at 23, 24 and 25. And they couldn't figure out like why do you have so much money? I'm like, because I Don't do what you do. Bury yourself in you and making money for two years and you will come out the other side in such a good shape, you'll be able to have your base built. You'll be able to be prepared to go ahead and buy that first property. I would house hack on the first property, especially if you're still selling single, because you can live in one unit, rent the others and let them help you pay the mortgage. You're on track to do great things. And I would spend the next two years loving that you have all this free time to build, build, build on your financial knowledge and make as much money as possible.
- [41:02]
A
Well, I think what's so important about that is to remember it is a season of your life.
- [41:07]
C
That's right.
- [41:07]
A
Robert and I are not saying to go work 60, 70, 80 hours with all these side hustles and your 9 to 5, 5. Like, we're not saying to do that forever. And in this instance, Brittany, we're saying that lock in for 18 to 36 months, like only you know what that number is and how you can actually attain it. But you're saying, okay, 20, 26. I'm not going on those vacations. I'm not. I'm cutting out the frivolous spending. I'm doubling down on the side hustles. I'm going to meticulously track my money goals. Which is a wonderful episode that we had just published. Episode147. Published that on the 8th of December. Go check that one out. Brittany. Highly recommend it, but it's like one of those things where it's like, I'm going to do this for one year, two years, like, like that's that small season of my life. Because you are going to trade this time for what seems like a big, daunting task. But having 50, 75, $100,000 working and building for you at 25, 26, 27 years old, that's how you retire as a multimillionaire in your 60s and 70s. 100%.
- [42:02]
C
Yeah. And one more thing I want to add. For any of you that want to highlight this point and really do an exercise to figure out how right we are, go find your older brothers and sisters or people that you know from work that are full 40, start asking them questions. Do you have your base built? How much do you have? Have you been maxing out your Roth IRA? And when 90% of them that you hear talking at work are talking about the next concert and the festival and where they're going, the whatever they do on the weekends to blow all their money. That's going to help you realize we are spot on here because friends are great. Going out and having fun is great. But it's just a season to avoid the that to set yourself up forever. That's all we're saying.
- [42:45]
A
Everybody, thank you so much for joining us on this week's episode of the Rich Habits podcast Question and Answer Edition brought to you by public.com as a reminder, please go check out Publix Generated assets. Robert and I played around on it recently and we created an asset or an index rather for ourselves. I think the prompt we use was top 20 companies by revenue per employee. Employee. I think that's what it was. And we back tested that against the S P. It had outperformed by like 2x against the S P. So like it's really fun. You can poke around, you can, you can test some things. And honestly, a couple things I'm, I'm looking forward to testing is, you know, companies growing the free cash flow by at least 15 per year. Companies who are expected to become gap profitable for the first time in their in their history. There's also, you know, Robert mentioned it on last week's episode of the pod. You know, companies whose founders worked out, right. Companies whose CEOs are in the gym every day. Like that's a thing. Maybe you want to invest in companies who are led by women or maybe you want to invest in companies who are, you know, outside of the United States. Or maybe you want to invest in companies whose CEOs are older than 50 or like, I don't know, maybe younger than 40. Right. There's a lot of different cool parameters that you can use to build your own investable index on public.com using their generated assets tool.
- [44:04]
C
Thank you all for stopping by as always. Ways we are so excited. With the holidays upon us, we are going to be taking a little break on the Friday episodes because I've got to rest this voice of mine and we've got families to attend to. So make sure you guys realize that and keep track of when we're back.
- [44:21]
A
That's right, Robert. We're still coming in with those Monday Thursday episodes but we will take a couple week break from our Friday episodes but they will be back in the new year. Do not worry. So you don't see us tomorrow. That's why as well. Always wishing you all the best and we'll see you very soon.