← Rich Habits Podcast
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When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets. Mom 60th and never miss a meme or milestone. All protected with end to end encryption. It's time for WhatsApp Message Privately with everyone.
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Learn more at WhatsApp.com Friday on NBC. Jimmy Fallon and Bozma St. John host the incredible new competition show. I hired 10 creatives from all walks of life. They will be battling it out to.
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See who can impress the world's biggest brands. This is a huge opportunity.
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This is the battle for the next big idea.
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This is not Play Play.
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We're spending millions of dollars.
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I'm so excited to embark on this adventure with all of you. May the best idea win on Brand.
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With Jimmy Fall Friday on NBC. Hey everyone, and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes where we answer your questions. You can ask us Questions via Instagram dms@rich habits Podcast. Email us your questions at Rich Habits podcast gmail.com or if you want to get your question answered 100% of the time, join the Rich Habits Network. Post a question. DM us a question. Ask us a question during our weekly two hour live streams. It'll definitely get answered then. But Robert, before we get started, we had Ilya Posen on the podcast this week. It was so funny. Some people in the comment section of that episode on Spotify were like, is this real? Is this guy really giving away TVs? Are you guys pedaling something? Nope. Totally real. He is partnered with the biggest manufacturers in the world, the biggest advertiser. You know, all these cool things going on. I've got one at my dad's house here. It's, it's really, really cool. The teletv's are legit. They have a crazy long wait list, unfortunately. So if you've been on there for a while, like, that's the unfortunate reality. But it was a great interview. If you've not yet listened to our conversation with Ilia from Monday, he literally wants give every American a free television, which I think is a pretty ambitious but also cool thing to do.
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Yeah, I like the episode because, you know, we're here to talk about finances, but also business mindset and entrepreneurship. And he just is the quintessential entrepreneur where I think he said something like he got turned down 93 times for one project and then finally got his first investor. So I love episodes like that because personal finance is personal, but so is building a business and entrepreneurship. Everyone's journey is different and it's really cool to hear stories from someone who has made it over the years and really, you know, speaks to the tenacity and all that goes on to make something successful. Because I remember when Silly Bands blew up and became this big worldwide phenomenon. Everyone made it sound like I crawled out from underneath a rock and it happened overnight. They didn't talk about the two, three years of struggles and toil to build it. So I love the episode and I think everyone should check it out now.
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Robert before we jump into the episode, I think it's important to remind everyone that the name of our podcast is called Rich Habits for a reason, because the behavior that we have with our money is the most important aspect when it comes to building wealth. GetSequence IO is a platform that takes behavior to the next level. On GetSequence IO, you essentially create rules for your money, and when a specific event happens, like a payday on a Friday, that rule is executed upon. So maybe it's setting aside $200 every paycheck to save your Dream Vac, or automatically depositing $500 every other Wednesday to your brokerage account. Or maybe you're a business owner and you want to automatically set aside 33% of your revenue for taxes. Right? You're the one that makes up the rules. But because sequence connects to all of your financial accounts, think personal business, credit cards, loans, you get one clean map to automate everything in one place. GetSequence IO puts your finances on autopilot, routing your money exactly where you want it to go.
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On what matters most, visit getsequence IO forward/rich Habits Podcast. Have fun with it. Go set up your own financial rules so that you are building rich habits to become wealthy over a long period of time. All right, Robert, let's now jump to Our first question so Robert, Our first question comes from Nicole R. Nicole says thank you so much for what you do to spread financial literacy by sharing your knowledge and experience. I've been following your podcast podcast for almost a year. I've binged all the episodes from the beginning. You've helped me learn things I doubt I would have learned any other way. Robert that's cool to hear. Shout out Nicole R. Nicole says here's my question. I've been saving up for my first home for several years. I'm 40 and I finally feel I'm there financially having saved for a good down payment. I live in Southern California and it's expensive to buy a starter home slash condo. Think two or three bedrooms. But I'm also not too far from the city and most of the ones I've seen that are in my five to $650,000 budget are these older homes built in the 70s and 80s that often require upgrades, fixes or might have a high HOA. So with a 30 year fixed mortgage, estimates for a monthly payment range between 3900 to 4500. But recently I saw a new home construction loan that's offering an adjustable rate mortgage with a 2:1 buy down. That makes 7 and $30,000 borrowing for a 3 bed condo seem pretty affordable to me. It's spacious and in a really good school community when again compared to a fixed rate to a $600,000 mortgage versus a seven year ARM on this $740,000 mortgage. So again I'm getting more home for a lower monthly payment. My realtor helped lay out the numbers for me. Despite this price of the home being higher, it's still a lower monthly payment. The new construction builder, who's very reputable is motivated to sell. So consider helping me on the closing costs. I'm still on the fence with such a huge financial decision as it will be my biggest purchase ever. Robert Walk us through before any of us answer this question, what is an adjustable rate mortgage? What is this two one buy down that she's alluding to. How can people like myself who've never used an adjustable rate mortgage better understand the situation that Nicole R. Is in right now?
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Yes, an adjustable rate mortgage is exactly what it says. The rate adjusts accordingly along the way versus a fixed rate mortgage. And here's why it makes sense in this situation, especially given the two for one buy down. And that is she could go in buy this house, give her more buying power with this adjustable rate mortgage. Although we got to be careful, we don't want to buy too much home because of it. But what it does, it gives you more buying power out of the gate and then you have time, 1, 2, 3 years to be able to refinance to a fixed rate mortgage when hopefully the rates come back down. So that's the bonus of having this adjustable rate mortgage. The other thing that's cool is if they're offering this two to one buy down, two dash one buy down, she's going to save 2% on the interest rate for year one and 1% on year two and then in year three it will go back to the original rate. So there's a lot of room here to get more house and really have a lower rate and more buying power while still being able to refinance when hopefully rates come back down into that 5 or 6% range in the next two or three years, which I expect they will do. So I think this is a good situation. A lot of builders are doing it right now because they have to move inventory because remember when they started building all these homes two, three years ago, we weren't in this freeze for real estate and we didn't have such high rates. So I think it's a really good situation. A lot of people should really look at this because on top of it, if she can get closing cost assistance as well, she could be buying a really great deal and have the affordability in the payment that she wouldn't have without this buy down and without the adjustable rate mortgage.
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So just we're on the same page. An adjustable rate mortgage is a mortgage where the interest rate moves up and down on a monthly quarterly annualized basis here with the pretty much the 10 year yield. Right? That's what mortgages track. So as the 10 year yield goes up, the interest rate on your mortgage will go up, which means higher monthly payments. As the 10 year yield goes down, the interest rate on your mortgage will go down as well, which means lower monthly payments. And on average the interest rates for these adjustable rate mortgages are lower than a fixed rate, which is why you were saying that you kind of can save some money there with more buying power. So if she has a 2:1 buy down, essentially what you're saying is not only will the interest rate be lower because it's an arm versus a fixed, but she's also now at 2% lower interest rate than where the ARM would be in the first place for the first year and the 1% lower interest rate from where the ARM would be in the second year. And then back to the Normal where the ARM would be, fingers crossed it's not higher in the future than where it is today because again, they can go up just like they can come down. And to your point, I would also agree that mortgage rates will continue to tick lower in the coming 12, 24, 36 months. But again, none of that's guaranteed. So here's what I would do. I would likely go ahead with the ARM and the motivated seller closing costs, right? Because I think that if you can get them to pay for some of the closing costs plus you're able to save like you could be sitting in a really interesting situation where you are saving a lot of money. Your interest rate's like relatively low compared to the 30 year fix. But the thing is your goal is to be in a 30 year fixed in the next 12, 18, 24, 36 months, right? The goal is not to go through all seven years now with this arm because what happens if it goes up and you know all the crazy stuff that, who knows, could be around the corner. So by having a fixed lower interest rate, hopefully as interest rates continue to come down. And Robert, let's just look here on the 30 year fixed mortgage rates. At the moment the 15 year fixed mortgage rate is at 5.5%. The 30 year fixed mortgage rate is at 6.3%. That's up slightly week over week from 6.26 and that's down dramatically year over year from 7% plus. So actually we were up at 7.8% back in October of 2023. So from 7.8% fixed now down to about 6.2, 6.3. So I think will continue to trend lower. I think to your point, I would agree with you that the 30 year fixed will hopefully be in the fives sometime in 2026 and maybe in 2026 or 2027, Nicole, are that is when you refinance out of this adjustable rate mortgage and you are now at a fixed, call it 5 and a half percent or 5% interest rate mortgage, depending on what happens to mortgage rates.
- [11:47]
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Yeah, I love that breakdown and it's really all about understanding the improved buying power with these options. And also if you're buying new construction which is year, you can find yourself in a higher quick capital appreciation situation, especially if it's in a growing area. So there's a lot of good things about this proposed deal that you're you brought to us and I think I love it because you have options to get you to a payment you want in a house that you want. Whereas right now or at least a year ago or six months ago, rates were so high that payments were a thousand, $2,000 more for the same house from a few years ago. And that's what's really stifled the real estate market is the payments are pricing people out from buying, making this a renter nation. So I love this deal and I wish you the best.
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So our next question comes from Sophie T. Sophie says. Dear Rich Habits Podcast hosts, I came across your show and I've learned a lot. Thank you. I would like to know how you decide whether to sell a mortgage free home that has significantly increased in value or if I should rent it out for a few years, maybe consider a 1031 exchange or just simply keep it and live inside of it myself. Single W2 job pays me $60,000 a year. I could retire in the next one or two years. And in retirement, I envision splitting my time between three different states throughout the year. I own a mortgage free home with $1,000,000 in gains. $1,000,000 is in my IRA/457B. I have 400k in my Roth IRA. I have 120k in a brokerage account, and my annual expenses are about $70,000 a year. Thank you so much, Sophie. Wonderful situation to be in. Sophie, congratulations on being a net wor. Very well deserved. I have no idea how old you are, but you did say that you could retire in the next couple years. So I'm going to say you might be in your 50s or 60s. Here's the framework I would use. Just so we're on the same page. What it means to retire again is that your portfolio income, your passive income, is growing for you on an annualized basis more than your expenses are on an annualized basis. So you said you're spending 70,000 a year, which means if your portfolio income generates $70,000 a year or more, technically financially free, and you can retire, right? So you've got a million dollars in an IRA 400. So you have $1.5 million invested in the stock market right now on that 1.5, if you wanted to do the 4% rule, which is super conservative. Trinity study, we've talked about this on so many shows. Essentially that just means you take out 4% of your total portfolio on an annualized basis, assuming the portfolio is invested 60% in equities, 40% in bonds, which should be what people do in retirement, according to the Trinity study, you can take out 4% for the next 30 years and quote, unquote, never run out of money. Okay? That's 60,000 a year at this 1.5 million you have invested right under your $70,000 threshold. If you wanted to bump that up to 5%, now you're there, you're going to be fine. You can do that. You know, 70,000 expenses. In my humble opinion, I think people make the mistake of retiring with a mortgage. I don't think that people should retire having a $2800 a month payment every single month that they're going to keep around for the next 15, 20 years because they've got another 22 years on their mortgage, like, while also having $2 million invested or so much equity in the home that it's like, why don't you just sell the home, use some of that, go buy something that's, like, reasonable for you in retirement and do that instead. So my framework is as follows. One, am I retired? And if yes, probably not going to have a mortgage. Is it the most financially advantageous way to live? Maybe not. Is it the most secure way to live in retirement? Yes. No one's ever going to kick you out of your house. Another framework to think about is like, okay, what is my opportunity cost of having this mortgage? And do I need the money if this was invested elsewhere to supplement my life? So, for example, of this $1 million, let's say that you sold it for 1 million, you took half a million. Use that to go buy your next home that you lived in. If it was a condo, if it was, you know, something going on over there, you put the other $500,000 in the. At that same 4% that we talked about, that's $20,000 a year of buying power, right? So that could get you theoretically, from that 60,000 a year to 80,000 a year, while following the 4% rule. So if you need that, maybe you need that, maybe you don't. Again, I'm not too sure what's going on here with your own situation, but that's how I'd approach it. I would think about, okay, how much money do I need? Do I have a nest egg that can help me generate that money? And then, you know, think about it like this, too, Sophie, which is really important. If you had a mortgage, how much now of that? 70,000 in annual expenses, right? If you had a $3,000 a month mortgage, that 70,000 is now 106,000, right? So now your whole financial situation is out of whack with your nest egg. And the 4% really need much more invested, right? Like, you just have to figure out, like, where's that sort of sweet spot between I've got a lot of equity, I don't have a mortgage, I'm happy, I'm retired, I'm hanging out versus I need a larger nest egg. I need more portfolio income. I need to figure out how to split up this $1 million in gains again. If I were you, I would probably hang out with the $1 million house. If you like living there and it's like, you know you want to retire there. Like everyone has their own personal preferences. That's amazing. You have a big enough portfolio, in my opinion, to supplement the 70,000 a year. But if you did need more money, I would sell the house, use half of it to go buy something perfect that you like. The other half could go get invested and generate about another 20,000 a year of income for you.
- [17:22]
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That was an incredible breakdown and I'm going to add a little bit more to it because I'm doing almost exactly the same thing. I have a smaller house that I downsize to in Ohio, which I own free and clear. I have my place here in Florida. And then I'm also looking at a third place in Idaho where we're building a lot of real estate. So in my opinion, I think everything Austin said is spot on. The only thing I would consider, because you're still going to have some taxes, is maybe you downsize the million dollar home, use a 1031 exchange like you alluded to. That way it will reduce some of your tax burden, take some of that money, downsize to a $500,000 home. You'll have some money to work with that could go towards your other homes or properties, depending on if you're going to rent or buy. But also then as Austin stated, put that money into your accounts to help you earn more to get to that $70,000 a year. But I think you're crushing it.
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It.
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I think Austin's breakdown was incredible because at the end of the day, at 1.5 million now, and you still have years of compounding, you're already there. You're already there to meet that $70,000 a year. And so I would just be smart with this. I personally going into retirement would want my own home. Even if it's a downsized home that's paid off versus jumping right back into a mortgage. So that's my take, but I think you're in a great spot.
- [18:45]
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Let's say she has a really low interest rate on this house. Right. Does that change anything for you? For me personally, if I am retiring and I'm in 50s or 60s and like, I'm ready to, like this is my forever home. I'm paying it off. I don't care about the interest rate. I want to own the grass. You know what I'm saying?
- [18:59]
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I think it can go either way, Austin, because if they do, in someone's instance, have a really low interest rate mortgage, then I think it's okay to take that mortgage into retirement, especially if you have a lot of equity. But on the flip side of that, in this instance with Sophie, I think it's okay either way to either keep it, ride it out, you own it, you own the grass like you said, or do a downsize, use a 1031 exchange, invest the difference and be able to free up some capital for the other living places that she's looking to do. Because she did mention having three different living quarters in three different states. So that would be my take.
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So our next question comes from Clarissa B. Clarissa says thank you so much for the Rich Habits podcast. It's given me the right mindset to start my financial journey as a 22 year old reset recent college grad. So here's the deal. I recently had to buy a new car after I graduated back in May because my old car was always breaking down. I traded my old car in and paid $27,000 for it. I put $7,000 down and took out a $20,000 loan from a credit union at 6% interest. My new car is a used 2021 Tesla. Although I would have liked to buy a beater car, pay for it in cash, all the fun stuff that you guys say, I just couldn't justify buying another gas guzzler that would because I live in a city with a ton of hills and it's just I've got scar tissue because of it. As a current college graduate with an electrical engineering degree, I take home $2,000 every paycheck after taxes and 401k contributions with every paycheck. I've been paying the car off with a thousand dollars toward the principal. The car now has a $15,000 balance on it, but I feel like I'm falling behind investing in my Roth, my brokerage, and saving for travel. I try to invest about a hundred dollars a week into each of these accounts, but I'm worried it's not enough and living off of the scraps. Do you think I should continue doing this and stick it out for seven more months until it's paid off, or should I allocate that thousand dollars a paycheck to investing now. Thank you guys for all you do. Clarissa, Robert, I'll let you kick this one off.
- [21:06]
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Yeah, you break these down really well. But I think no matter what, the roth always comes first. $583 a month, you max it out. Instead of paying down a car that has, you know, a decent interest rate at 6.15%. So in my op, I would max out the Roth first. I would make sure that I have that emergency fund and then anything that's left, if you feel like paying down the car, go for it. But always remember, a vehicle is a depreciating asset. So when you're over here putting all this money to get it paid off because you want to get it paid down so quickly, just remember it's depreciating right along with those payments. So that's why we would rather see, at least in my opinion, in the Roth IRA gets maxed out first and foremost because that's compounding over time, tax free into retirement. And the growth is going to be fantastic through the Roth ira. That's my take on it.
- [22:00]
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I'm right there with you, Robert. Here's what our friend Clarissa could consider doing. Max out the Roth IRA every month at that 583. Congrats. You now have essentially 1400 bucks left over if you wanted to go pay down that car quicker. So now you go from paying your car off in seven months at a, again, this is like, like decently high interest rate, 6,7ish. You're starting to get to that, you know, high single digit range. So instead of paying it off in seven months, you pay it off in 11 months. Right? So that you now have this, call it $1,400 a month to pay off $15,000. And now you have no car payment and also nothing for this money to go to. Now the all $2,000 a month, not just 583, but all 2,000 is getting invested into your bridge account. The Roth, the HSA, maybe you're doing some 401k action. You've got autonomy over there. Right now you are in your twent is call it 23, 24, investing 2,000amonth. How quickly do you think you're going to become a millionaire investing 24,000 a year? The answer is very quickly, right? So I would do that. I would get the Roth rocking and rolling first and foremost. Make sure that's above everything else, especially at your age, because $1 invested turns into 70 in retirement. So again, that 583amonth turns into $41,000 every month you max out your Roth IRA, you're a wage is another $41,000 in retirement. So like yes, you should be doing that. But on the flip side, I hear you want to pay the car off. I get that. Do the Roth bare minimum. Once the car is paid off, double down on your investing maybe double down on, you know, just saving and investing. Maybe you want to buy a house soon. Like who knows what your goals are. But that's sort of the framework I would use in the process of building wealth at your age, in your situation. Our next question comes from Tim S. Tim says hi gentlemen. Thank you for all your knowledge. I wish I had learned it years ago. I'm very new to investing, but since finding you guys, I' completely changed my mindset from a consumer to an investor. Let's go Tim. Tim says, here are my details. I'm 40 years old, I'm single and I earn an annual income of 130,000 a year. I currently have 60,000 in a Roth 401K. I invest weekly up to the company match. I have 7,000 in my Roth IRA which is automatically set to reach 7,000 annually and 90,000 in a high yield savings account. I'm in an opportunity where while my father is overseas building his retirement home, I'm taking over the family house here with the rent to option. I pay myself rent monthly which goes into the savings account. This money can be used as a down payment. The family friend price is at 450,000 with two doors down just selling for 650,000 cash. So here's my question. The house overseas is delayed and my father isn't in any hurry for the cash. I thought it would be a good idea to get my foot in the door with this $90,000 investment in real estate as a rental property to potentially generate some cash flow and start my real estate investing journ. In the meantime, what would you recommend? Should I save some money? Should I buy this house? Do I invest in other options? What do I do in my situation? Robert, what's your take on this situation for Tim?
- [25:03]
A
Yeah, I like it. Just make sure I know it's your father, but make sure you have proper documentation and paperwork because you never know what can happen with your father being in another country and you don't want a situation where you have a rent to own contract. But maybe the probate courts see it differently. If something were to happen to your father and then you invest the $90,000, you're doing a bunch of improvements but then you have to go through probate court to get real ownership of the property. So it starts right there by getting the right documentation, make sure you have a land contract agreement, you have everything spelled out of the terms to make sure that everything goes well there. And I like it if you're getting this friendly friends and family discount because that gives you this built in equity already if you have comps that are selling for 650, 660,000. So that's another kind of forced appreciation situation where, where you're walking in with equity in the home, which I love because you know, normally when you're buying a property, you don't have all this type of equity up front. So I like that as well. So overall I don't see anything wrong with this situation because the number one thing I don't want to see is you having $90,000 sitting idly in High Yield Savings. At least it's in High Yield Savings. But that's a lot to have in High Yield Savings. Personally, I'd rather see you maybe since you're buying the house at a discount account, put 10% down, which would be $45,000, take some of the rest of the money, get it invested into the markets, into some of these low cost ETFs, we talk about crypto or whatever and then leave a smaller emergency fund in the High Yield Savings. But I think any way you do this is a good proposition for your future financially. So I really, really like it.
- [26:44]
B
I agree. Have these conversations, have these conversations. Robert talked about documentation. So important, right? Make sure you're like, dad, this is worth 650,000. You could get 650k right now in cash. Are you sure that you want to sell this to me at 450,000, essentially owner financed for the next 15, 20, 30 years, whatever it turns into, right? Like make sure that your dad doesn't have any regrets with what he's doing. Make sure your dad's got money for retirement. I mean, he's building his home overseas. So like maybe I'm sure he does have money, but just make sure that there's no like weird vibes between the two of you. As your dad gets older, he's like, man, I can't believe I left so much money on the table. I could have had that in my retirement. I could be like, you always want to be as open and communicative about these things as possible to avoid any of that tension in the future. Always, always, always have these conversations to avoid tension like that. Especially when it's money and family and things like that in the future. But I do want to commend your dad what a wonderful legacy and what a wonderful thing to do. He essentially gifted you, right, $200,000. And I, I think that's like, really interesting. And Robert, I want to talk about this for a second because a lot of people, you know, we're living longer. I was just talking with my uncle. He's 70, I think 77 or 78 this year. He's, he's getting up there, right? Living longer. He's got, he was a doctor for a long time. He's got a wonderful nest egg, I'm sure. And it's just like we were talking about some of his, like, estate planning over the weekend. And I guess it was my dad's death that got him thinking of. It was like, oh, my brother died, maybe I should start thinking about this. And so it's just like, it's interesting because, like, when people think about diet, they think about, like, leaving money and assets to the people they love once they're gone. And sometimes we live to be 70, 80, 90 years old and the people we love are now in their 40s, 50s, 60s, or even older. And it's like, wow, like this $200,000, you know, inheritance would have gone a long way 10 years ago. You had the money 10 years ago, but you waited until you died to give it to that. Like, so it's like blessing people in their lives, lives while they're still alive. It's an interesting conversation. And it, and I respect your dad, Tim, for having that mindset of, like, listen, if I can set my son Tim up with a $200,000 gift to, you know, raise his family and have a better life for him and what we're doing as a, as a generation here, like, that's, that's a good thing to do and I want to do that. Like, I think that's really interesting versus, you know, your dad. Who knows how long, you know, he's going to be around for? You know, he could be around for another 5, 10, 15, 25 years. Who knows, waiting until he passes, passes to give you this money. So it's just, it's a cool conversation. What's your take on it, Robert?
- [29:12]
A
I love what you just said because I believe throughout all of what I do every single day and what we do together, most people look at estate planning and retirement planning as an afterthought. I'll get to it when I get there. And the problem is the sooner you plan for it and the earlier you plan for it, the better off you are because, because you're setting yourself. We always say, you know, don't kick the financial can down the road forever. And most people do. I feel like most people don't even really start to set themselves up for retirement and think through what it's going to take to retire when they're at that age, until they're in their 40s, sometimes early 50s. And I'm not saying it's too late, but you really highlighted something that I think is problematic. So anyone listening, make sure you get this planning done earlier. You can always change it later. But make sure you have your eyes on the prize, not just for your kids, but also for yourself. Because like Austin alluded to, we are going to be living longer. There is so much new medicine, new technology and help to be able to allow that. And you know, in the old days of people saying, well, you know, the average male in America dies at 77 years old. Old, that's out the window now and you have to plan further out. So I really love your breakdown and I think everyone needs to consider all of this sooner because at the end of the day, really good paperwork and estate planning helps everyone win, especially your heirs. And so many people just leave the house in their name, their personal name, and then they pass away and the house ends up in probate for 18 months and it costs $10,000 in probate fee fees. Whereas if you have estate planning and you have a holding company, you have a revocable trust, you have all of these things done, you are going to be much more protected in the end. So I love this question and your breakdown was incredible.
- [31:10]
B
Now before we jump to our next question, let's take a moment to give a major shout out to public.com this reality that we gotta sit down and talk with y' all about is really important. If you are not yet investing toward your financial future future you will not be able to retire. So if you want to stop trading time for money at some point in your life, you need to have a nest egg that's growing for you passively throughout your lifetime so you can rely on that in retirement.
- [31:34]
A
And the easiest way anyone can begin investing towards their Future is on public.com they make it incredibly simple to build a multi asset portfolio including ETFs, stocks, bonds, crypto options and more. They also offer access to industry leading Yields up to 4.1% percent APY for your emergency funds.
- [31:55]
B
And for a limited time, you can earn a 1% match on all IRA deposits. IRA transfers and 401k rollovers. So that's literally a thousand dollars in free money for every hundred thousand dollars you roll over into their platform. Which means your old boring broker that's got your 401k on it or whatever the heck rollover crap you got going on with a stinky old broker, go roll it over onto public, get your 1% free match and get your free.
- [32:20]
A
Money fund your account in five minutes or less. Head to public.com rich habits to claim your 1% match today. Paid for by Public Investing. Full disclosure in the podcast description.
- [32:31]
B
All right, Robert, let's now jump into our next question. Our next question comes from Sean F. Sean says, hey guys, I love your show. Started listing last year. It's been a huge help for me. Is there an episode on closing credit card accounts? My Chase Freedom Unlimited credit card was the first card to get me starting to build credit. Now I've got two other cards that I use primarily because of the higher credit limits and their benefits. I always pay off my balances in full each month and have a good credit score of 770, but I never use my Chase Freedom Unlimited credit card. I heard canceling a credit card can hurt your credit. Is it better to keep using it, even if it's just once a month, to keep it alive? What are my best options here, Robert? I've got a handful of cards myself that I, you know, opened up in 2018, 2019, 2020, so five, six, seven, eight years ago now that I don't really use use. But because they're free, like they don't have any annual fees or anything like that, I keep them around because longer credit history duration definitely keeps the credit score up. My credit score is about 815 or 820 right now, so I'm cool with that. So I'm not going to be closing any of those cards anytime soon. But I think, Sean, in your situation, the misconception is you got to keep using it to keep it alive. I don't think that's the case. I think it's okay, at least in my situation, that I've. I've observed in my own credit card portfolio, quote, unquote, if you want to call it that. There are some cards that I haven't used in like four years. They're still good and they haven't negatively or positively impacted my credit that I know of. They're just there. So because the Chase Freedom Unlimited card has no annual fee, if I were you, I'd just keep the card. I'd put it in a safe place where no one can keep it. I wouldn't deactivate it, I wouldn't lock it, I wouldn't do anything, I just wouldn't use it. And, and I think just having it around is going to be fine. But closing the account to your point will bring down your like credit history, like length of history and that will negatively impact your credit for a while.
- [34:26]
A
Yeah, I agree 100%. Everything that I've ever been taught and learned in the credit world is aged accounts help your credit history and your credit score and that you should keep them even if they're in non use. Now if you want to use the cards that you, you generally don't use now once in a while, like this card in specific, go for it, put a subscription on it, buy a tank of gas, do something, pay it off every month. But I don't think it's necessary of anything I've ever learned to use it in order to keep it in good standing and help your credit score. But I just don't recommend you close out these older accounts because it just helps you long term, show your credit history, show that you've been on time and you know you've built these older aged accounts. So I agree with Austin. I would keep it, use it or don't use it because it's going to help you long term.
- [35:17]
B
So our last question comes from Sandra P. Sandra says hi Austin. Robert, First, I want to say that I've been listening to you guys for the last year and I absolutely love your podcast. I'm having a hard time deciding on if I should continue to invest 22% of my total income of $160,000 a year to my Roth 403B or or do I start cutting my savings in half and start spending more on vacations with my two daughters age 17 and 20? I'm 50 years old, I'm a single mom and I'm a registered nurse at a large hospital in New Jersey. My job is stable and I'm realizing my time with my kids are becoming shorter as we begin to get older. We've never traveled to Europe and I'd love to start doing this with them every other year. So every two years if possible for the next few years at least, we do a vacation annually, but I would love to travel with with them even more. Please tell me your thoughts on if you think I can afford this or if I'll be jeopardizing my financial future to retire at age 67. I am also considering doing a backdoor Roth. Ira, thank you so much for taking the time to read this. Warm regards, Sandra P. Okay, so Robert, unfortunately, Sandra did not let us know how big her current nest egg is, which is the only number we need to know if she'll be able to retire at age 67. So, Sandra, we don't have full information here, unfortunately. Maybe reply back again, let us know and hopefully we can give you a little bit more. Col here's what I would do if I had two daughters that were 17 and 20 and I was saving 22% of my total income of my 166,000 a year, which, by the way, congratulations on saving $35,000 a year. You are doing incredibly well. That is awesome. Awesome, awesome. So if I was in that situation, I would dial it down to 15%, take the other 7% of my 160,000 a year, which is $11,000 a year. Year. And that's what I would use to go on these trips every other year to, to Europe or whatever it might be. I totally agree. If your kids are 17 and 20 and you want to do this, you know, call it two more times between now and the end of the decade, so, you know, you do it maybe next summer and summer 2028, heck, you do it again, summer 2030, I think that's great. Wonderful memory is your kids are going to love it, you're going to love it, and you're not jeopardizing, in my opinion, your financial future because you're dialing it back. You're not staying stopping. Right. Know the difference where you were investing $35,000 a year? Well, let's now dial it down to maybe 24,000. You're still investing 15% of your total income, which I think is a wonderful move. And now you've got a little bit extra, call it $20,000 every two years to go to Europe and make an incredible vacation out of it. Which, by the way, 20,000 to go to Europe. You can go spend like three weeks there and do some crazy stuff. You can, you can achieve this very easily with that kind of a budget. That's my take, Sandy. I would do it for a couple, you know, let's call it three times to Europe. I would not stop investing. I would just dial it down a little bit. Or the other alternative is maybe you're in a season, you know, once per year for every, you know, let's say two or three months out of the year. You work like a mad woman. You working at a, at a large hospital as A registered nurse in New Jersey. Maybe you work 60 hour weeks for two months or, you know, one month on, one month off. And that extra money that you're earning, that goes to the Europe fund. So you're still adjusting 22% while now working a little bit more to find that extra income to, to save for Europe on a, you know, every other year basis there. What's your take on this, Robert? How would you suggest Sandra go to Europe and have fun with her daughters, which she should do while also not jeopardizing her retirement?
- [38:56]
A
Yeah, I like where your head's at. I wish we knew the amount she has in retirement because she is a high earner. But it brings me to a story from a an Uber I took a couple years ago. Gentleman was very clean cut, the car was immaculate. And I said, how long have you been Ubering? He said, well, I Uber only every Saturday or every Sunday, depending on the weather. And it's just to pay for the family vacations. So in this instance, I love your take on maybe doing three extra shifts a month. That money goes right into that vacation fund and is invested. Maybe it's just into a high yield savings, maybe it's into, you know, a bucket of, you know, these index funds we talk about, about. But I like that idea of pouring fuel on the fire to have that set aside because if you dial it back a little bit. So you're building this fund to be able to take these vacations. I love that for your family. So many people spend decades and decades saving money and building up their portfolio, but they forget to live along the way. And so I would rather have a little less in retirement and get to enjoy, you know, the kids and do these European vacations, even if it was once, once every three years, I still think it's very, very meaningful and I love your breakdown of how to achieve it. But always remember, when you guys are asking us a question like this, let us know the totality of all the numbers because then we can dig in so much deeper and give you a really concise answer of how to achieve your dreams. So thank you, everyone.
- [40:24]
B
Thank you so much for tuning into this week's episode of the Rich Habits podcast. If you've not yet checked out the Rich Habits Network, we're still running a seven day free trial while inside of the Rich Habits Network. Once you subscribe, you get access to Robert and I via two hour live streams that take place every Tuesday night. We sit there, we answer your questions, we give you our perspective on the markets, what we're doing with our own money. You also get to invest alongside of us into awesome pre IPO companies, which by the way, big announcement coming on that very soon. Stay tuned about that one. And then you also get 8 hours of video coursework covering budgeting, credit, business ownership, investing, how to analyze a stock from scratch. Right? All the stuff that Robert and I talk about on the show, you just get a lot more of that dedicated focus and access to us by joining the Rich Habits Network. We have over 700 people now, Robert, inside the Rich Habits Network. And over like 250 of them come every single Tuesday night to just like hang out and say what's up? It's actually a lot of fun. So regardless, you guys go check that out seven day free trial link in the show notes below. Still doing that. And as always, thank you so much for tuning in to this week's episode of the Rich Habits podcast. Leave us a five star review, please. If you learned something, maybe someone sent you this episode. Like, we love the five star reviews. They are what keep us going on a daily basis. And make sure to vote in the poll below here on Spotify and leave a comment as well.
- [41:47]
A
Yeah, the Rich Habits Network is probably the coolest thing I've ever built. So Austin, thank you for doing this with me. And it's just so incredible because, you know, we all are growing our businesses, we're growing our wealth. We have mindset issues, we have business questions. And the coolest thing about the network is we have lawyers, accountants, real estate agents, mortgage specialists. We have people of every walk of life that are just trying to level up. And so it is just incredible. And that seven day free trial gives everyone listening a chance to kick the tires, see if it's a good fit for them and then decide from there if they want to join or not. So we appreciate each and every one of you stopping by and make sure you come back tomorrow tomorrow for our Friday Rich Habits Radar episodes because they are growing and they're newer and they are such a blast.