← Rich Habits Podcast
Rich Habits Podcast
Q&A: Portfolio Adjustments, Starting an Ice Vending Business, When NOT To Use A 529
00:42:03
Loading summary
Transcript36 lines
- [00:01]
Narrator/Advertiser
You're about to make a trade. Which u do you listen to? Is it get optioning those options or let's do a little research. Learn more@finra.org TradeSmart 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. Learn more@WhatsApp.com hey everyone and welcome back.
- [00:46]
Austin
To the Rich Habits Podcast Question and Answer edition brought to you by public.com these are our Thursday episodes where we sit down and answer your questions as if we were in your shoes. Your your questions are asked to us via Instagram dms@rich habits Podcast, emailed to us at rich habits podcast gmail.com or sometimes you guys ask us questions in the Spotify comments and they're interesting so we share them on these episodes. But nine times out of ten it comes from email or the Instagram dms. So Robert, I'm excited. These, these episodes are a blast. We've got a lot of cool questions, right? We got questions about some side hustle work. We've got questions about what to do with some proceeds after selling a home. Some questions about, you know, investing on half of children or doing the 529, how to kind of navigate that, as well as a couple questions from some younger folks. Oh, and then finally our last question about rates coming down and some portfolio changes that we're making right now. That'll be a good one to answer as well.
- [01:42]
Robert
Yeah, I mean, personal finance is personal. That's the hill we live on. And I just love these episodes because we get to hear these questions right from the audience and really try to help everybody out. And you know, there's a lot of overlap for people because we all have issues, we all have blind spots in our finances and that's why these episodes are so important to the audience. I love doing them, for sure.
- [02:03]
Austin
Well, I think what's fun about these episodes is you might not have a specific question that gets answered because we literally get hundreds of questions asked to us every single week. But maybe bits and pieces of other people's answers and questions, right, could apply to your situation. So we're hoping that these episodes continue to provide value to as many of you as possible. Now, before we get started, I think it's really important that we make sure everyone understands this reality. Investing toward your financial future is the only way you'll ever be able to retire. So if you want to stop trading time for Money in your 9 to 5 or hourly job, you need to have a nest egg growing for you over time.
- [02:40]
Robert
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 industry leading yields of up to 3.8% APY with for your emergency fund.
- [03:00]
Austin
And for a limited time you can earn a 1% match on all IRA deposits, IRA transfers and four 1K rollovers, which means it's $1,000 in free money for every 100,000 you rollover into their platform. I know you've got an old stinky broker that your dad's dad's dad was telling you to use back in the 19. Whatever is right. Like ditch that stinky broker, use Public. You're going to love it and fund.
- [03:22]
Robert
Your account in five minutes or less. All you have to do is head to public.com rich habits to claim your 1% match today for by Public Investing. Full disclosures in the Podcast Description so.
- [03:34]
Austin
Our first question comes from Sarah H. Sarah says hi. I've been listening to your podcast on Spotify and I find a lot of value in your Q and A episodes, so I'd love your opinion on my situation. My Name's Sarah, I'm 19 years old and I make between 2,500 and 3,000amonth from my serving job. I have 3,500 in a Vanguard brokerage account, all of which is in the S&P 500. I'm also putting about 200 from every paycheck into this account. I have another 5,000 in my bank account that I want to take a little bit more risk with. I've been looking into buying an ice vending machine to make some passive income and eventually grow into more of a long standing business. I would also like to purchase a duplex and do some house hacking sometime in the next five plus years, but I've got nothing set up for that just yet. I don't have the 20-60k to purchase an ice machine and I'm not sure I'd be able to get a loan to even finance something like that. However, I do have a decent credit score in the mid-700s. I I don't have many expenses, but I do have an expensive hobby that I'm not Willing to give up. I'm a skydiver and a biker, and skydiving takes up a good portion of my income. I spend at least $500 a month paying off my parachute. I've got about seven more months of that and another two to $300 per month, depending on how often I jump out of airplanes. The parachute payments are interest free, so there's no need to pay it off sooner. Other than that, I don't have any debt. My question for you is, should I be spending less on my hobbies in order to save more for my investments? What are your thoughts and opinions on vending machine business? Would someone like me be able to get a business loan? Should I even consider that? Or maybe try and pay for something like that out of pocket? Or should I completely forget about the ice machine and just put it in stocks and save for a house? Robert, what a cool situation that Sarah is in. I've never met like a skydiver that does this so often. So shout out to Sarah here, but I'll let you take a first stab at this one.
- [05:24]
Robert
Yeah, I love the entrepreneurial mind and I really appreciate the thought process, but I'm going to go back to the basics. I think Sarah is putting the cart ahead of the horse. I think she needs to get that base built, keep putting that money away every single month. When it comes to should I cut back on these expensive hobbies? Not just hobbies, expensive hobbies. The answer is yes, because until you get the base built, if you're always in a situation where a lot of your money is going out the door for these hobbies, we want you to have a great quality of life, but we also want to make sure you're not a Walmart greeter at 75 years old. So I think she should dial it back a little bit. Get that parachute paid off, get more money going into the brokerage account to get more money working while she sleeps and then revisit or if she's not going to listen or anyone else out there that has expensive hobbies like cars or motocross? I raced motocross early on in my career. Very expensive hobby. Get a side hustle that pays for the hobby. So those are my thoughts, those are the options.
- [06:28]
Austin
But.
- [06:28]
Robert
But we just always want to see all of you get the base built first before you start going in all these different directions. And then maybe the ice machine can come later and you might find a better, more profitable side hustle to make extra income without so much investment. Because remember, buying the ice machine is the easy part because you can go get a loan, you can find a lot of different ways to get the money. But finding the right place to put it and getting it all hooked up and it being profitable is the difficult spot unless you live in a very, very high tourism area and you already have a spot selected. So be careful out there with that one.
- [07:05]
Austin
My head goes a couple different places off the rip. Right. So the first question I have for Sarah is that's exciting that you're 19, making 2,500 to 3,000amonth with your serving job. How do you plan to make six figures by the time you're 29 or 39? Right. Like, what's your career path? Because I'm sure you don't want to just be serving tables and waiting on people as a lifelo career. So one, are you in college? Are you in a trade? Are you trying to fit, like, what's your next step? So this serving job is just a means to an end until you start your like long life career. So really want to encourage you to think about that. And maybe right, instead of the oh, should I spend less on my expensive hobbies? Maybe that means pulling down some funds from the expensive hobbies to then allocate to getting a certificate or a associate's degree or something else that's going to allow you now to earn more money. Right. Where the expensive hobbies are just expensive hobbies, like they're not like nothing, I guess like monetarily is going to come out of them. Right? Just fun experiences. That's where I had goes first. Next, you make 2500 to 3000amonth. I'd love to see you off the rip, just investing 15 to 20% of that. Call it 450 to 550amonth. So if you're investing, let's call it 500 bucks a month in your Roth IRA, which you said you've got 3,500 in a Vanguard brokerage account, all of which is in the s and P500. I hope that that is sitting inside of a Roth individual retirement account on Vanguard's platform. If it' it's not, you should put it into a Roth IRA on Vanguard's platform and then start contributing 500 bucks a month to it every single month until you've maxed it out at 7,000 a year. Do that all the time. Absolutely. So that's like your bare minimum. Step one is like serving job, max out Roth ira. Now, if you still have money left over and you want to rock and roll and do more, you know, expensive hobbies after you've invested 15 to 20% of your income. I'm cool with that. I think that's totally fine. You're young, enjoy your life. Just make sure that you are one being forward thinking. I know you're young, right? You're still in your teens, so you don't have to think so much about your career. You're too young to even understand, you know, what you enjoy, even in my humble opinion. So I hear you on the serving job, but do not make the mistake of forgetting about how important investing can be at such a young age. You know, we made this episode recently talking about how to 70x your money. Every dollar invested in your 20s turns into $70 in RET, right? So every time you put $500 in this Roth IRA, it turns into 35,000 upon 65 years of age. $500, 35,000. So just make sure that you understand, yes, hobbies are fun, rock and roll, enjoy your life, but not at the expense of a nice retirement in your 50s, 60s and 70s.
- [09:50]
Robert
And I want to click back one more time because I had this happen recently and she got back to me about what she did as. And in this instance it also applies you could also take instead of getting a side hustle or cutting back on the expensive hobbies, pick up one shift a week and whatever you make on that shift, that is your extra investment money because that's money that is found money without going and get a second job. I told this to a nurse, she was struggling and she said, hey, I work four or five days a week and I'm barely getting by and I'm only able to put a couple hundred dollars away a month. I said pick up one extra shift because it's a high paying shift and just pretend it doesn't exist. Invest all of it, she said. It changed her life. She picked up Sunday. She gets paid time and a half or whatever it is and it's just an incredible journey. So look within sometimes because you can find more money right in front of you.
- [10:44]
Austin
I think that's a great answer. So our next question comes from Jeremiah. Jeremiah says hi Robert and Austin. I stumbled upon your podcast six months ago and I wish I found it sooner. I love how you talk about every aspect of finances and how to build wealth. A little background on me is I'm 44 and my wife is 39. We have our forever home near Orlando, Florida on acreage with a monthly mortgage payment of 3,650. I make a base salary of $200,000 with commissions typically around 60 to 80,000 per year, along with money. As a veteran, around 4,000amonth. Thank you for your service. Jeremiah. My wife makes 60,000 per year and we have just over 400,000 between both our 401k accounts. Currently, I max out my 401k annually and my wife contributes 10%, her company matching 14%. This gets her about half of the way toward maximizing annually. We also have a stock account with just over 40,000 between index funds and crypto. And sometimes we like to trade options. We have about 35,000 in a public dot com high yield cash account. That equates to three and a half months of our current bills. So this is our emergency fund. Next year I should hit some additional Metrics and get $260,000 of company stock. Going forward, I would expect between 25 and 100,000 in company stock. Ann so here's my question. We're in the process of selling our rental property and want to use the profits to do a couple things. We don't currently have a garage and we have limited space in our house, so we want to pay cash to build a garage. In addition, we would reroof our house to help lower our homeowner's insurance by roughly $7,000 a year, along with paying off our SUV. The projected savings between the insurance, the SUV payment, and a few other items we're paying off, like braces for our kids. And our air conditioner is around $2,400 per month. We want to take the savings and use it to max out our individual IRAs for each of us annually. In addition, we want to take a hundred dollars per month for each of our three kids to start funding stock accounts for them. Does this make sense or is there something else you might suggest we do? Jeremiah Again, thank you so much for your service. You guys are in a good situation. But then after reading the Last part, there 2,400 bucks in payments of debt that you guys are doing, like, I guess, you know, or 500 of it a month could come from. Yeah. So 1900amonth of payments. That's a lot of money. You guys. You guys want to figure out, like the budget stuff, you guys might be a little over your head here, but I do like this plan regardless. Right. So here's what I want you to do. If you want to take off some of this money from your rental that you're selling and use it to, you know, redo the, the roof, which I think is probably going to add Value to your home regardless, right? So redo the roof. You're also going to pay off an suv, which probably has a decently high interest rate, depending on when you got it, and then also pay off the braces, your AC unit, stuff like that. Like, that's great. I'm down for that. Assuming you take that 2400 per month and you start actually investing it, like you said, right? The whole thing about, like the argument around paying off debt quickly and paying off debt early versus not the only reason you would do it. Right. It's always predicated on if you're taking that monthly payment and making it work for you, which it seems like you would be doing. So taking that $2,400 a month, you're 44, your wife is 39. That's going to be worth millions of dollars in retirement assuming you keep that momentum. Now, here's what I don't want you to do. You guys mentioned you've got, you know, 35,000 and a high yield savings account for an emergency fund. Where was this 35,000 when your AC went out? Where was this 35,000 when maybe you realize your kids need braces or whatever, Right? So I'm just saying, like, just make sure you understand what some of these things are used for, right? We're not saying to use an emergency fund on whatever you want, but if your AC goes out and you don't have the money for it, like, that's what the emergency fund is for, right? If your kid goes to the emergency room and you've got a $6,000 bill, that's what the emergency fund is for. Not going into debt to keep it around like a pet. So I'm down for you to do this. I think it sounds like a decent way to use this money. You already have hundreds of thousands invested. You're getting another quarter million in company stock later. Like, so you're going to have, let's call it 650 to 700,000 already in the markets here. You make a ton of money. Things are going to be great. But just please be cognizant of just what I feel from a vibe here from your lifestyle, inflation. I just feel like you guys are kind of in this. Oh, we make a lot of money. I got the commission, My wife's doing this. Like, we're investing all things cool. Therefore, we're going to have 4,000amonth in payments and go into all this debt and like, whatever, Y' all should have more money invested making a quarter million a year in your mid-40s. It's cool that you're going to be investing more aggressively now. So, like, I'm not knocking you for it, but just be careful of the lifestyle inflation.
- [15:19]
Robert
I love that answer. You basically covered everything my brain could go to and that was incredible. The only thing I would say is I see it every day when people get a windfall and the windfall would be from selling the property. A lot of times they don't have a full plan. It sounds like they have a pretty good plan here. But just always remember, every dollar needs a job. Whether it's the garage, the braces, paying off the suv. But the rest of those dollars also need to have a job. And Austin's point about making sure the rest is invested and the new net money you get every month is invested. The more you automate all of that, the better off you're going to be long term. Because what I see a lot of people do, they get the windfall, they pay the things off, then they blow the rest of the money because it doesn't have a job. That's my only clickback to make sure you guys fully understand this and anyone else as well. Make sure you're not just paying off debt because you want to feel better, but not having a plan with all the net new money you have every single month.
- [16:20]
Austin
That's right. It is so important now to say, okay, great, we paid this off. We paid this off. We paid this off. Now we have an extra 2400amonth. That doesn't mean we can afford to go out to eat four times, you know, this upcoming month versus two or like, like whatever. It doesn't mean you can go buy new things or spend this money. This money has a job. You've already decided that that job is to be investing it. You know, do the 529 for your kids. Like, that's great. Rock and roll. Make sure that you actually, you know, stick to that plan because it's going to get real tempted. Oh, we could skip investing this month and just use that 2000. We can go on that vacation we wanted. We could always do it next, I don't know, next month. You know, Christmas is coming up. I think that's where our Christmas money is going to come. So please just do not get complacent.
- [17:04]
Robert
100%. I love the question. Great coverage, Austin. So, so good.
- [17:09]
Austin
So our next question comes from Johnny. Johnny says hi, Austin and Robert, I've been really enjoying your show. I've been listening regularly for the past six months and I've Learned a lot from your discussions around investing and wealth building. I'd love your advice on what to do with the proceeds from selling my home. Well, here we go. Back to back home Questions Robert. So Johnny says I recently bought a new primary residence and due to HOA rules, I can't rent out my old one. So I'm planning to sell it. After paying off the remaining mortgage and fees, I'll have $300,000 left. Here's a quick snapshot of our situation. We're married, 38 and 36. We have two kids and eight and a two year old. Our combined income is 200,000 a year. We both max out our four 1Ks, our Roth IRAs and we contribute to our child's five hundred and twenty nine accounts. We have no other debt besides our current home which has a $265,000 balance at 5.5% interest. My initial plan was to use 100 of this 300 to pay down our new mortgage so we can cut the balance from 265 to 165, invest another 100 into the ETFs and index funds you all talk about and then keep another hundred as a down payment for a future investment property. Do you think that this is a smart allocation or would you recommend a approach, maybe even adjusting the split between paying down the mortgage and investing in saving for real estate? Thanks so much for all your time and all you do. I love the show. Robert, I'll let you chime in here, but I think for the hundred thousand that you want to put into ETFs, go do that with direct indexing on public, right? Because if you do it correctly and you get those automated tax loss harvesting like Robert and I have been doing with direct indexing now for the last year and a half, right. We've tax loss harvested about 12% of the original investment, right? So about $2,400 on about 20K. And so if you are able to tax loss harvest 8, 10, 12% per year on your hundred thousand dollar investment, you're talking about 8,000, 10,000, $12,000 of capital losses that you can use to offset gains elsewhere in your portfolio or offset your W2 income up to a couple thousand dollars, right? So go talk to a tax accountant about that. But I just want to make sure you have this windfall of taxable money that you have to invest. Invest it in a tax efficient manner via the direct indexing on public.com in the S&P 500. So Robert, I'll let you take a stab at the other 200,000 that they plan to allocate.
- [19:36]
Robert
Yeah, I'm going to cover all of it, and I'm going to start at the bottom. I like the idea of keeping $100,000 towards a future investment property, but I would not just let that sit in a bank account or even a high yield savings unless you plan to buy this investment property in the next year or two. Anything beyond two or three years, let's say, is in four or five years. I would get that money invested, maybe give yourself some exposure to some crypto, maybe some precious metals which are very hot right now. But get yourself some further diversity to make sure you are earning as much as you can with this money while still leaving it liquid enough that you can use it for the property down the road. Now, to go back to the hundred thousand that you wanted to pay down the mortgage with, you're right on that fence with 5.65% as your mortgage interest. I personally would not put the hundred thousand dollars down. Yes, it lowers, you know, the balance you owe on it, but I just think you could put that money in the markets and make more with it and have that positive arbitrage in your favor. So that's me. If you feel good about it, I would maybe adjust that. I would put $50,000 to lower the total mortgage down and put the additional 50 then with the 100,000 in the ETFs. But that's my play because I don't mind 5.65% as an interest rate rate. It's high ish, but it's still a really good interest rate given what we can make in the markets. So that's what I would do. But I love the plan that you guys have. You're young, you can be a little more risk on, and there's a lot of money to be made right now through whether it's AI or crypto or some of the things, these secular growth trends that have been really popular the last couple of years.
- [21:17]
Austin
Yeah. The hard part about this is y' all didn't let us know how much you already have invested. Right. Because if you like don't have that much invested already, then I would not suggest you pay down this mortgage aggressively because we want our money growing for us. Right. Because debt can go to zero, but money invested can compound to infinity, essentially. Right. So, like, you just understand that the thing is too, a $265,000 balance tells me that you already probably put down a couple hundred thousand dollars when you bought the home. So if I Were you, I probably would skip the pay down, mortgage faster section, which means you'd have to have 200,000 in these direct indexing. Right. So like I would go that route. And then if you wanted to save 50, 75, 100 for a future investment property, just make sure that the numbers shake out. Make sure that you are sort of doing it in a way where cash flows on day one, things of that nature. But right now I think that that dollar cost averaging this money into the markets over the next three, six, nine months, this 200,000 is probably the best bet. And, and when I say three, six, nine months, just by looking at these numbers, I'd imagine. So my rule of thumb here, Robert, and we've talked about this in the past, is if you're trying to invest a lump sum of dollars into the markets, if that lump sum makes up more than 20 or 25% of your total net worth, that's so much money of, you know, so much your net worth tied up into a lump sum investment that I think you need to spread that out over several months. Because what happens if you go put that on, what was it April 2nd or April 10th right after, you know, right before rather Trump did the Trump tariff tantrum and now your 200k turns into 160 because it went down by 20%, you'd be pretty upset. But if you dollar cost average over the next 3, 6, 9, 12 months, that's a better way to think about it. So I would dollar cost average this 200 grand into the markets. I would absolutely take advantage of public.com's direct indexing to tax loss, harvest this amount of money. I mean we're talking now about tens of thousands of dollars in tax loss harvesting, which is really, really important. Important.
- [23:16]
Robert
Before we get into our next question, listen up folks. You can lock in a 6% or higher yield with a bond account on public. But remember, your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds. Only@public.com rich habits.
- [23:38]
Austin
So our next question comes from Leslie T. Leslie says. Hi Austin. Robert, I love your podcast. Keep up the great work. I want to pick your brains on saving for my children's education. My sons are 10 months old and 2 1/2 years old. I've heard a lot about 529s. However, my dad set up a joint brokerage account when I was 16 and it paid for my wedding. Most of my professional school and contributed to my first down payment on the home that I bought when I was in my late 20s. So from a personal standpoint, I feel like it has more flexibility to spend and allocate the money. But I want to hear your thoughts. Okay, so let's walk through this. So the 529 account, as you all know, it's essentially this brokerage account that you can put money into and invest in the stock market and you can use those profits to pay for education related expenses, which means trade school, books, tuition, like, like all the things related to education, college, all the stuff like that.
- [24:35]
Robert
Right.
- [24:35]
Austin
And if they do not use that money, you can roll over up to 35, 000 of it into the child's Roth IRA upon 18 years old in my opin, should be rolling over $35,000. Right. When your kid turns 18, that money if invested I think like 8 and a half or 9% throughout their life. Just that 35,000 turns into a million adjusted for inflation in their retirement account by the time they're 65. So like guaranteed millionaire. Right. By using the 529 the right way. I however understand the flexibility you're looking for when it comes to wanting to use some money for a wedding, professional school and maybe a down payment. So my thing here is like why not both? Why don't you have 300amonth go to the 529s. So 150 into each kid's account and then another 300amonth going into a brokerage account that you've got joint between your, you know, your two kids here. Their 529s are rocking and rolling and this joint brokerage accounts are rocking and rolling. Fast forward 20, 25 years when they're ready to get married or do the down payment on the home. That 300 is going to be worth tens, if not hundred plus thousand dollars and then in the next, you know, call it 15, 18, 20 years when they're ready to go to Colle know 300 bucks a month will be worth probably well over a hundred thousand by that time too. So I don't think it's as black as white as you're putting it. I think you do both. That's probably what I would do if I were in your shoes.
- [25:55]
Robert
Yeah, I don't really have anything to add. I like the fact of doing both because then it does give you additional flexibility just in case. It's such a great thing to see parents thinking so far ahead. I wish more parents did you know, we talk about, you know, when your kids get in their teens, making them a signer on your credit card so you build up their credit score as well. Really giving them a chance when they turn 18 or, or 21 to be able to go out on their own with all of these tools and also money already there for education and maybe a wedding or whatever it is. So I love this thought process and I hope more and more parents learn from this episode and do these things because it's just so helpful rather than saying, all right, you're 18, go figure it out. You're setting them up for success.
- [26:39]
Austin
So our next question comes from Ethan. Ethan says, hey, guys, my name's ethan and I'm 18 years old. I ran a car detailing business in my small town back in Montana. I just moved to St. George, Utah about seven months ago. My father passed away a few years ago, and the money from him has now totaled a hundred thousand from putting it into a money market account since his passing. The money is just sitting there. I think it's earning 3 to 5%. I want to invest it in real estate, but I don't know where to start. The market in southern Utah is very saturated and expensive. I also have a car detailing job at a dealership and I just started a small business doing car flipping. This is a lot for me at 18 years old. What should I do with all this? Plus, I live at home and have no debt or car payments. Should I just invest it in real estate, put all the money down on a home that I can live in, or put it in the stock market? Ethan, as someone whose dad just passed away a couple months ago myself, I am really sorry to hear that you had to go through that at such a young age. I cannot imagine what was going through through your head and your heart and everything. So I'm praying that you're, you're feeling a lot better now a couple years later when it comes to this hundred thousand dollars, I would use 7,000 of it in 2025 to max out a Roth IRA on public.com I would then use the other 93,000 of it. Also in public.com I'd roll it over to get that 1% match and I would also use the, the other 93,000 to just park it in a core satellite portfolio that we like to talk about. Right? So like build your base of those couple strong etf, qqq, vgt, vug, vti, things like that. Well diversified across a bunch of different types of sectors of the market and then Forget about it. That's what I would do. You're too young, in my humble opinion, to want to make a mistake and pay a stupid tax of a lot of money by buying the wrong real estate, trusting the wrong people. Oh, I'll take your money and I'll invest in some real estate. Let's go work together on this, right? Don't do any of that stuff. I respect the ambition. I think it's very admirable. I'm sure your dad would be very proud of you. But at the end of the day, I think right now the best course of action for you is to let this money grow for the rest of your life. This is your base, right? Shout out to your dad for allowing you to build your base so quickly. It's very awesome that he was able to pass this much money down to you. And now it is time to honor him the way that he needs to be honored, which is letting that money grow. And then the money you now make from your car detailing, your car flipping and things of that nature. That money can now go be used to go save for a down payment or a real estate investment or another venture that you're working on. But I'd let this a hundred thousand grow and let it grow indefinitely.
- [29:12]
Robert
Great answer. And for everyone listening, if you're under 35 years old right now, it is very, very hard to get the first hundred thousand dollars saved and invested. So Ethan and everyone else listening, do not touch that money. Pretend it doesn't exist. Because here's what happens. I've seen it happen a thousand times. You're going to dig into it for 25,000 for a project. It may or may not go well. Then you're going to be down to 75 or $70,000. Then you're going to build it back up a little bit more and then you're going to use it again. Pretend it doesn't exist. Let that base grow forever and you will be guaranteed to be a multimillionaire in retirement just from that $100,000. If nothing else goes well at 18 years old, until you're ready to retire, you'll be a multimillionaire. So please, please, please do not spend this money on one real estate deal, one restaurant deal, one lease for a car detailing shop that you think is going to be great. You are in an incredible position by having your base build at 18 years old. Shout out to your father, so now you have to let that grow. Now, would I leave it in a money market? No. I would do exactly what Austin just laid out it is the perfect strategy to build your wealth and then take the money from car flipping, take the money from your job, build up more money to be able to then do these other things you want to do in real estate or whatever down the road. But please don't touch that money. Let it grow. You'll thank us in 25 years, I promise. Because I don't want to see you go backwards because you already have the base built at 18 years old.
- [30:50]
Austin
And something you mentioned, too, was like, it takes a long time for people to build their base. The statistic is, is it takes the average person 7 1/2 years of actively investing and pursuing building a base to actually build their base. Right? Seven and a half years of focused, intentional investing to get your first hundred thousand invested, and then after that, the next hundred thousand, I think, is five years. The next one's three years, the next hundred thousand. Like so, you know, compound interest helps a lot at that point, but it takes seven years. That's why it's the hardest one to get. And you now, Ethan, have this opportunity to have it in an instant. And what comes fast can go just as fast. So please heed our warning of not dipping into this and using it for other spontaneous ideas. So our next question comes from Gus M. Gus says, what are some labor? Heavy side hustles? You mentioned pressure washing and car washing. What else do you recommend for me to make some extra cash while I'm in college? So how I made extra cash in college, Robert, was I went onto Amazon. I bet I can just find it right here. It was called the Sylvania. Yeah, Headlight Restoration Kit. Well, we're filming this right now as Amazon's AWS is launched. Like having an outage. So Amazon's website doesn't work. So it's the Sylvania Headlight Restoration kit. It's like 25 bucks. I would use it to go clean headlights for two cars, right? So one kit is specifically made for one car, but you can stretch out the supplies for two. You'll be fine. A little bit better margins there. So what I would do is I'd have these, like, little pieces of paper I'd go print out at University Tennessee's, you know, library. I'd cut them out and they would just say, hey, your headlights are dirty. I'd be happy to clean them for you for $75. Call me. So I'd spend like 25, 30 bucks on the kit. I would then make $150 of revenue. So the margins they were pretty good. I made like $3,000 one summer doing that. I mean, that was my side hustle for a summer. That made me some extra cash, about a thousand a month. So if I was in your shoes, Gus, I'd explore that a little bit. But Robert, what in your opinion are some labor heavy side hustles that Gus can, can think about?
- [32:46]
Robert
Yeah, I love this question because I think the smartest thing anyone can do that's in college age or even up to maybe, maybe 23, 24, 25, is go on Facebook Marketplace, find a used landscape trailer for 5, $600. I just bought one a couple months ago because we needed a another one here in Florida for hauling. And I would go job site to job site just like you said, with a little flyer. And I would find roofing companies, construction companies that need help with demo and clear out. And you can really just make a ton of money with you and a buddy hustling to help on job sites, roofing sites, mall clear outs, if a store's closing or whatever it is with just a $10 worth of flyers and a 5, $600 landscape trailer hooked up to your car, or if one of you has a truck, it is one of the best ways to make a lot of money fast because you don't need any investment or tools. You might need a couple brooms, a couple shovels, and maybe a rake. And that's about as far as it goes and some gloves and you can make a ton of money day in and day out doing that. So I think there's just a lot of ways to really make money. And I love the heavy labor side hustle because there are so many options.
- [34:00]
Austin
So our final question comes from Jillian. Jillian says, hey guys, I love the show. With the Fed cutting rates and talking of more easing in 2026, how should everyday investors think about adjusting their portfolios? Over the past year, keeping money in a high yield savings account or T bills made a lot of sense. But now as rates are falling, is it SM harder to rotate this money into stocks, real estate, bonds? What should we do? So it was a great question. Let's talk about it, Robert. So the Fed started cutting interest rates during Q4. It was even September of 2024. But they, they started the rate cutting cycle last year, late last year. I think they cut rates twice. I think it was December, it was the second time. And then they paused for like nine months. Right. They cut rates starting now in September and I think they're forecasting for three or four rate cuts. By the end of the year. I have to go check what Calci and polymarket are forecasting. But long story short, multiple more rate cuts between now and the end of the year. What are interest rate cuts and why are they important? The federal funds rate. Right. Right now it's hovering around high threes, low fours. The federal funds rate is what's deriving all the other interest rates on debt. So the federal funds rate is essentially saying, here's how much we are willing to pay bond investors for buying treasury bills. Right. For buying, buying essentially bonds against the United States. So if you get that's, that's where you have like the 3 year, the 10 year, the 20 year, the short. It's a whole economics class. I can walk you all through here. I'm sure you're too bored to know about it. Long story short, as the Fed cuts rates, theoretically that's going to bring down interest rates on debt like car loans, personal loans, credit cards, business loans, everything that has real interest rates, like attached to it. Those interest rates are going to begin to come down. Why is that important? That's important because now people can go buy with more buying power. Less of it going to interest, more of it going to principal so that their monthly payment is now lower. They can go, instead of, you wanted to have a monthly payment of 400 or 600amonth on your car with a really high interest rate, a lot of that's going to go to the interest. But now with a lower interest rate, more of it can go to the principal. So Instead of a 30,000, you can get a $40,000 car or maybe, you know, whatever, right? Go buy a boat, you can go afford more payments. Right? That's the whole like debt thing. So as the Fed lowers interest rates, which it is expected to continue to do for the, the next couple months here in 25 and again in 2026, more interest rates are going to come down. That's not just impacting consumers, but also businesses, Robert, because as we know, businesses have a lot of debt on their balance sheets as well. They, they use this debt to fund future growth and different, you know, business endeavors and things like that. So if you're telling me, Robert, that those businesses with millions or even billions of dollars of debt on their balance sheet are going to say, save half a percentage point, one, one and a half, maybe two percentage points on that debt balance. Now we're talking about millions, tens of millions, hundreds of millions more of profits that get to flow to the bottom line because it's not going to interest to the bank on their debt. So this is obviously better for the stock market. Things of that nature. That's why we're seeing some small caps right now do pretty well in the markets. So how do we think about like portfolio construction? Do we move out of T bills and saving? Like in my opinion the most important thing to understand when it comes to investing is that you need to have a long term mentality while also knowing what the difference is between investments and insurance. We say this all the time. Your emergency fund is not an investment. It is insurance against your investments so that if you have an emergency, you don't need to sell your investments at a potential loss to cover the emergency. Now if you have T bills and high yield savings and bonds inside of your well diversified portfolio, I think that's fine. That's going to be just cool. Just make sure it doesn't make up so much where you're leaving money on the table. Robert, what's your take on portfolio construction and rotation now that we're starting to see the Fed cut rates?
- [37:53]
Robert
Well, I think this is a great question from Jillian Jay and I love to see questions like this coming from someone in their early 30s just because it means either they're really taking financial education seriously or we're doing a great job because I think it's spot on to think cause we're always going to be a net buyer of assets and especially when we're talking about stocks and real estate and all of these other sectors. And I do think it's a good time because as and we talked about this on last week's episode, as money gets less and less expensive to borrow, it really bolsters the stock market and the real estate markets which have been really good this year. Not so much real estate, but the stock market and crypto markets have been good. So I think it's a great question and I always believe people should be a net buyer of stocks, stocks and cryptos and always be diversified. So I love this question and when it comes to T bills versus bonds, that all is relative to what's paying the best. 2 years ago T bills were incredible because I think they were paying like five and a quarter percent in a couple years ago and now they're not. So I like this question because there's so many options within this question and it's all about your personal choices. But for me the answer is yes, I would start rotating back into stocks more and make sure you have a little more risk on approach, especially being in your younger 30s.
- [39:15]
Austin
Here's something else to consider. You know, we've got a couple questions from people inside the Rich Habits network that are like, hey, public is paying three and a half percent. Wealthfront's paying 4%, Robinhood's paying 3.8. Like all these other different, like, you know, I'm gonna move my 30k off of this platform to get this platform to go over here and do that. Like, I think a lot of people need to understand that they are. What's the phrase, walking over dollars to pick up quarters or whatever it is, Right? So, like, it's okay to not have a perfectly perfect 0.1% optimization on your emergency fund. Again, it's not an investment, it's your emergency fund. So if you're earning 3.8 on public, 4 over here on wealthfront or 4 over here on Robinhood or 3 and a half over here on Sofi or whatever it is, like, cool, it doesn't matter. You're earning three and a half to four percent. We're talking about a dollar sixty a year difference on your month money. Right. So that comes down to five bucks a month. If you want five dollars a month that bad, I'll venmo it to you. Right. It's like, it's not that deep. So just understand the difference between having a just portfolio that's diversified in a plan and how important that is versus trying to like perfectly optimize the whole. Like, it's we, we are big believers in optimization and arbitrage and things like that, but the brain calories sometimes don't make sense to go earn an extra five bucks a month elsewhere.
- [40:34]
Robert
I agree 100%. And what great episodes. So many really good questions. These just get better and better month in and month out. So it's just so fun to answer them.
- [40:45]
Austin
Yeah. If you have a question for the show, any future episodes, be sure to send us a DM at Rich Habits podcast on Instagram or email us at rich habits podcast gmail.com. also be sure to check out the Rich Habits Network if you want more exclusive access to Robert and myself. Over at the Rich Habits Network is where we host our two hour weekly live streams on Zoom every Tuesday night. About 300 people join us with their cameras on or off or whatever they want to do there. And we're just talking for two hours and sharing our portfolio trades or insights on the markets. The headlines that I think are mattering most to us, where we might be in this AI bubble market cycle. Right. A lot of fun stuff gets shared over there and Then of course, you're also given the opportunity to invest alongside of us into some really fun, interesting opportunities. We just did some cool stuff with Apptronic, which was a blast. And then of course, check out the Rich Habits newsletter, completely free newsletter that gets published every Thursday morning.
- [41:38]
Robert
I know the Rich Habits Network is the coolest, coolest thing we've ever built and I've ever built. Just because everyone that joins just gets all of our best stuff, everything off the top of our brains, what we've been studying, what we're working on, what we're investing in. Plus with all the deal flow in the modules, I think it's a no brainer for everyone that's looking to take their, you know, investing in their business to the next level of being able to really get more engaged with us. I don't know why that's striking such a chord with me, but it's just all about more engagement with us and everyone in the network. And I just, I'm really proud of what we've built and we're coming up on a thousand members, which is just so cool to me.
- [42:17]
Austin
All right, everyone, thanks so much for hanging out with us and we'll see you tomorrow for our Rich Habits Radar episode. Stay tuned. Sam.