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Rich Habits Podcast
Q&A: Preparing for a Recession, Invest $37K or Pay Off the Car, & Active Portfolio Management
00:48:06
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- [00:01]
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- [00:30]
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- [00:59]
Austin
Hey everyone, and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our weekly episodes where we sit down and we answer your questions right off the dome. We get your questions asked to us via Instagram dms@richhabits podcast also emailed to us@richhabitspodcastmail.com and sometimes we answer questions that are asked inside of the Rich Habits Network, which is Robert and I's way to really connect with our biggest and truest fans. The Rich Habits Network includes eight hours of videos, video coursework and a weekly live stream. We're now like, gosh, Robert, I think it was over 250 people joined us on our Zoom call last week. It was so much fun. But we're running a seven day free trial for the Rich Habits Network right now. So if you want to join, you've been on the fence about it. You're like, I don't know what these guys are doing. 77amonth sounds kind of wild to me. You can literally do a seven day free trial. If you don't like it, you cancel it. See you later. No hard feelings. All is well. And right now, Robert, We've had over 35 people sign up for the seven day free trial as of recording this on St. Patrick's Day, which. Which, by the way, crap, dude, where's my green? We're not wearing green today. What are we thinking?
- [02:05]
Robert
We are not. We should probably change clothes. Although I don't know if I have any green here in the Florida place. So interestingly enough, this is what they get.
- [02:14]
Austin
But yeah, go sign up. Go check out The Rich Habits Network guys, we've had so many people do the free trial and like literally 70, 75% of them stick around because they realize, wait a second, these guys are legit. They're hosting the live streams. The video course works amazing. They're getting back to my questions. The community is so responsive. And like our episode last week, right? You want surround yourself with people. Your network is your net worth, right? That's why we called it the Rich Habits Network, because we want people to be networking, communicating, and knowing that everyone's going in the right direction.
- [02:44]
Robert
Before we dig into the webinar. I think the coolest part about what we do at the Rich Habits Network, the live streams are great. And people always ask me, do you guys really do these live streams every single week or do you pass it off onto somebody in the team? And I want to make it very clear, Austin and I host the entire live stream. It's not like some of the fake gurus where they come on for five minutes and do an intro and then pass it off to a team member or an intern. This is Austin and I start to finish every single week. So keep that in mind. But in my opinion, the coolest part about the Rich Habits Network is the school community. We have so many amazing like minded people in the community, all sharing their thoughts, their aspirations, their dreams. But also we have accountants, we have lawyers, we have real estate agents, we have mortgage lenders. We have all of these people of varied skill sets. And I think that is where the magic is for the everyday person that's on the fence of joining the Rich Habits Network. Because by joining, not only do you get access to Austin and I on a weekly basis, all of our thoughts, all of our updates, market insights, all of that, but you get access to the hundreds and hundreds of other really smart people in the community that are there to help each other and grow alongside each other. So keep that in mind. That is my favorite part of the Rich Habits Network.
- [04:02]
Austin
And then finally, Robert, let's remind everyone about what's going on later today, March 20th at 4:00pm Eastern Time, which is our Financial Independence Retire early webinar. This webinar is a breakdown of the FIRE movement. FIRE F I R E is an acronym that stands for Financial Independence Retire early. And it's essentially a playbook that allows people to retire early, right? Have the autonomy, economy, the decision to say I want to work because I like it versus I work because I have to. And so we'll talk about different savings rates, different ETFs, to buy. You know what the 4% rule is. It's just a really interesting way for us to dig deep into how people can retire early and share with you how I plan to retire early myself.
- [04:48]
Robert
Now getting back to the webinar. Yes it is tonight 4:00pm Eastern Standard. I'm super excited about it and just these webinars to me are so fun because we can break down like we always do otherwise difficult topics to help people understand because personal finance is personal and we are always here to help guide you on the various topics like.
- [05:10]
Austin
Fire and finally, before we jump into this week's episode of the podcast, we have to give a major shout out to our sponsor, public.com if you are a serious investor, which you probably are because you listen to the show, you need to know about public.com that's where you can invest in everything. Stocks, options, bonds and cryptocurrency. They even offer some of the highest yields in the industry, like the bond account that pays a 6% or higher yield. Even if the Federal Reserve continues to cut interest rates. That 6% or higher yield is locked in. Now what sets Public apart is how they give you the tools you need to make informed investment decisions. Like their built in AI tool called Alpha. Alpha doesn't just tell you if an asset is moving, it tells you why an asset is moving. Think ChatGPT meets your Apple Stocks app. That is what Alpha does. Really, really cool stuff. It allows you to actually understand why your portfolio goes up and down on a daily basis.
- [06:05]
Robert
Public is a FINRA registered SIPC insured US based company with a customer service team that actually cares. Bottom line, your investments deserve a platform that takes them as seriously as you do. Fund your account in five minutes or less@public.com rich habits and get up to $10,000 when you transfer your old portfolio. That's public.com rich habits paid for by Public Investing. Full disclosures in the podcast Description so.
- [06:33]
Austin
Our first question of our Q and A episode today comes from Julia P. Via email. Again, that's rich habitspodcastmail.com Julia says hi guys, I've been listening to your podcast for a little over a year now and I just want to say that it has been so eye opening and informative. Thank you for pouring your time into educating others. So here's the deal. I'm 28 years old and I'm a single mom. I've gotten divorced last year, which means I recently sold my house and received $90,000 for the portion of equity that I owned and I also received a $4,000 bonus from work last week before taxes. I make 125,000 a year. I have $115,000 in my traditional 401k, 20,000 in my emergency fund in a high yield savings account. I owe $35,000 on my car at 4.5% interest, which is about $702 a month for me. And then other than my car, I don't have any deb $50,000. I've already used some of it to max out my Roth IRA for the year. I set aside another 50,000 in my high yield savings account on top of the 20 as a down payment on a future home when the time is right for me. My question is, should I take the remaining 37,000 and use it to pay off my car, or should I take that money and park it in a bridge account, invest it and see it grow over time as well? I feel very fortunate to have so many options, but I want to make the most informed decision. Robert, you want to kick this one off?
- [07:52]
Robert
I love this question. And yes, Julia, you have set yourself up very well. And we did a little bit of math for this and I'll let Austin break that down. But I think the move, if you're looking at it from a long term time horizon, is to pay off the car, get rid of the 700amonth payment, but pretend the payment is still there and invest the 700 every single month. Because we did some math and it is quite shocking where you'll be at retirement by just making this one really smart and calculated financial move. So Austin, break down the math adjusted for inflation, because this is really important for everyone to understand because we're always talking about being consistent with your investments and what compound interest can do for you over time. So Austin, break down the numbers of the $700 a month invested in the S&P 500 until she retires.
- [08:40]
Austin
So the way that Robert and I approach this question, Julia, and why we're going to tell you to pay off the car is twofold. So again, you laid out a great reason. Hey, should I keep the debt? Park the $37,000 into a BR account, invest it in the S and P and let it ride. So let's assume again, you're 28, you put $37,000 on to public.com and you invest it in the S&P 500 and you completely forgot about it until you're 65. That's going to be about $850,000 adjusted for inflation. When you're 65, that sounds pretty great, right? So like bare minimum, let's do that. But we think there's a better option here. And the better option comes with a little bit of discipline, a little bit of planning, but it's going to yield bigger results. The other option is you use the 37,000 to pay off your car and then that $702 a month car payment that you are probably gonna have for the rest of your life anyway. We want you to start investing that every single month until 65. Right. So again, a lot more planning and a lot more discipline comes with that. But if you start at $0 and you take that 702 every month and you just invest it in the S&P 500 at the same inflation adjusted return at 8 and a half percent here, you're looking at $2.2 million at 65 compared to 850,000. So again, if you want to just throw it in that bridge account, let it ride, go get your 850. We love that idea, but we think you are listening to the Rich Habits podcast because you're trying to find the edge. You mentioned making an informed decision. We're going to make sure you have all the information in front of you to make the best decision with your money. And we think the best decision is to pay off the car and take that 702 every month and invest religiously until you're 65 years old and you now have $2.2 million in this brokerage account on top of whatever your 401k is going to turn into your Roth IRA. Right. This is on top of those things.
- [10:42]
Robert
This illustration really points out something we talk about every day and that is being consistent with your investments, not trying to time the markets and automating as much as possible and then letting compound interest do its job. And I love illustrations like this because is the 800k from 37k great? Absolutely. But if you can stay consistent and automate that same 700amonth as if it's the car payment into the investing, getting that two point something million dollars is so much better long term. And I want everyone to understand these numbers are all adjustable. If you're trying to become a multimillionaire and retire comfortably even at $500 a month, if you're at a younger age is enough. It's so important to understand that you just have to be investing early and often and be consistent and you'll get there.
- [11:30]
Austin
So our next question comes from Carson. Oh, Carson says, hey guys, I love the podcast and you are the Reason I have my Roth ira. Thank you so much. My wife and I are going to buy a car in the next year. We currently have $10,000 sitting in a bond account on public earning over 6% and about $1500 in the brokerage account invested into Voo and Vti. Should I change this weighting at all based on expected volatility in the markets, or should I move the money some else? What do you guys think? I'll take a first stab at this one. Robert. Love that you've got 10,000 sitting in that bond account that's going to be spitting out that 6% or higher yield for you. I love that idea. The reason why Robert and I encourage people to invest along the way when it comes to saving for a big purchase is because normally when you're saving for a down payment or a large purchase for a car or something like that, that comes with two and a half, three and a half, four and a half, five and a half years of saving and long term sort of stock market trending higher. Essentially you're looking at 12 months. I do not know for certain where the stock market's going to be 12 months from now. If you said, Austin, do you know where it's going to be in five years? I'd say, yeah, it's going to be higher than it is today. Like, no problem, all good. But in 12 months, with whatever volatility we've seen so far this year and the tariffs and, you know, the war, all the crazy things that are happening, I don't have that same conviction. So I feel good, though, about this weighting the $10,000 to the 1500. Because at the end of the day, Carson, Even if your 1500 DOL went down by 20%, which means you lost $300 in the stock market, you now have 11,200 versus 11,500 to buy a car. And that $300 difference isn't going to be the reason you don't buy a car. You're just going to find $300 elsewhere in your budget, in my opinion. So, like, if you want to keep it invested, rock and roll, go for it. But if you had all $11,500 invested, that's when I'd say, hey, maybe we pump the brakes. Maybe we move this a little bit more safer, into something a little more predictable, considering we buy it in 12 months or less.
- [13:30]
Robert
I love this question, and that is a great takeaway. Austin and I just want to add one more piece. And that is, I always say it. Austin says It a lot as well is parked. Money is dead money. And I like the fact that your money, while you're waiting and you're thinking ahead, you're forecasting like we talk about. You don't have this money parked doing nothing because 12 months is too long to just have money sitting in a checking account. And I see this every single day where people are like, oh, I'm buying a house in two years, so I have $86,000 in my checking account. That is not what you want to do. You need to make sure, even in volatile markets that your money is least is in a Treasury bill or a bond account or a high yield savings account. So you're getting that 4 or 5, 6%, because at least then your money is still working hard for you while you plan for the future. So I love that you're forecasting, I love that you're making money with your money for the future. So I think it's a great strategy.
- [14:25]
Austin
Now here's a question for you, Robert. Do you have any car recommendations in the 10 to 11 thousand dollars range for our friend Carson here?
- [14:32]
Robert
Yeah, I mean, any time you're going to buy a car and you want to pay cash, I think the best way to go about it is to go to an affluent area or search in an affluent area. Because what you want to find is retirees that are giving up a car because they no longer drive it it. And if you live in an area where there is an affluent retiree community and you can buy that 567-year-old BMW or Audi or Lexus and it has low miles and was well taken care of, that is the move for those of you, whether you're financing or paying cash to do when you're looking for a nice reliable car that doesn't have150,000 miles on it, that's what I would do. You could make a whole business around that. Because a lot of these affluent communities that have older drivers that are no longer using these cars, they have multiple car families, they will sell these cars for reasonable prices and you're not going to have the normal wear and tear of somebody that owned it and had four kids in it, or they beat it up for five years and it has a ton of miles. That's what I would do.
- [15:40]
Austin
I am so glad you said that because that's exactly what I did in 2018, 2019 when I realized I couldn't afford my brand new cool Lexus car payment with a big insurance payment and I was being stupid with my money. And I said, I need to start investing more aggressively. I need to get rid of this car and go drive a normal car. And so I saved up and I had about $7,000 to go use to buy a car with. And that's exactly what I did. I bought a 2005, so a 15 year old car at the time, Lexus ES330 with about 45,000 miles on it.
- [16:15]
Robert
Perfect.
- [16:15]
Austin
And it was immaculate. It was a 77 year old woman who couldn't drive anymore and the back seats were only used to put her groceries in. I mean, it was a cool, cool car. It worked for me. All I had to do is get to point a point. Point being come home. I mean, and it, it was great. So that is the exact advice I would have given Carson as well. Right. Find yourself a car that's, you know, 8 to 12, maybe 13, 14, 15 years old, but it's one of these reliable Toyotas or Lexus or one of these brands like Honda. Right? That's been around for a long time. Totally, totally agree, Robert.
- [16:48]
Robert
I love that question and I'm so glad you did that. That is awesome because I didn't know you back then. So that is really cool.
- [16:54]
Austin
So our next question comes from Braulio C. Braulio says, hey, Robert naustin, I have $75,000 in my 401k from an old employer. I'd like to get your guys take on what I can do with this money. I currently have a Roth ira, but I'm not sure as to whether I should roll it into that and take the tax hit now or open a traditional IRA and roll it over into that without taking a tax hit. Assuming I do open a Roth IRA, would I invest that 75,000 over time into the ETFs that you talk about? Do it all at once? How do I figure this out? Thank you guys in advance. I appreciate all the education you provide. Have a nice day. You have a nice day too, Braulio. Thanks so much for listening to the show, my friend. I'll take a first stab at this one. So, Braulio, you're thinking about this completely, correct? Just to break it down for everyone, there are two flavors of retirement accounts that are like commonly known. One flavor is employer sponsored. The other flavor is individual. Right now, the employer sponsored one could be a 403B. A 401K. There's a lot of different combinations of numbers and letters over there. But in this instance it's a 401k and then the IRA. Right. Both traditional or Roth is The individual retirement account that anyone can open up. They don't have to be employed by anyone, just have a Social Security number, and you're off into the races. So in Braulio's instance, he's saying, hey, guys, I've got this 401k from my employer. It's got $75,000 into it, but it's a traditional 401k, which means that all the money that Braglio put into this account was tax deferred. He had to write that off of his taxable income for the year. Now what happens is you write off the taxes now to pay the taxes later in retirement. So how it is today, that 75,000 will grow to, let's say, I don't know, 500,000 by the time he's 65. And then any time that he takes the 500,000 or any amount of that and puts it in his checking account and enjoys it, he's paying income tax on that money. And the reason why Robert and I are such big proponents of the Roth 401K and the Roth IRA is because, yeah, you're paying taxes on the money before you put it into the account, but it grows tax free, and all the money you take out of it is also tax free. So we agree, Braglio, that you should be aiming to have all 75,000 of this in a Roth IRA. But we believe you should work closely with, like, a tax accountant or someone who could, you know, get a better understanding of your total financial picture that will allow you to pay as little amount of taxes as you roll that money over as possible. What we're saying here specifically is maybe instead of lump sum, all 75,000 rollover at once in one calendar year. Maybe you roll over 15,000 a year for five years, and that keeps your taxable income pretty low. Right. So that's the way we do it. And then I'll let Robert answer the second half of this as to how to deploy the 75,000 into what ETFs and at what time frame.
- [19:51]
Robert
Yeah, I love this question. And, Austin, good takeaway. Two things for me. Number one, we should always assume that the taxes are going to be higher in the future. That is why we're always telling people to take that tax hit as soon as possible because you don't want to kick the can down the road forever and then have a much higher tax bill later on because we have to assume they're always going to go up. So that's number one. But number two, the deployment you're talking about in a basket of these low cost index funds. And ETFs is definitely the playbook because you want something that's going to perform well over time, that's going to give you diversity, but also is going to just be something that, you know, is tried and true. You know, we've talked about this over and over again. People are always like, why do you guys love VO so much? And that is because it has performed 11.8%, you know, over time for the past 60, 70 years. And we love that because. Is it exciting? No. Is it crazy high flying like it would be if you just bought Nvidia stock or Palantir or something? No. But we want to make sure that people have enough diversity so they can make sure that their portfolio breakdown provides them security during the tough times and the good times. So they're not just always in these high flyer, you know, sectors or stocks. So that's my takeaway for it. I think it's the right move. I always want to make sure to take care of my taxes sooner than later because we don't know what's going to happen down the road.
- [21:18]
Austin
And Robert, you did a great job explaining this. Why it's so important to have these index funds and ETFs in your retirement account is because this is your nest egg. This is the money that if you blow up this account and it goes to zero, you know, trade, you do options, you do crypto, whatever, like congrats, you're broke now in retirement, right? This is the account that you don't touch. This is your fortress of solitude when it comes to retirement. Having the ability to retire with dignity means that you have now a wall, a financial wall around you through this retirement account that no one's going to be able to break through and penetrate. And that happens by investing into the long standing blue chip, tried and true index funds and ETFs over a very long period of time. This 75,000, if you invest it, right? So there's actually a rule called the rule of 72, Robert. And I love this rule because it's a really easy way for people to think, how quickly can my money double in the stock market, right? Because we're like, I want to double my money, I want to triple my money, whatever, right? So this rule allows people to do that. So braulio for you here, what you should be doing is the rule of 72 says you take 72 and you divide it by your expected annual return. And whenever the number that gets spit out is how long it's going to take for your money to double. So we know the stock market on average goes up about 10% per year, which means 72 divided by 10 is 7.2 or about seven years. So on average, your $75,000 is going to double every seven years. So that's going to go from 75 to 150 to 300 to 600 to 1.2 million. Right. We're talking about doubling compound interest. That's how that works. And that's going to allow you to retire with dignity and retire with grace.
- [22:59]
Robert
And it really comes down to portfolio construction because so many people think that all of their money that they're investing towards retirement and building wealth is up for grabs. And I think the simplest way to put it is, and Austin, you really alluded to it well, is you have to look at the retirement account as your fortress. You don't touch it. You're not going into it to buy a boat. You're not going into it to renovate the den or the man cave. That is your money, your forever money that hopefully you don't dip in and out of year over year because it'll never grow. That is it. Then you have the bridge account. You have the other investment accounts. Those are the ones that, if need be, you can go in, take some money in and out of over time because you have your fortress of solitude, as Austin stated, because that is what keeps you, you know, dignified in retirement. Because at the end of the day, no one's going to be there for you in retirement. And you need to make sure you cover your bases for yourself to make sure that you can retire with dignity.
- [24:03]
Austin
So our next question comes from Mark N. Mark says. Hey, Austin and Robert, I know you've talked about the foundations for building your base and your Roth IRA and ETFs you guys love and recommend, but I have some pushback and I hope you could answer it for me. We all know your favorite ETFs of Voo, QQQ, VGT, VTI, Moat and others, just to name a few. But when comparing them side by side, most if not all of them generally follow the path of the S&P 500. Due to their heavy weighting in stocks, this doesn't seem very diversified. Wouldn't it be smarter to invest in the S&P 500 as well as then just like other sectors or markets to track different things? I love the show. I've bing nearly every episode since I found it. I'm just hoping you guys could give me some clarity on this. This is a great question, Mark. Robert, you want to kick this one off?
- [24:51]
Robert
I would love to. Mark, great question. The answer is performance. We could come to you, everyone that follows along and watches the podcast as part of the Rich Habits Network. And we could say, okay, you're going to have XYZ percentage in the S&P 500, then we're going to do 20% in bonds, we're going to do 20% in international stocks, and we're going to do the rest in treasury bills. We could do that. But when we talk about diversity, we also talk about fine wine and whiskey. We talk about real estate, we talk about cryptocurrency, we talk about fine artwork. We talk about all these things because we don't believe in diversity just for the sake of diversity, if that makes sense. We don't think you need to be overly diversified in your portfolio of ETFs and index funds or even stocks just to say you're fully diversified. Because in our defense of this, we believe that a smaller basket of index funds is way better than so much diversity that you're not going to perform as well as we would like because you have a little bit of money in way too many different sectors and too many investments instead of a lot of money in the 4, 5, 6 sectors that we like the best. So I hope that helps.
- [26:05]
Austin
I'm right there with you, Robert. And like how I think about it, again is this idea of portfolio construction. I want to have the vast majority of my investment portfolio invested into US stocks, equities, ETFs, all that fun stuff, right? Because I believe that betting on America will continue to be the right bet for the foreseeable future. And the easiest way to just reflect upon this and check my work is to look at the Vanguard Total International stock index fund. VXUS. That's the ticker VXUS. I pulled it up here. Robert, the 10 year total return of VXUS is 73%. The S&P 500's 10 year total return, even after this correction, we've experienced 229%. So could I have some VXUS in my portfolio? Sure. Right. If I had that right now, you're right, I'd be in the green. Right. International stocks are doing well this year, which I think is probably why Mark is thinking about this. Like, what's going on with the US Under Trump? We've got all this volatility with tariffs. Let's put our money elsewhere. I'm sure he's looking at this and like yo, it's up eight and a half percent. This is cool. I want to put my money here. Why doesn't Austin and Robert talk about it? I get that. But if you zoom out and not just look at a three month period, but instead look at the last decade of performance which is again we think about in years and decades here as investors, not just weeks, months and quarters. The long standing decade of performance has only been 70 ish percent, whereas the S&P has been over 229%. And so I would much rather have my money invested into American exceptionalism that comes with the S&P 500. The 500 largest, most profitable companies in the United States that gets rebalanced every single three months. Like that to me is a really cool winning strategy. And to Robert's point, yeah, I have some fine art, I've got some real estate, I've got some cryptocurrency, silver, gold, right? All that stuff is really awesome. And I agree, right, if I want to little bit of, I don't know, Chinese tech right now is kind of popular, I'll dabble in the dark arts of some diversification over there, but that's only a 2, maybe 3% weighting of my portfolio. Again, the vast majority, 65 to 85% is American capitalism.
- [28:20]
Robert
Yeah, 100%. So I love this question because it just really illustrates we want diversification, but not just for the sake of diversification. And like Austin alluded to, yes, the Chinese market is starting to look good right now. There's some other markets that have promise, but overall I'm going to bet on the US markets way more. And that is why we diversify throughout other sectors other than just the stock market.
- [28:45]
Austin
Really good question though Mark. And we love getting this feedback from people looking for clarity and not attacking us, but like, hey guys, like yeah, help me understand this better. And our next question from Ali is another one of those. Ali says, hey Austin and Robert, I've been listening to your podcast for about four months and I hear some possible conflicting ideas when it comes to discussing how portfolio should be managed. For example, Robert mentions that the best performing portfolios are those of people who lost their passwords or are dead, meaning it's the ideal set it and forget it mentality. Another time though, Robert mentioned that he likes to have active management and changing your allocations based on market conditions. So I'd really appreciate it if you guys can clear this up. Robert, I'll let you clear it up.
- [29:25]
Robert
I love it and I'm so glad we're covering some of these. So great question Ali. Here's how to clear it up. The reason I say both sides of this is because of one one point and that is so many people have knee jerk reactions to the market conditions and the sentiment based around headlines that they see every single day. So here's what happens. If they don't set it and forget it as you allude to, then what happens is they end up buying high and selling low because they're trying to time the market and they get scared when there's volatility or negative headlines. In a perfect world world you have active management of your money but you're also making these allocation changes throughout tougher markets. Whereas we might be adding a little more bond, we might be adding some small cap, we might be adding international. You're making those changes but they're structured and strategized because you're doing it for a reason, not having a knee jerk reaction to a headline. And that is why it is always, I say it all the time, that these people that lost their password or someone that died has a better performing portfolio because they're not reacting to the markets. They have a long term thesis. So I hope that helps break it down. We want people to think long term and adjust accordingly along the way. And by adjusting, that does not mean selling all the time and trying to time the market when there's bad news and volatility.
- [30:52]
Austin
For me, whenever I think about adjusting, I think of what I'm doing now with my net new capital. So I'm always saying, yeah, I've got a bunch of index funds and ETFs, I've got some blue chip single stocks, I've got some thematics, things like that that get me excited about my portfolio. But then I'm looking like, okay, interesting. Silver and gold look like they've been doing really well. I think it's a great hedge against potential inflation and volatility in the markets. Maybe I should put some net new capital into these asset classes. I'm not saying oh, I'm going to sell my VOO so I can go park it into gold or oh my gosh, I got to sell this so I can go do that. I'm not saying that, that. I'm saying net new capital is going into a new idea. And then to that point, Robert, maybe three months, six months, nine months or 12 months go by. And to your point, I strategically think I'm like, okay, great, I've now had the opportunity for this trade to take place. I've been patient with it. It's either done well or it's not done well. Now I have a new thesis on that idea. Does my original thesis that cybersecurity will only be more and more in demand as AI continues to go and become a worldwide phenomenon? Yes, I still have that thesis. Therefore, I'll continue to add some cybersecurity stocks to my portfolio. But maybe there's a world where cybersecurity disappears and no one needs it anymore. Then I'm like, all right, well I'm going to rebalance and put that elsewhere. I'm not making trades based on emotion. Right. That's what Robert and I are trying to get out with. This is like having active management means that you actively are reviewing your portfolio. You're looking at understanding trends. You zoom out to a 3, 6, 9, 12, 8, 18 month time horizon on some of these ideas and you're not looking at the day to day, the week to week volatility causing you to what Robert said, buy high and sell low.
- [32:41]
Robert
The biggest takeaway here is that so many people do this. I've witnessed it for decades. They chase the shiny ball. People do it every single day. A lot of people do it with their portfolios and their family's money where they go oh my God, gold's going to all time highs and they pull everything out of one thing and they put it in gold. Gold. Oh my God, crypto's going crazy. Someone said that bitcoin was going to be $1 million within two years. They pull everything out and they go all in in bitcoin. This is a repeatable cycle and most people that do this never build wealth because they don't have diversity and they don't cover their bases. That is why we try to cover both sides of the fence. To make sure that everyone is diversified, thinking long term and automates as much as they can in their investing strategy to make sure that they're not always chasing the shiny ball syndrome. So if you're someone that is trying not to chase the shiny ball syndrome, that is why we like things during volatile times. Like the bond account you can open@public.com, make that 6%, have some security and make sure you understand it's not always going to be sexy and fun. Investing is not supposed to be that. It is supposed to be a way way for you to be able to build wealth over time and have that security for your financial future. So remember, you can lock in 6% or higher yield right now with a bond account. But remember your yield isn't locked in until the time of purchase. So make sure you act fast because if you lock in the 6% or higher yield with a diversified portfolio of high yield investment grade corporate bonds only at public.com forward/rich habits.
- [34:23]
Austin
Yeah, it's never been more important right now to have some stability in your portfolio, especially as we reflect upon 2025 being this year of volatility. I still can't believe how well we nailed that prediction, Robert. I mean we also predicted some IPOs. It's going to be a big year for IPOs. I don't know if you saw but klarna now pay later company from I think it's Sweden, they just announced that they've filed their paperwork for an IPO. I think we'll see much more more IPO action here in 25. And our third prediction, Robert, was that the crypto bull market will peak this year. Right now, bitcoin has so far peaked around 105 or around 82 at time of recording. I'm not going to say that the top is in because I'm not exactly convinced it is, but it has been an interesting couple of weeks. So our next question comes from Daniel R. Daniel says My name is Daniel R. And I'm a regular follower of the Rich Habits podcast and I really enjoy your the show. I'm reaching out today with a question regarding the current economic climate. As news continues to circulate about the possibility of a recession, many investors and business owners like myself are seeking guidance on how to approach this potential financial crisis. I truly value the advice you guys often share about staying ahead of the game, and I'd appreciate any tools, strategies or advice you can offer to help me prepare for a possible downturn. I love this question, Daniel, and I'll take a first stab at it. I'm going to answer this question from two different perspectives as an individual person as well as as a business owner. So starting as an individual human being that's just living their life every single day. The best way to prepare for a downturn is to have three to six months of your monthly expenses saved up in an emergency fund via a high yield savings account. Remember guys, Murphy's Law is real. What can go wrong will go wrong. And what can go wrong is you might get laid off of your jaw or you know, something to do with your employment or your income might drop, maybe the sales commissions go lower, whatever's going on during economic uncertainty. So having that buffer three to six months of expenses has never been more important. And if you don't yet have something like this saved up. Use the link in the show notes below to download our Honest Budget. The Honest Budget is going to allow you to build a budget from scratch, find the margin on a monthly basis so you can begin saving for the this. Once you've got that three to six months, then I think it really comes down to two or three things. The first one is if you're worried that your income's going to drop, it's time to find some side hustles. It's time to get a little bit more familiar with maybe some Ubers, some door dash, some instacart, some like, you know, gig economy type vibes and be ready to say, hey, I'm on these platforms. If I need to make 200, 300, $500 a week using some of these things, I'm comfortable and I know how to do that, right? Have, have the ability to trade time for money on some platform like this, readily available to you. And then finally is maybe it's time to brush up the resume. Maybe it's time you take a little screenshot, you upload it into chat, GPT or GROK or whatever else and you say, hey, how do I change my resume? Here's my recent experience, here's how my title has kind of evolved over time. So in case there is a layoff that happens in your company, you have a really updated, nice resume that you can begin passing out and applying for jobs. And my biggest piece of advice when it comes to finding a new job is the proximity principle, right? Getting as close as you possibly can to the hiring manager. Do you know someone that works at that company you're applying for, can they put in a good word for you? Just them putting in that good word. Bringing your resume to the top of the stack, hand delivering it to the hiring manager is all the difference when it comes to getting an interview and putting yourself out there. And then of course, brushing up on some interview, you know, question and answer type vibes, I think that's always smart as well. But having your finances in order as an individual, making sure you got that emergency, emergency fund, making sure you're ready to earn any income if you have a gap in income, because maybe an economic downturn takes that away from you. Oh, and then Robert, here's a great one, right? Being able to find the deals when it comes to groceries, I'm telling y'all, Aldi is a gem. If you've not yet started shopping at Aldi, you need to. It is what we do in this household, it allows us to save so much money on our monthly groceries. Go shop at Aldi, cook at home, figure out some cool recipes that work for you. One Pan Meals is what my girlfriend and I like to make here, here. And they're super simple, super cheap, super easy, and really delicious.
- [38:43]
Robert
So I love this. And let me answer the business side of this question. I think the key takeaways are always improving on your literacy. So you understand, because, like in business, you can't always increase sales, especially in an economic downturn. You can't always, you know, create new products or new ways to increase profitability. But you can look from within. And so what I mean by that is sometimes let's say Your business does $700,000 a year, and from that you make a hundred thousand in net profit and you're afraid or that's going down because of the economic condition. What you could do is look from within to find ways to cut costs, find ways to improve processes or other ways to define how you can keep more money for yourself. So I think that's important. But then also when it comes to the investing side of things is having diversity and a better understanding of what's happening in the markets. That's why so many people do well within the rich habits network, because they have a constant influx from Austin and I in the community of information of what is really happening in the markets. Not the clickbait headlines, but the real stuff. What is going on and how should we react to that? So I think it's important to have forecasting literacy and being able to look from within for your businesses and your investing, to be able to make sure you can weather any storm.
- [40:09]
Austin
And I think too, if you are a B2B business, right, your revenue comes from selling products and services to other businesses. Maybe now is a good time for you to start reaching back out and just being that, hey, just, you know, want to check in and see how things have been going? I haven't heard from you in a couple months or, you know, we worked together back in 2023. Just want to remind you that here's some new services we're doing, right? Switching from a offensive posture, which is like, people are inbound on my company and I'm making all this great money to a defensive posture, which is I'm going to start reaching out, I'm going to start shaking some bushes. I'm going to start, you know, trying to drum up some business for myself is a really good idea in my opinion. And the last piece of advice, when it comes to the business stuff, Robert, I also think businesses should have their own emergency funds. You know, if things slow down. Having 20, 30, 40, $50,000 sitting in a savings account in the business's name is a great idea to help you run things like payroll, stay up to date on your utilities, maybe your rent, things like that. If you have a storefront. I think just having a little bit of buffer is a really good idea as well.
- [41:10]
Robert
100%. I totally agree with that.
- [41:13]
Austin
So our next question comes from Reedy. L. Reedy says, good morning, new listener here. I've recently started investing in stocks, but with the tariff threats, I'm currently in the red. I loved your episodes on where you mentioned time in the market versus timing the market. So if you were in my shoes, what advice would you give? Also, which episodes would you recommend for a beginner like me looking to improve my stock market knowledge? I'll answer that second part first. There's actually an episode I think it's like way back in 2023 called how to Build an Investment Portfolio from Scratch. It was like maybe our first one of our first 20 episodes. Go listen to that.
- [41:46]
Robert
It's a great.
- [41:47]
Austin
Right? You're going to love that. Robert, you want to kick off this one when it comes to timing the market.
- [41:51]
Robert
Yeah. It's just really. I know you're new, I know the headlines are scary, the tariffs are scary, all of that. But in the end you have to zoom out. And you mentioned that about not timing the market. That is fantastic. Please, please don't worry about your day to day pricing that you're in the red, your money's going down because you're only losing money if you sell, sell. And if you have a long term time horizon for your investments, you're going to do great. So just keep that in mind because no one can time the market. And the longer you allow the markets to have their volatility, have their drawdowns and allow for compound interest to do its job on your money by reinvesting your profits over time, the better off you're going to be. So I know it's tough. Sometimes you have to take the emotion out of it and you just have to really let it ride. I mean, I've been in situations, I've been doing this for over 35 years where I had companies that I believed in even three years ago, Palantir, Nvidia, some of these companies at that time were down 50, 60, 70%. DraftKings was one of them as well. And now they've all Come back to be tremendous winners for myself, my listeners, the listeners here at the Rich Habits Network. And so it's just all about staying steadfast. Past understanding volatility is important, is always going to be there and riding out the storm. That is all it's about, I guess.
- [43:15]
Austin
The piece of advice that I could give people. And this is what I use during times of volatility because it is really, it's psychological warfare. It really is saying, I'm going to put money into something just for it to go down in value. It is the most psychological battle that you will ever experience when it comes to investing as investing during a bear market or investing during a correction or you have know, 2022 was so hard for so many of us because the markets contracted 20, 30, 40%. Single stocks were down 50, 60, 70%. So like during those times of volatility, it is so hard to stay focused. Now, here's what I want you to do. This is the exercise that helps me stay focused. I do not focus on what my portfolio has performed from an up or down perspective, even up, right? I don't care about the ups. I care about instead, how much money have I invested. If I focus instead on what I'm investing and how much I'm investing, oh, have I hit my 50,000 for the year mark? Have I hit my hundred thousand for the year mark? Have I hit my, you know, whatever that is for you? Maybe it's 10,000 or 5,000 or 2,000. But having a goal of I want to invest X amount of money before the end of the year, X amount of money this month, or X amount of money before the end of summer, whatever it is, and then going and saying, okay, did I hit this goal goal that allows me to feel accomplished. It makes me feel like I'm doing something, I'm moving my portfolio in the right direction despite volatility. Because if you just focus on the ups and downs of the markets on a daily, weekly or monthly basis, one, you might get euphorically excited about the ups. And then, you know, to Robert's point, you know, get a little too emotional. Someone said, bitcoin's going to a million. I'm going to sell my house, sell my car and put it all into the markets, and then now you're buying the top and selling the bottom. It's a terrible situation. Instead, if you have a strategy and you say, I'm going to invest 200 doll week or $2,000, you know, every month or whatever you can afford, focusing on that will allow you to say I did this, I accomplished this goal. Here's my next one. I'm going to stick to it. And the other thing I want to mention is like who wants to buy the all time highs anyway, right? Don't get me wrong. Whenever we break out to a brand new all time high previously, you know, higher than our last all time high that happened before this last correction. So. So for example, Voo was trading around $432 a share in late 2021. So when we broke out above 430 in late 2023, we rallied another 30%. I'll buy that all time high. That's exciting, right? I love to see that. But we've been rallying now for a couple years. We're experiencing some volatility and I think this is the time to take advantage of it. Get excited about the long term and stay focused. Instead fast on your plan and automating your money and automating your investments. No matter the price price.
- [46:01]
Robert
And this is the exact reason you mentioned automation. You need to dollar cost average because then no matter if the market is at the top, the market's in the middle, the market's at the bottom. It's not going to matter over time because your dollar cost averaging, you're being consistent and you're diversifying. That's it. If you want to become wealthy and financially free, that's the playbook and keep doing that.
- [46:24]
Austin
And our last question comes from Brooke M. Brooke says quick question. Do you consider your base to include your emergency fund or is the base separate? Separate from the money you have set aside for your emergency fund. So it is actually separate. Robert and I always say you want your money working for you as hard as you work to get it, which means it needs to be invested, rocking and rolling and growing for you. Your emergency fund will grow at 3 or 4%. But we want you to have 50 to $100,000, preferably a hundred thousand dollars invested across all of your brokerage accounts. If it's your Roth IRA, your 401k, your account on public whatever, we don't care how it's invested. We want a hundred thousand cumulatively invested and working for you in the markets. That is the base.
- [47:04]
Robert
Yeah. And the emergency fund, as Austin alluded to, is not the same. It is not your investment fund. It is your emergency money. Case you need tires, the dishwasher goes bad, the roof, something happens to the roof and you have to replace a roof, whatever it may be. We don't want people robbing from their future, from their retirement funds, their investment funds, funds to pay for the current. That is the importance of understanding. The difference is that part of your base is not the emergency fund. You need. Both so, so important because we want to make sure we always talk about making your money work as hard for you as you work to get it. This is that instance, that fund. That is your bridge account or your Roth ira. Those are all for the future. Those are not to pay for current expenses like emergency. That's why we consider it separate.
- [47:53]
Austin
As a final reminder, join us today, Thursday, March 20th at 4pm Eastern Time for our Fire Strategy webinar. It's going to be a blast. We can't wait to talk about this stuff with you all. Hopefully you'll learn something that'll allow you to retire early again. It's completely free, but we only have 500 seats and they are filling up quick. There's a link in the show notes below to go. Check that out.
- [48:13]
Robert
And thanks again each and every week for all of you that follow along in the Rich Habits Podcast, the Rich Habits Network for many of you that are members and also just sharing with a friend. If you find the value that we're providing and you believe it can help someone, turn them on to the Rich Habits Podcast. Because you never know how you can change someone's life by getting them involved in financial literacy, business, mindset, all of these things that we believe can help people find their way to financial freedom and living gracefully in retirement.
- [48:47]
Austin
And to the 70, 80, sometimes 90,000 of you that come back every single week to listen to our show, we are super grateful. Don't forget you can ask us a question on Instagram, you can email us a question or join the Rich Habits Network 7 day free trial right now and ask us a question in there. As always, thanks everyone and have a great rest of your week.