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Rich Habits Podcast
Q&A: Selling a Business for $2.8M, $2K of Side Hustles in 3 Weeks, & How to Structure Your LLCs
00:49:11
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- [00:00]
A
Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify. This is our question and answer edition, which means you send us questions via Instagram dms@rich habits podcast. Email us questions@richhabitspodcast gmail.com or more importantly, you're a part of the Rich Habits Network, our sort of private community where we give that one to many experience to our biggest fans and you get your questions answered. Both in there and on the episodes like today, we have a ton of questions. Some questions about some person selling a business for 2.8 million. Another person who's looking to, you know, have, I think it's like half a million dollars that they need to go invest. Another question about how to protect your assets and like, you know, structuring your LLCs and sort of your trusts and things like that. Another question comes from a 19 year old who made $3,000. It was $2,000 walking dogs over the last three weeks because they listened to our side Hustle episode that we published about a month ago. So we have a ton of really fun questions. We can't wait to dive into them. But before we dive into that, got to give you guys a heads up. Interest rates are falling. But lock in a 6% or higher yield with a bond account on public.com and that's a pretty big deal because when rates drop, so can the interest you earn on your investment with those traditional high yield savings accounts.
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B
A bond account allows you to lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds. So while other people are watching their return shrink, you can sit back with regular interest payments.
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A
But you might want to act fast because your yield is not locked in until you actually invest. The good news is it only takes a couple of minutes to sign up@public.com and you can go lock in that 6% or higher yield with a bond account. Again, that's only@public.com rich habits. Again, public.com rich habits. This was brought to you by Public Investing. They're a member of FINRA and SIPC. These rates are as November 4, 2024. The average annualized yield to worst across the bond account is greater than 6%. Yield to worst is not guaranteed. This is not an investment recommendation. All investing involves risk. Please visit public.comdisclosures/bond account for more information. And I know, Robert, we talk about the bond account. We've talked about, you know, how important it is to lock in rates like this. And I think it's More important than ever because we are now seeing another 25 basis point cut around the horizon here on November 7th. So just here in a couple of days from the Federal Reserve, I mean rates are going to go down in your high yield savings accounts, right? This is an opportunity for you to trade that 3 1/2 to 4% rate in your high yield savings account for a 6% or higher rate with a public.com bond account. So go learn more about it, do your own research, check it out. But we're just here to let you know what we're looking at and what gets us excited.
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B
Yeah, we always talk about active management and this is just that you're basically flip flopping from your high yield savings over to this bond account and keeping those yields high. It's very important to understand that you're not just going to sit back and expect one thing to be great for years and years. Sometimes you have to move your money around from account to account. That's why we love public because they do so many of these really great vehicles to keep those yields high. And I love it.
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A
So let's jump into our first question. This one comes from inside the Rich Habits Network and our question is by John B. John B. Says hello Rich Habits Network. I'm so excited to be here and I've gotten so much value since joining. I'm combing the Internet and my lawyer in figuring out the best way to structure my assets for max maximizing protection. I have a holding company that holds all of my LLCs. For each investment property that I have three going on four now I've signed up to start a business. Now my question is do each business example franchise in this circumstance would I need to also put that in an individual llc? And additionally do you have any general tips or tricks on what the best structure is for those businesses? I have a trust that covers my holding company and the holding company has all the LLCs. So I'm fingers crossed I don't get screwed on any of this but would love Robert's advice. So Robert, I'll let you jump in on this one.
- [04:05]
B
John B. You're on the right track. How I do it is a separate LLC for every property and every business. Then those LLC are wholly owned by the holding company and then the holding company is wholly owned by the revocable trust. That is the structure I use. That is the structure that all of the wealthiest people I know use. So you are on the right track and the answer is yes. As you open more businesses I always believe that it is best, as do my lawyers, to have each one of them in a separate llc. Now, some people that buy a lot of properties and businesses will lump 4, 5 or 6 in one LLC, then open another LLC. I don't recommend that because even though operating individual LLCs cost a little bit more every month or every quarter for accounting or, you know, banking fees or whatever it might be, I like the fact that I have more insulation and more layering for protection section. And that is the whole reason we do this. So I love where you're at. I would do it separately, keep them all separate, get them in the holding company, and then have the revocable trust own everything.
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A
Okay, Robert, So walk the listeners through, though, why you should have an individual LLC and like, all these sort of things going on behind the scenes and not just lumping them together. Right. Let's say, obviously you guys have the pizza restaurant. Like, what if someone slips and falls in the pizza restaurant and they go to sue the llc? And inside that llc, though, you know, you also have assets of like two other rental properties. So are you saying that, like, if the restaurant gets sued, they can also go after the rental properties? Is that where you separate everything?
- [05:40]
B
Yeah, that's always been my understanding. I've been doing it this way for 25 years. Is because you want to be able to protect yourself personally and the assets from an inside or an outside attack. So an inside attack could be an employee sues you for something or whatever, and the outside attack could be someone slipping and falling on your property or whatever it may be. So the goal here is to control everything and own nothing. Please, everyone watching and everyone following along to write that down. Control everything, own nothing. So by having these additional layers, you're protecting yourself. Now, you have to be careful, though. A lot of people have llc, but they don't operate them correctly. And that allows the opposing counsel, the lawyers, to be able to do what's called piercing the corporate veil. So when you launch this llc, make sure you understand you want to have a separate operating agreement, you want to make sure you have your ein number, you want to have your separate bank account, you don't want to commingle funds. All of these things are very important to make sure that you are isolated and using the layering for what it's worth and what it's there for to prevent you from being attacked personally. Because the last thing you want them to do is pierce the corporate veil, win and come after your personal assets. So that's why we keep it all.
- [06:59]
A
Separate and when you say control everything, own nothing, you're talking about out Robert Croak, Social Security number. You sitting here in front of me right now doesn't own X number of, you know, rental properties and this pizza shop, things like that. But your companies, the LLCs, they are what own those things. You control those companies. So none of these things are in your name. They're in the name of these, you know, LLCs and holding companies and trusts and things like that, of which you control all of those things 100%.
- [07:31]
B
Because at the end of the day, you never know, especially as you get bigger and bigger, bigger. You know, the old song mo money, mo problems is definitely something that comes into play because when you become successful and the word gets out and you're building this big empire, people are going to come for you. They just are. It might be an employee, an ex employee, it could be an ex spouse or girlfriend or boyfriend. It doesn't matter. At the end of the day, you just want to structure everything properly so you can stay protected.
- [07:59]
A
Now, I want to linger on this just a little bit longer. I know we've been talking about it for a while, but talk to me about one, what is an umbrella policy? Two, are they important when it comes to figuring out the total protection that John B. Might be looking for?
- [08:14]
B
That is a fantastic question. And I never hear anyone talk about it. And for me, I keep an umbrella policy of $5 million at all times just because I want to make sure I have that next level of protection. So if somebody does come after an llc, comes after me or something were to happen, God forbid, in a car accident, in the full insurances of the automobile insurance policy aren't covering. I have that umbrella policy and it's exactly what you think it means. It's covering everything to help me better protect myself and make sure that I am covered end to end for any liabilities that could come up. And the cool thing about an umbrella policy, it can help you with legal fees, it can help you with so many different things over the years. It has been a godsend for me having these umbrella policies. And I don't think they're necessary if you're just starting out. But when building that net worth, the number one thing you want to do is just be protected because people are going to come for you and you don't want to ever go backwards financially because of a frivolous lawsuit. I have had so many frivolous lawsuits over the years. We could spend a whole episode on that of how I lost money or had to fight these frivolous lawsuits to protect myself. So it's very important for John B. And everyone listening as you're building that empire, make sure you spend the time to understand these things and have them in place so you're fully protected.
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A
Our next question comes from Zach M. Zach says, I'm looking for some advice or maybe some affirmation. Here's my situation. I'm 31 years old. I have a company 401k with a balance of $130,000. This is all in a Target Date fund and I do not have the option to move that money into ETFs that we like. I only have the option for other target date funds. My minimum contribution to get maximum match is 10%. So at 10% my company matches 50%. So I get a free 5%, which is what I'm currently doing. My other account is on public.com and at $24,000 I have 12,000 in a high yield savings account with them and the other 12,000 spread across SPY, QQQ, Voo and VGT. The 24,000 hits my emergency fund target at around five to six months of expenses. I do not have a Roth IRA or any other accounts besides my checking, which I keep 1 1/2 to 2 months of expenses in there. I'm currently saving around 5 to 10% a month on top of my 401k, putting my combined savings around 15 to 20% per month. With all that information, my thought was to stop contribut to my 401k and put the current 15 to 20% toward my bridge account and just let the Target Date Fund 401k ride until retirement. My other thought is to leave it at 10%, get some free money. But my gut tells me I'm going to underperform with the Target Date fund over the next 30 years before retirement. So my analysis paralysis is this. How much would this free money cost me versus putting it all in a bridge account and building that up knowing I can invest in index funds we all know and love. Really good question, Zach. And I'm going to let Robert kick this one off.
- [11:11]
B
Zach, I love this and just the fact that you're thinking it through so in depthly and understanding, you know the opportunity cost of if you put all this money in the Target Date fund and IT underperforms these ETFs and index funds that we talk about, what is the difference and what does it cost you over 10, 20 or 30 years? The answer is none of us know. But we can Assume that it's, let's say the average target date fund earns you 6% a year. But yet Voo or QQQ, let's say they average 10, 12% a year. Well, we know then we have a 5% difference year in and year out over that 10, 20 or 30 years until you reach retirement. So for me, I would always do what Austin talks about. I would get just the match on the 401k and I would get the rest of the funds into that Roth IRA, into that bridge account. You're only 31 years old, so you have a ton of time to really take advantage of the Roth and then put the rest into this bridge account and do that active management so you can perform really well over the years. And then also the bridge account gives you the flexibility of having money and funds that are available to you anytime you need them. So I definitely think you're on the right track. And that's what I would do. Keep the minimum of whatever the match is with the company and the rest goes into the Roth and the bridge account and you will crush it over the next 25, 30 years.
- [12:37]
A
And Robert, just to kind of piggyback on what you said about the Roth IRA, Zach, I mean you're 31. Let's say you just completely write off 31 years old and you don't start investing in the Roth IRA until 32. Okay? And you start maxing this out by investing 580 something dollars toward it every single month. And then as it also increases over time, you stay maxed out and you continue to invest more and more at this, call it 10 to 12% annual return over the next 30 years, 35 years until 65, you're going to have two and a half million dollars of tax free money waiting for you in retirement. All because you started maxing out your Roth ira. Now, yes, you should absolutely go up to the match with your 401k. You should get the free money. That's great. Like go do that. That's fine, we talk about that, we teach that. But don't do it to the expense of maxing out your Roth ira. We think you have enough in your sort of take home pay here to max out your Roth ira. If you don't have enough to max out that Roth IRA, pull back the 401k contributions just a little bit because we do think the Roth IRA is going to outperform the 401k, considering it's going to be invested properly. It's not going to be holding cash Bonds, international stocks, commodities, else that comes with a target date fund. It's going to be invested into American capitalism. Right? The s and P500, the NASDAQ, VGT, VTI MOAT, all those great index funds and ETFs that we talk about. And those will do 8, 10, 12%. I mean, geez, just year to date, the stock market's up 25% this year, and it was 28% last year. The markets are up 52% since the beginning of 2023. Like, that is just amazing. And so that's what we're trying to get you to be participating in, Zach. And we're not saying it's going to go up 52% over the next two years. Right. I can't predict the. And neither can anyone else, but I do know that over a long period of time, it tends to go up double digits. Right? Call it 10 to 12%. And by having your money allocated correctly in these Tax Advantage accounts, you're going to be just fine. So don't worry about the analysis paralysis sack. You're crushing it, man. And we're rooting for you every single day.
- [14:35]
B
And I want to add one more thing for everyone to understand. I know we hammer a lot on target date funds, but let's really break it down just for a second. And that is, target date funds are totally fine. If you're trying to preserve money because they are built and structured in a way where they're not going to take a lot of risk, so they're not going to have a lot of volatility, and that is totally fine. But what I don't like about target date funds is I feel you leave too much money on the table over too long of a period of time. Now, if you were 51 and you built a decent nest egg and you wanted to have it in target date funds until retirement because you just didn't want to risk going backwards, I'd be okay with that. But at 31 years old, you have a lifetime of high earnings because generally the markets go up into the right over time. And I just think it's a mistake because you'd be leaving too much money on the table. So keep that in mind. We definitely think you can overcome this analysis paralysis and crush it in the coming years. And we're here to help.
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A
So our next question comes from Candice H. Candice says, hi, Austin and Robert. I'm looking for some investing advice. I'm in my 30s, have my CPA, and work at a CPA firm. I also help Run a family business business with my two brothers. I recently sold the business where we have equal ownership in the company. I've already received $400,000 and I'll receive another 400 to $600,000 at the beginning of 2025, all after tax. The only debt I have is on my house. I was lucky enough to purchase my house right before COVID and since then the housing market has really taken off. I bought my house for $216,000 and I currently have an outstanding mortgage on it at 149,000 with an interest rate of 4.75%. I've been told by a realtor that if I listed my house it would go for about 305, maybe 315,000 for investing. I currently have 25,000 in treasuries, 464,000 in a high yield cash account on public.com and roughly 25,000 split evenly between some of the nuclear stocks that you guys mentioned in your last episode. I currently max out my contributions to a Roth IRA in hsa. I would like some advice on what you think I should do with the cash I've already received and will receive over the next couple months. My future goal is to grow my passive income where I don't have to work at all. But right now I'm focused on buying a new house with some acreage. Houses in my area with at least an acre of land seem to be going for 450 to 650 thousand dollars depending on the location. One, what are your thoughts on how I should invest my money? And two, what do you guys think about me taking this money and going out and buying my forever home with some acreage? Rober let you kick this one off.
- [17:11]
B
Yeah, I love this. You're in a great situation. You just need to get a little more aggressive. In my opinion right now you have way too much money sitting in a high yield savings account. Some of that money needs to be mixed into these, you know, blue chip funds that we talk about all the time, like voo, qqq, vgt, because those are going to perform well over time and we want to make sure we're not leaving so much money on the table by having this amount in a high yield savings account account. So that is one thing that I would do. Also, at your age, in your 30s, I don't see any cryptocurrency. I think with this much money you should have a small portion of it in Bitcoin, Ethereum, maybe some XRP and Chainlink. Get a small portfolio there as well, to give you some exposure to that market. And then also I love that you're thinking about this forever home. But I would just make sure you don't overdo it right now because your current living situation is really incredible. And if the market is going up on that property, maybe, maybe consider because you have that property at such a low interest rate, turning that into a long term rental, keep getting the tax write offs, keep getting the capital appreciation on that property, and then still go buy the other property. So those would be my takeaways. I just want to see you have more money diversified into the things we talk about all the time, rather than just these little tiny amounts, maybe in nuclear, which I think is a great sector. But we also want to make sure that you have the. These kind of boring investments that perform really well each and every year. Like the S P500.
- [18:45]
A
I liked all that. Robert. That's really good. Kind of just thinking out loud here. Right. So if your current goal is to buy a house with some acreage, then sell your house that you live in right now at this 4.75% interest rate. Sure. Is it a low interest rate? Yeah, it's kind of low. It's not high. It's not too low. It's like right in the middle. Right. Let's call it 5%, sell the house. Which means that you would take home about $150,000, maybe close to 125,000. After everything's said and done there with your realtor, you already have 400,000 sitting in a high yield savings account. So now we have 525,000. And then you're going to get another, let's call it $500,000 in the next couple months, all after taxes. So we're talking about once you sell your house and look at your high yield savings accounts, just over a million dollars. If it were me, I would do the following. I would would park probably 500,000 of that into the S P 500, NASDAQ, VTI, all these things that will allow it to grow specifically double over the next seven years because the S&P 500 doubles on average every seven years. So my 500,000 in seven years will now be worth about a million dollars. I'm going to take the other $500,000 and find my dream home. Which means that maybe not spending all 500,000 on buying the house. I'm not saying buy a house in cash, but what I am saying is, is putting down enough of a down payment where that monthly mortgage isn't a crazy burden on you but also having enough set aside where when you want to do those, you know, that 80,000 renovation or that a hundred thousand renovation and you want to completely redo the kitchen because it was, you know, built in the 90s but it's sitting on seven acres and it's all this perfect stuff for you. So have enough money set aside where you can also buy your dream house and renovate it with the other half a million dollars and then whatever you have left, park that again back into, you know, The S&P 500, things like that that we've talked about over here in the bridge account. Now fast forward seven, eight, nine years. You're now in your early 40s I'd imagine call it 42, 43. You have, let's call it 1 million, $1.2 million that is in this bridge account. You can immediately flip all of that into monthly income paying ETFs like SPY, QQQI, BTCI perhaps and these other neos funds that we talk about allowing you to make 10 to 15,000amonth in passive income. So check your long term goal of passive income and completely retiring is done. And now seven years down, the still have a mortgage on the house which is fine, but the mortgage is now so, you know, still low enough that it's not that impactful on a month to month basis for you. And number two, I'd imagine in seven years, Robert, interest rates will have dropped on 30 year fixed mortgages allowing you to refinance this for out of, let's call it the seven and a half where it's at right now, maybe closer to three and a half, four and a half which will take you back to where you were pre Covid there. So that's my question. Quick money to go find that forever home, renovate it, turn into something special as well as park this money in the S P500, let it grow aggressively over the next seven, eight, nine years, add to it over time because I'm sure you're going to keep making money and then when you're ready to truly, you know, set it and forget it, really stop working because you said that was a long term goal of yours, you can now move that into these neos funds and then maybe even if you want to pay off the mortgage because that's been a dream of yours or something, you could do that too. But the only mistake I want to make sure you don't make is forgetting about the Roth ira. You should still be maxing that out every single year. At 7,000 a year. If not, you know it's going to grow over time, too. So keep maxing that out until retirement. That's what I would do if I was in your situation.
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B
I've got one more thing, and this is more of a mindset concept, and that is you mentioned you feel like you're behind. I promise you the hundreds of calls I do a month in a year, you know, with people that are working towards financial freedom. At your age, you are not behind, mind, you are doing wonderfully well. You are here asking these questions. You are listening to our podcast. So you're taking your money and your personal finances seriously. A lot of people don't even pay attention to their finances until they're 45 or 55 years old. Then they really have some catching up to do. I promise you, you're not behind. I love that you're thinking about it that way because you're being serious about it. But you have a long, prosperous future ahead of yourself and we're really glad you're here and we're excited for you to join the Rich Habits Network in December Member as well. I think you'll get a ton of value from it and we look forward.
- [23:08]
A
To having you 100%. And I think at the end of the day, for anyone else listening that feels behind in their investing journey, you, statistically, you probably aren't first off, right? There's a lot of people that are like, oh, I'm 42 and I only have 100,000 or, oh, I'm 36, I only have 12,000 invested. Like, I'm pretty sure the median, you know, 401k balance at 65 years old is like 180 grand. But I just want people to know, like, you still have so much time and then even, let's call it, Once you are 65, you can continue to invest. You're going to be around for another 20 years. My dad's 79 right now and he's still kicking and having a great time. We all have those grandparents that are in their 70s and 80s that are just hanging out and still doing it, right? So don't feel like, you know, 65 years old is the shot clock. And then going back to another question we had, right? You don't have to, you know, oh, 65th birthday. Time to sit on a beach for the rest of my life. Time to play golf every day or watch sports for the rest of my life. No, like, go have your encore career. Maybe go take a couple years off and enjoy retirement as you should. But there's a lot of people listening, including myself, that feel like we're never going to retire because we love what we do. We love going out and working and providing value in the marketplace and, you know, being that resourceful older person for someone much younger. Right. There's a lot of just good that that comes from that. I think Robert's a great example. Right. The guy's, you know, edging on 60 years old and he is having a blast right now with the podcast. So the encore career, I think, is a great idea for a lot of people as well.
- [24:29]
B
You know, I always tell people you don't need as much as you think. You just need to make sure you understand what you need. And that's one of the critical thinking moments. Your life, especially for those of you that are younger, getting ahead of it is the greatest thing you can do for your later self because then you're not going to be panicked at 55 or 65 years old because you have to always hope that you can take care of yourself because you don't always know if others are going to be there for you. So this is a great episode and a great question because I love to talk about this to help people think ahead in tens of years and decades rather than in months as an investment strategy strategy. Because the best thing you can do is set yourself up for later 100%.
- [25:11]
A
Now, with that being said, I need you all to listen up to what I'm saying. It's incredibly important. Time could be running out to lock in that 6% or higher yield on public.com you need to go lock in that 6% or higher yield with a bond account@publicublic.com remember, your yield is not 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. That is public.com rich habits. So our next question comes from Cindy F. Cindy says. Hi guys. My husband and I have owned a construction company for 30 years and we're finally selling. I'm 52 and my husband is 53. We currently have $50,000 in our high yield savings account, 150,000 in silver and gold, 40,000 each in a precious metal traditional Iraq way. And we also own a piece of property in a downtown area that was recently appraised at $671,000 that we own outright. We're going to receive $2,850,000 at closing. We'll have a note in the amount of 1,570,000 that will bear interest at 6% per year and will be payable in 30 equal quarterly payments of principal and interest, with the first payment due 24 months after closing. There will be an earn out up to $750,000 as well. We've never invested in the stock market, so we really want advice on how to make our money grow so we can retire by the age of 60. Robert, what a cool situation. I'll let you take this one first, but man, I'm just so pumped that people are able to spend 10, 20, 30 years. I don't know how long they've had this company for, but build it and work hard and just build into something so meaningful and then have this awesome payday at the end of it. It's just so, so cool. I'm just so p. So Robert, take it away.
- [27:07]
B
Yeah, you always hear me talk that I think owning a small business, whether it's a service based business or you invent a product or whatever it is, but I think it's the best way to wealth because not only are you paying yourself along the way, but you get this big beautiful payday at the end as long as you understand having a succession plan in place and how to sell that business. And so this is just a really, really cool question by Cindy and her husband. Husband and I love it, first and foremost, what I would do before that money hits the bank accounts. Get some opinions from people that you trust, but get two to three opinions and make sure what you don't do is go to a friend of a friend that you didn't vet. You don't understand the numbers, you don't understand their fees, and just really find someone you feel good with and that you trust because you want to make sure that this money is put out there in a way that matches your risk tolerance, but also that you understand what they're doing with the money. Because at the end of the day, this is a lot of money. You're coming up on retirement. So it's not just about how much you have, it's how much you keep and what your gains are, but also setting up the structure properly. Because when you have this much money, structure is important because you want to have the right tax strategies, you want to have the right retirement strategies. All these things come into play play. So certainly get multiple opinions. Go with someone you're comfortable with. You could even split the money up and go with a couple different people if you wanted to. Sometimes People do that so you can keep people accountable for the performance. So that's what I would do. First and foremost. That would be a lot of heavy lifting for you to try to take it all on your own. As much as we would love to help you, I think you need a professional with this much money to assist you and just really get you off on the right track.
- [28:58]
A
Track, totally. I will jump in and do all the nitty gritty though. So, 2.85 million. And you mentioned that you have this note of 1.57. So I'm assuming then that they're giving you cash of about 1.3 million. So that's 1.3 million in cash. I'm assuming that will be taxed as a long term capital gain because you're selling a business and it's not like earned income. So just meet with the CPA to ensure that my assumption there is correct and understand what the tax liability looks like first and foremost. On that $1.3 million sale business, assuming, let's call it, you know, 20% long term capital gains there, you'll be paying about a quarter million in taxes, which will bring your, you know, after tax money deposited to your account to about $1 million. So let's just set that to aside. Right. You have a million dollars sitting over here. You mentioned that there's a $1.57 million note on the business, right. So owners financing at 6% interest. If I did my math correctly, that should come out to about $72,000 paid to you every quarter for the next 32 quarters. So that's $72,000. I don't know how that's taxed. I'm not going to pretend like I do. So again, make sure you get with a CPA and understand, do you need to be setting that money aside for taxes there or is that like, I don't know. Right. Maybe the 6% interest is what's taxed. Just get with the CPA to understand. Exactly. I think again, that's the most important thing here that could go wrong is you get this windfall and you immediately go, you know, deploy it elsewhere or put it in different accounts or with other people and professionals. And then you see it, tax bill of $300,092 and you're like, yo, what's going on? I did my math wrong, Right. So the biggest surprise in my opinion that might come your way is the looming tax bill not just on this million three, but also the quarterly payments that get paid out to you for the next eight years, 32 equal quarterly payments. This comes out to eight years. The next thing I want to address is the 150,000 you guys have in silver and gold and then 80,000 you have combined. So it's 150 plus 80. It's $230,000 invested in silver and gold. That's really cool. I'm not mad at that. Right. Silver and gold have done incredibly well over the Last call at 18, 24 months, even outperforming the stock market. So congratulations on picking the right commodities. But again, they're commodities. You know, they don't have earnings, they don't have profits, they don't have dividends, they don't have CEOs and management teams that can, you know, make better products. You're investing and speculating on a commodity. I'm not saying to get rid of your investments in silver and gold. I'm not saying that at all. I have investment myself. But with this newfound fortune, right, let's call it a million dollars after taxes and this maybe quarter million a year that you're going to get paid now with this newfound fortune, maybe it's time to, you know, sit down and really begin to invest in the stock market for the first time in your life. You guys are in your early 50s. You have easily another 20 years of investing ahead of you. So, you know, don't think that you need to preserve capital. I mean, you have 20 more years of investing. If I were you, I would absolutely put all of this money to work in the stock market. That might be in index funds, that might be an ETFs, that might be in maybe a public bond account as well. Right. You can diversify the pot in such a way that allows you to have upside exposure in a meaningful way. Right. Again, the S and p is up 25% this year. It was up 28% last year. Like that is a quarter million dollars a year you're growing against this million investment there that we had alluded to. So you definitely want to have that. But on the same token, it seems like you guys are very risk averse, right? Your gold bugs your people who think the world might be going down. And, you know, that's why you have the silver and the gold. And I'm super empathetic to that. So maybe there's a way where you could craft this portfolio to have a big slice in your silver and gold and another slice and, you know, a diversified basket of stocks and maybe another slice in some Treasuries and maybe a slice in real estate. Maybe you guys want to get into some hard assets that you can look at and see and say, wow, this house or this duplex is making me, you know, 3,000amonth in cash flow. You guys are very good at running a business business. So what I'm saying is you're very analytical, you're forward thinking and you're super, super on top of it when it comes to money. Now it's time to be the same, you know, analytical and on top of it with investing. Don't let someone come in and say, hey, give me your million dollars. I'll invest it for you. Don't worry about it. You want to learn what's going on. You want to know what they're investing into, why they're investing into it. They sat down with you and maybe they, you know, want to have that conversation about what is your biggest goals over the next 10, 20 years as you inch toward retirement and how are they deploying your capital in such a way to help you achieve those go goals. So I know it's a little long winded, but I mean, you guys now are sitting on what could be over a million dollars after taxes and you're in your 50s and it's time to, for the first time, take that leap of faith into investing into American capitalism. Hard assets and things that make you feel comfortable. And you are absolutely on your way to be fully retired if you want to right now, but super duper retired with millions in your retirement accounts over the next seven, 10, 15 years.
- [33:50]
B
I just really enjoy seeing people win and follow along the podcast and we can go from our experience, experience, give people all we've got to try and help them figure out, you know, how to live their best lives. And it's just really, really exciting when we see stories like this.
- [34:04]
A
And congratulations again, Cindy, and you and your husband, I'm sure, worked so hard to build this business over the last several years, if not decades. And this was your retirement. Right? A lot of people think like, oh, you know, my retirement, I gotta invest and do this and do that. Other people's retirements are building a business or owning a diversified portfolio of real estate or, you know, there's a bunch of different ways to define retirement, which goes back to what Robert was talking about in a previous question. A lot of people don't know what they don't know and they need to understand and have a plan of where they want to go. It's okay to have an untraditional retirement strategy like Cindy and her husband here. You just have to Know what that begins to shape up as over a longer period of time. Now our next question comes from Lucas. Lucas says, hey, Austin and Robert. My name's Lucas and I'm 19 years old. I'm a college student doing online classes, and I started listening to your podcast about a month ago. Since then, you guys have completely changed my money habits. You guys inspired me. I opened up a Roth IRA ira. I've got my brokerage account, and I started two side hustles. I listened to your side Hustles for Busy People episode, and I started walking dogs and house sitting. I made over $2,000 in the last three weeks alone. Thank you so much for the inspiration. And because of my living situation, I can invest nearly all of this money. My question is, since I don't have a registered business or claim this money from dog walking as W2 income, am I safe putting it inside of a Roth IRA? At what point do I need to claim this money as income and how does that work? Thanks for everything you do, and you truly are creating a new generation of financially literate individuals. Man, I just get goosebumps. I get so excited. Let's go, Lucas. Let's go. Everyone else who's sending questions and is.
- [35:38]
B
I love it.
- [35:39]
A
Like, this is so cool, man. All right, so Lucas, let's dive in. Lucas asks this question of like, hey, I made this money over here. Is it safe to put in the Roth ira? Because your Roth ira, the money you put into that has to be earned income as a sense, like you have to pay taxes on the money before you put it in. There's no if, ands, or buts about that. The money you make has to already have taxes paid on it before you can put it in the Roth IRA and invest it. And so Lucas is saying, I'm earning this money dog walking. I'm earning this money house sitting. I'm doing these things in such a way that I am not exactly paying taxes on the money I'm making. Now either one of two things are happening. One, Lucas is using an app like Rover or Wag or one of these other, you know, dog walking apps where he's finding new clients, going on the walks, doing all this stuff, and then he's getting paid through the app. If that's the case, you're going to get a tax form early 2025 that's going to say, hey, I'm Rover. Hey, I'm Wag, whatever you are, Lucas. We paid Lucas in 2024x amount of thousands of dollars through our app as A service, right? He's a gig economy worker. So we paid him him, you know, 1099. And you know you'll owe taxes on that money. Therefore, you can use that money for the Roth IRA contributions. Now, the flip side of that is Lucas may be found inside of a Facebook group. Said, hey, I'm Lucas. I'll walk your dog for cash. Don't have to pay taxes. It's all fun and games. That gets a little bit trickier. I don't believe that you could take the money that you did not pay taxes on and invest it in the Roth ira. And so here's what I want you to think about, right? When you file taxes via Cash App or TurboTax or whatever else, there's a line on your tax form that says, my name is Lucas and I made this much money in taxable income in 2024. If that number of taxable income is zero, then no, you cannot take money and put it in your Roth IRA. But if that number is like 4,000, then you can take up to $4,000 and put it in your Roth IRA. If that number is 7,000, you can do up to 7,000, right? Whatever that number might be. But you can't do more than what you actually paid taxes on as an earned income type individual there. So just make, you know, you know when you file your taxes, what that looks like. And the good news is you will know what that looks like early 2025, because that's when sort of these tax forms begin to get sent to you from these wags and rovers and other things, which gives you time to retroactively contribute to 2024 Roth IRA. For everyone listening, you can contribute and invest money toward your Roth IRA for the calendar year of 2024 until April 15th of 2025. Right? You'll get a better understanding of what your tax liability looks like. Your taxable inc. That allowing you to say, wait a second, I actually did earn some money. I can go do that. Right? That's totally normal. I've done it myself. It's pretty unique there. But that's my hot take. And Lucas, you're crushing it, man. Seriously.
- [38:32]
B
Yeah. And I would say, just understand the taxman is your friend. You know, everyone is always trying to. I get people every day, hey, can you pay me under the table? Hey, can you pay me in cash? Hey, can you not report this? And the answer is always no. I have no reason to cheat the tax man. And I have no reason because I understand the tax code. My team understands the tax code. And I'm going to make sure to follow the law. And it's the same whether you're doing rover or whatever. There's no need to try and hide that money from the tax man because you want to be able to utilize it to build your future. And trying to hide it and find ways around paying taxes on it just normally doesn't end well for people. So just understand that.
- [39:12]
A
And the only other piece of advice I have, Lucas, you're 19 years old. When I was 19, 20, 21, 22, and I had to do taxes for the first time. It was so overwhelming. I use TurboTax super easy. I think it's like 40, 50, 60 bucks to file your taxes with them. Super reasonable, in my opinion, of a price. And they make it step by step. And they have, you know, your records of your taxes, so you can like log back in and see all these forms and things. But on the flip side, my girlfriend actually used cash app in 2023 for her taxes, and it was completely free and done all in the app. So, like, there's a bunch of different ways that you can file your taxes very cheap or free for free. You just gotta be tech savvy. And I mean, if Lucas, you're making $2,000 in three weeks, you're pretty savvy to begin with, man.
- [39:56]
B
Right, right. I love this story because it just goes to show, with modern technology, in the society we live in, you can go out there and make really good money if you put in the work. So many people just, you know, have this lack mentality that, oh, well, I lost my job or I'm getting laid off. What am I going to do? Go out and find something. You can do exactly what Lucas is doing. Following the blueprints that we put out each and every week, taking action, and the money will come. It's just there, it's all around us. You just have to want to go get it 1,000%.
- [40:29]
A
And you take that money and you spend the time, hours, days, weeks, years, working hard to build up a nest egg that then gets invested into the S&P 500 that will then grow for you over time passively. And the money you earn passively with this portfol portfolio income will eventually be more every year than what you're actually trading time for money for at your job or your side hustle doing. Right. I mean, again, we talk about building your base and how important that is. A hundred thousand dollars invested at the beginning of this year is now worth 125,000. That's $25,000 that those people didn't have to spend any time, any effort, anything to earn because they invested their money properly and they sacrificed time, pleasure, you know, vacations, all the things they couldn't afford to set aside extra money and put that into. And that's going to continue to grow for them over time.
- [41:20]
B
But it's the coolest feeling like, and you think about our 30 year age gap, you're crushing it, Austin. You're way ahead of the curve. You're really good at all this. I've been doing it for 30 additional years and the best feeling on earth is waking up almost every day and making that money while I sleep. And it's greater than most CEOs make a year while I sleep and do nothing additional. Because I set myself up along time ago. And that is the key of everything we're doing, is to get everyone to understand the sooner you start, the more time you let compound interest do its job and the better off you're going to be. Because we want to make sure everyone gets to live this wonderful, beautiful experience in retirement. That's what drives me every single day.
- [42:04]
A
Dude, I'm right there with you. Now let's hear from our last question from Elijah A. Elijah says. Hey Austin and Robert. I love the podcast and I listen to every episode on my way to work on Monday and Thursday morning. I've been very excited to start investing more into Bitcoin but I haven't built my base yet and make auto investments to about 5 to 15% of what's in my Roth 401K and Roth IRA combined. I'm young and I wanted to get into crypto early. I'd like your guys opinion on the idea of increasing my dollar cost averaging into Bitcoin even without my base being built. Since I believe in Bitcoin and I'm excited to see where it goes in the future. For context, I'm 24 years old and my wife is also 24 and we have a 16 month old daughter. I make $73,000 a year as an early career engineer and my wife will be working again in a few weeks as a student nurse tech making about 750amonth. I have 5,000 in my Roth 401k, 1,500 in my Roth IRA, 650 in Bitcoin and 6,000 in our emergency fund. Our rent is $2,000 a month and we have an auto loan of $457 a month at 11 and a half percent interest. Let me take a first stab at this, Robert, because I think there's a best of both worlds here. I'm all for you investing in bitcoin before building your base. I'm cool with that. And a really easy way that I think you can do it in a risk adjusted manner that's not too risky at a young age is allocating 10, maybe 15% of your Roth IRA portfolio into iBIT. And that new money that you invest into your Roth IRA could have some of that bitcoin exposure. So you have 650 right now in Bitcoin. You have 1500 in your Roth IRA. Let's assume you max that out every year. So now you're talking about, you know, a thousand, maybe twelve hundred dollars a year invested into bitcoin over there. You add that now to your 650. We're closing in on $2,000 a year invested into Bitcoin and over a long period of time because you want to have this long term mentality with bitcoin, I'm sure that'll grow exponentially and you're going to be just fine. Right? The mistake I think people make, and I see my friends do it all the time, is they open up a Robin Hood account, they get their paycheck and they go deposit $500 into Robinhood, and they put it all into Bitcoin or Dogecoin or whatever coin is the coin of the month here. It goes to 300 and they think, oh man, I gotta win it back by putting it into something more risky. And then it goes up and then they don't sell in time. Now it goes back down to 100. Now you're out 500 bucks, dude. So you absolutely can add bitcoin. In my humble opinion. You're young. Just do it in a way that is, you know, sort of risk adjusted returns by putting it into the Roth ira. So you're going to have that long term mentality regardless. And again, IBIT OR BTCI are two really cool ETFs that allow you to have some bitcoin exposure.
- [44:46]
B
I love that. And I think absolutely, Elijah should get some money into bitcoin. If he's following along and he loves the crypto space, he sees the future of it. I'm okay with it as well. And I don't think the base is necessary in this instance because I believe bitcoin, it has outperformed pretty much everything for the last 10 years. I think it'll continue doing that for another five years and then it'll start to kind of level out and be Like a traditional investment. So I love that. And like Austin said, you can get the exposure through these ETFs. And I think it's a great idea to get some of your money in there in bitcoin, even if it's only 100 bucks or 200 bucks a month like Austin said. Because as bitcoin grows in the crypto space grows, you're going to be right there in inside of it and you're going to feel good about it because you own a piece of it. Now, while it's still early on.
- [45:37]
A
Now, here's what I don't like. Well, first off, you know, congrats. You guys have achieved a lot by 24 years old. Like, you guys are doing a great job. 73,000. I mean, you are making some awesome money and your wife is going to be making some awesome money here too. But I'm skeptical of only a $6,000 emergency fund. Your rent's 2,000amonth. Your auto loan is another 500. I'm assuming you guys are probably spending 4,000 to 6,000amonth just living life. And like, I mean, that's what you have to budget every month. It's called $5,000. You should have at least a three month emergency fund, which puts you much closer to the 10, 12, $15,000 range versus just 6,000. Maybe before you get really, really excited about adding bitcoin to your portfolio, it's probably a better idea to beef up your emergency fund a lot closer to that 10, 12, $15,000 range. Really putting a good buffer between you and life versus just 6,000. I just think, I just think that too low. And then over time, you know, maybe you guys by 30 have a goal of buying a house. And so now you got to think about, you know, the down payment of that and saving money and putting that aside. So there's a lot to get excited about. You guys are very young, but don't fall victim to this idea that you have to be, you know, levered up to your eyeballs and trying to buy this and do that and invest in that. Like, stay focused, stay disciplined. You guys are very young. There's always going to be the next big thing to invest in. There's always going to be people that make more money than you at your age that invested into something cool and now they're on a yacht, like it's cool. I just, I want to really, really emphasize you guys are crushing it and you guys are going to do so, so well with your money over the next 10, 15, 25 years.
- [47:11]
B
Well, thank you all for following along the Rich Habits podcast each and every week. We are so excited for 2025 and beyond, and we're just really stoked about the Rich Habits Network and all of the amazing questions you all submit each and every week. Thank you so much for the support. We hope that we bring you max value all the time and that you're constantly taking notes and taking action because we want to see you all on the beach as well, sipping those Mai tais and having a good time.
- [47:40]
A
Now, don't forget, we have the Rich Habits newsletter that just came out this morning. This is our weekly newsletter where we break down the biggest and most important topics as it relates to the stock market, the economy, and everything in between. That's a completely free newsletter. There is literally no dollars that come out of your account. Account to go read that and check it out. That's the Rich Habits newsletter. You can Google it. It'll pop right up. We have the Rich Habits Network, which is our sort of private community where we now have nearly 500 people that are a part of it. They join our weekly live streams. They get their questions answered both via DMS and inside the community itself. We have four and a half hours of video coursework that walks everyone through how to build wealth. I mean, there's a lot of really cool things in there. And then finally, I want to remind y'all, the holiday seasons are coming up, right? We've got Thanksgiving travel, we've got December travel, all this stuff. Do not forget to budget for that. We have the honest budget. It's our template. We have it link in the show notes below. But do not be the person that swipes the credit card. You go into $6,000 of credit card debt and now you're spending the next, you know, January, February, March, trying to crawl out of it. So you had to stop invest all these things. Do not fall victim to that. If you can't afford to get someone a present, don't feel bad about it. If you can't afford to go travel somewhere because you're trying to pay off your high interest debt, have that conversation with that family member. Let them know, hey, listen, I'm working toward this goal. I can't do it this year, but I can't wait to see you guys next year. Right? Have those honest conversations. Be an adult. Children do what feel good in the moment. Adults devise a plan, they stick to it and they conquer that plan. You all are adults. We're excited for you and we'll see you all on Monday.